How could W(r)onga be made right?

Yesterday’s news that Wonga, Britains biggest payday lender, slumped into the red by £37m, came, to a certain extent, as no surprise. The scandal-ladened lender has lurched from regulatory fine to regulatory clampdown over the last year providing Andy Haste, the Chairman, with probably the biggest challenge of his career.

Mr Haste is an interesting chap. He has achieved a strong financial services reputation. His previous role as CEO of RSA, the insurer, perhaps gave him the most appropriate experience for his chairmanship at Wonga. He was parachuted into the RSA following a shareholder revolt after they said they would not support another rights issue. He was there from 2003 to 2011 so the guy likes to see a job through.

The question is can Mr Haste turn around Wonga? Could he even make it a force for good? Helping the millions in the UK and the world that are now closed off from mainstream credit providers.

Following the results announcement there have been a few pieces in the media about what they need to do to change. At Money Saving Movement we have some ideas about how this company can turned into a force for good. We hope Mr Haste takes a look:

  1. Re-Direct the strategy and aims of the business

There is, without a shadow of doubt, a very large market for a business like Wonga. The company’s success during the boom years, in terms of revenue and profit, is testament to that. Where it could be suggested that they went wrong is that the guys in charge, at the time, lost sight of how important their customer was. Never lose sight of how important your customer is, rule number one, right! Well, Wonga did. Back in Wonga’s hay day, it is well documented that there was an arrogance amongst the management who were unashamed of their exploitative business model. Well this rather short term approach is why the business is now £37m in the red.

What is now required is an approach distinctly different to the one previously adopted. Strategically they need to embrace the hand that feeds them. They need to care about those in poverty as well as low income groups and adopt a corporate responsibility charter way over and above that dictated by the Financial Conduct Authority. Wonga could be Become a for-profit social enterprise. They could direct a proportion of profits to helping those most in need and provide education to prevent financial hardship. This polar opposite approach would be welcomed by the market that they serve and help them to become a force for good.

2) Raise affordability

Wonga’s current representative APR is an eye watering 1509%APR. Now we know that APRs can be slightly misleading in the short term lending game but even so Mr Haste, 1509%. Raising the affordability for customers by reducing the cost of credit would open up the market. This would bring them Inline with options that are currently being provided by progressive credit unions like London Mutual. There is no need to have the interest rates so high.

3) Re-brand

What Wonga stood for was bad. It was exploitative and caused pain for many. To end the association with this a full rebranding exercise is required. Change of name, change of advertising (we are pleased you stopped the puppets Andy) and a change in the tone of voice. Here are our best name ideas for you –

Conga (People love dancing in a line)

Change (Coins in your pocket and a double meaning about a new start)

Lending Hand (helping and supporting people)

Admittedly this took us two minutes over tea and cake but hopefully you get the idea.

Wonga is toxic and it now needs dramatic change. For once we hope that change is not just about trying to make more money but also about helping the people that need their service. The two can be achieved together.

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7 Ways to Stop Spending Money

Do you find yourself spending money when you really need to be saving or paying off your debts instead? If so, you’re not alone. Many people impulse buy even when they really can’t afford to and in some cases, they spend more than they actually earn. It’s a fact that impulse buyers are less likely to consider the consequences of their spending and this could lead to financial problems and ultimately, debt. Our blog looks at the psychology involved and tips to help people who want to stop spending.

There is a definite psychology involved when it comes to spending money unnecessarily and it can be linked to anxiety, stress and general unhappiness. According to Psychology Today, people who purchase impulsively often do so to improve their mood. When you think about it, shopping is fun and pleasure is experienced from buying something new. The problem is that this pleasure is only temporary as the novelty of owning something new soon wears off.

Here are some great tips to help you if you would like to stop spending money:

  1. Calculate your yearly spend

If you find yourself spending money regularly on cigarettes, alcohol, clothes, magazines, chocolate or other impulse items that you don’t necessarily need; try calculating how much money you spend on these items over the course of a year. Check your statements for the last 12 months and add up the amount. It might just be enough to stop you spending on some of these things in the future.

  1. Recognise needs from wants

Ask yourself the following questions if you find yourself tempted to spend on something. Do you NEED it? Or do you just WANT it? If you need it, can you actually afford it? Or can it wait until your finances are in better shape? If you really want something so badly, don’t buy it the same day. Walk away and if you still really want it badly in a few days’ time, then at least you’ll have thought the purchase through properly.

  1. Compare the cost of the purchase to “real work hours”

If you’re tempted to spend money impulsively, a good way to understand the true value of such a purchase is to calculate how long you’ll need to work for it. For example, if you want to spend £500 on a last minute weekend away, work out how many hours at your day job you’ll need to work to pay for it (add more time on to account for interest if you’re paying using credit). Sometimes, this is just the kind of reality check that you’ll need to decide whether you really do want to spend that money after all.

  1. Use cash not cards

It’s incredibly easy to swipe your credit card and forget about it until another day. Yet handing over cash rather than plastic is a definite deterrent when it comes to spending money. No-one actually enjoys parting with pure hard cash.

  1. Take a photo of your old things

Before you spend, check out the things you already have. Maybe they’re old, worn, or you just don’t like them as much as you used to. Lay them out on the floor and take a photo of everything you can to keep in your purse or wallet. When you want to spend money, take a look at the photo and ask yourself whether you really want to add more to the things you already have (and don’t actually use).

  1. Keep busy

Find ways to occupy your free time that don’t involve much opportunity for nipping out to the shops or searching online for the latest deals. Making the most of free activities or trying out a new inexpensive hobby will leave you with less time to be tempted to spend money.

  1. Set yourself a no spending challenge

If you determinedly set yourself a no spend challenge, you might find that you enjoy it! You could try one no spend day per week at first. Take a packed lunch and a flask of coffee to work and try cycling rather than taking the car if you can. If you find this easy, you could increase your challenge to two or three spend days per week!

The most effective way to stop spending money on things you don’t need is to change your financial mind-set. This means evaluating what really does make you happy in life and whether impulse buys will help or hinder what you want to achieve. Will making that purchase today delay or even stop you from achieving what you want to do in the future?

“Scraping the Barrel” – The Cost of Living for Social Housing Residents, Full Report

Service providers helping those on a low income, are consistently missing opportunities to cut poverty and problem debt.

Our full research report, “Scraping the Barrel” – The Cost of Living For Social Housing Residents, details how housing associations, local authorities and other service providers are too focused on addressing immediate need and emergency provision, leading to increased social service costs and worsening outcomes for those living on the breadline.

The report:

  • Finds that specific problems are repeatedly pushing people into poverty, including flashpoint expenditure, transitions between payment schedules, and gradual declines in purchasing power
  • Finds that service provision is largely focused on those in crisis, rather than preventing crisis, or supporting those recovering from crisis
  • Concludes that agile and user-centred design methods help make poverty intervention services more effective

Screen shot 2015-03-03 at 08.30.05

In our full report we offer a series of recommendations for how to design effective services that offer preventative, rather than reactive, solutions to poverty. This includes integrating current understanding on tangential learning, incentives, and gamification into poverty prevention services.

There are already some excellent solutions in place for when people fall on hard times, but sadly these services are inundated in the social housing and public sectors. Housing associations and local authorities are struggling to cope with demand for their in-poverty services, whilst people living on the breadline are ignored until they succumb to the poverty trap.

It’s not right that support only reaches vulnerable people after they’ve fallen on hard times.

Housing associations and local authorities need to better understand what pushes people into poverty, and what makes some intervention services work better than others. By changing the way we design intervention services, the ongoing growth of those on a low income falling into poverty can be reversed.

The report builds on our earlier research, which suggested that the vast majority of social housing tenants are struggling financially. A survey of over 1,200 social housing residents found that:

Infographic Main FindingsOur report adds to a growing body of evidence that suggests that services are failing to prevent the spread of poverty amongst low income households.

Over 20 million people are now living in poverty in the UK, whilst research from the Citizens Advice Bureau suggests that systemic problems in the consumer credit market are pushing young and vulnerable people further into debt.

But it doesn’t have to be like this. With better and more informed service design, housing associations and local authorities can provide more effective interventions that prevent poverty and problem debt, rather than merely responding to it. Our report lays out a framework for how to do that.

Poverty Oscars

The 87th Academy Awards last week was a special evening and not just because John Travolta’s antics. I think it was special for the composition of the winning films and in particular the evening’s stand out acceptance speech. Headline awards went to films that tackled some of the biggest challenges people face in life. Speeches instead of being the standard Mum, Dad, Wife, Partner, Osteopath tear jerkers (for those speaking) were instead impassioned with heart-warming rhetoric.

The best actor’s award went to “our man” Eddie Redmayne who made it clear in his speech that his depiction of Steven Hawking with the debilitating Motor Neurone Disease should be dedicated “to people all over the world battling the disease”. Patricia Arquette, winner of the best supporting actress award, used her acceptance speech to challenge inequality with people calling it “the moment of the Oscars”. “To every woman who gave birth, to every taxpayer and citizen of this nation, we have fought for everybody else’s equal rights,” were her words that achieved a symphony of support from the black ties and ball gowns.

It was good to see that for all of Hollywood’s plastic back slapping, the event could be used to pour more exposure on the difficulties that people face on a day-to-day basis.

Similarly, but closer to home, we have also been reading and hearing about the challenges and difficulties people are facing in our very own country. In fact it has been a very important couple of weeks. Unfortunately, the producers of these pieces of work didn’t manage to achieve the exposure that comes from a red carpet in Los Angeles but the messages, all the same, are critically important for us in the UK.

Firstly, we had the results of the largest piece of research into poverty ever undertaken in the UK. “Breadline Britain” a landmark study undertaken by economist Stewart Lansley and academic Joanna Mack. Headlines were in abundance, but to perhaps give you an indication of scale, the study found that 20 million people were living in poverty in the UK. The figure has doubled since 1983 and is more worryingly set to increase. One of the most memorable quotes for me was from Lansley “Today’s huge imbalance between people and profits, built around poverty wages and huge corporate and private surpluses, is unlikely to hold indefinitely.”

We then heard from a corner stone of UK social support, the Citizens Advice Bureau (CAB). Their Consumer Challenges report is notable for it’s slightly different slant on the complexities of people’s financial problems. In particular it highlighted consumer spending as an area missed in the debates on the living standards crises. Within the report they state “consumers are under intense pressure because of weak or woefully outdated protections. Pressure on consumers is not only high, but also uneven, and we need to understand its shape as well as its scale.” This is challenging for the UK as consumers have effectively driven the recovery in the UK but CAB does have optimism “assertive action on consumer problems becomes an even more important way to help hard pressed households – and one that all parties can get behind”.

We also feel optimistic about creating ways to help consumers. Our report, “Scraping the Barrel”, released this week shows there is significant opportunity to improve millions of lives. To be progressive services need to adopt a ‘preventative’ approach, steering people away from increasing debt and potential financial crisis, they should create alternative approaches to exploitative premium business models and importantly work to strengthen communities.  By designing services in this way we can improve lives.

Our own practical step in doing this is our pilot service “Canny” which launches in the London Borough of Waltham Forest this spring. Collaboratively working with the Credit Union, the Local Authority, Housing Associations and most importantly the community, we have designed a service that provides access to discounted products and a link to information and support to improve people’s finances. Importantly all of this is backed by our research.

So if there were Oscars for research (Roscars!?) then I think Stewart Lansley, Joanna Mack and CAB would be front-runners, but I would imagine like us, they’re not interested. Change and improving lives is the greatest award anyone could give us.

Cakes and “Awesomestow”

This weekend Money Saving Movement (MSM) placed itself back on the streets (well actually on a lovely piece of grass) in Walthamstow (Or “Awesomestow” as they like to call it). We have been itching to get back there and talk to the lovely people of this diverse area for a while as Walthamstow really interests us.

Walthamstow has been home to a number of research visits for MSM. It sits within the Borough of Waltham Forest which has some of the highest concentrations of deprivation within the U.K. Its High Street is notable for its long market (apparently the longest in Europe). The high street is busy with high cost lenders and high cost retailers, unfortunately. Both of which MSM are not fond of. However the people of”Awesomestow” are brilliant and we found them great fun to talk to. This might have been helped by the Free Cake, more about that in a bit.

The objective of this trip was to spend some more time talking to ordinary people about how we might design an alternative social enterprise service to high cost rent to buy retailers. So when we arrived we were all prepared with a pre-planned discussion structure, gazebo and the all important MSM banner. Most importantly of all (well maybe) we were also offering Free Cake supplied by the lovely Dee.

I’m pleased to say that we found out A LOT. Here is a quick snapshot –

  • People continue to use rent to buy retailers.
  • People are also paying for warranties to cover themselves in the eventuality that something goes wrong with an appliance.
  • People like brands that have a solid reputation.
  • People would purchase from a social enterprise.

It was great to hear people’s opinions and the data provided us with plenty to think about. For me it underlined the importance of “getting out of the office”. I wonder how much emphasis is put on this within business. I hear plenty of people talk about it but I struggle to find actual examples. It is core to our approach at MSM and we are looking forward to doing lots more of it.

Have a great week everyone.

JP

James Perkins

Co-Founder

Money Saving Movement  MSM in Awesomestow 1MSM in Awesomestow 2

“Scraping the Barrel” – The Cost of Living for Social Housing Residents: Executive Summary

Scraping the Barrel Cover

Today we launch the first part of our research on the cost of living for social housing residents – and our findings suggest that a financial crisis is brewing in the social housing sector, as residents are increasingly struggling to keep their head above water.

Having spent the last 6 months researching how the unaffordable cost of living is impacting peoples’ lives, Money Saving Movement can reveal the stark realities facing low-income households in the UK today. After surveying over 1,200 social housing residents from 10 Housing Associations across the UK, Money Saving Movement has found that:

The vast majority of residents have experienced some form of hardship  

  • 94% have had financial difficulties in the last six months 

Even the basics are a struggle for many

  • More than 2 in 5 struggle to keep up with household essentials (43%)

Friends and Family are where people go first for help

  • Of those who knew where they would turn, 48% said family & friends

Housing Associations are not seen as a primary source of support

  • Twice as many people would go to their bank for help (10%) than their Housing Association (5%)

 

Infographic Main Findings

The research adds further weight to a growing body of evidence that suggests that low-income households are bearing the worst brunt of the financial crisis, as well as the resultant recession.

With the cost of living having risen 25% since 2008, low income households are now also facing an average extra yearly cost of £1,280, thanks to the “Poverty Premium”. For the 13 million people living below the poverty line in the UK, these added expenses can mean the difference between living on the breadline, or being pushed over the edge into damaging debt-spirals.

 For those living in lower income households, the reality is that life today is the hardest it has been in a generation. While jobs offering decent pay or decent hours are scarce, families and individuals are struggling to afford even the basics to get by.

With limited financial provision provided to those in poverty and support services often not getting through to the right people at the right time, families and individuals are constantly forced to make dire decisions between getting ripped off or living in deprivation.

With 3.7 million English households living in social housing and almost half of those earning a low income, financial difficulties for low-income households could prove a serious problem for social housing providers.

Many Housing Associations are working to mitigate these issues, and do provide a variety of support services to their residents. But with further social security cuts looming that will cost those in poverty an average extra £2,744 a year, more and more people are struggling to make ends meet.

There is a financial crisis brewing amongst social housing residents in the UK, and the sad fact is that with the government’s planned cuts to social security, things are only likely to get worse before they get better.

Payday loans are being used for rent, unpaid bills are stacking up behind the sofa, and ringing phones are being left unanswered in case it’s debt collectors on the other end.

Forward-thinking social housing providers are working extremely hard to support their residents through these tough times, and today’s figures show the urgent need for those services. What’s clear, though, is that these vital services must be expanded, with more innovation and cross-sector collaboration encouraged in supporting social housing residents’ financial health & general wellbeing.

You can read the full Executive Summary of our research here (6 pages).

Behind the Scenes of “Scraping the Barrel”

Money Saving Movement Team

When you are part of a social enterprise start up it is fair to say that life can be a little crazy.

There is so much to do. We juggle our time between crafting our strategy, talking to investors (we love you Solve), instigating a copious number of meetings, and completing a fairly impressive quantity of admin (The FCA have some long forms). It’s hard graft, but when you manage to complete a piece of work that moves you closer to your ambition the feeling is great. It is simply what it is all about.

“Scraping the barrel”, launched this week is our first piece of thought leadership work produced here at MSM, and needless to say one which we are very proud of. The summary details the headline results from our survey of 1,200 social housing residents from 10 Housing Associations across Britain. It explores how people are coping financially in an increasingly expensive world. As you might expect, the picture is bleak, but we see the findings outlined as an opportunity to build a relationship with a sector that is ideally placed to reach some of the most in need in our society.

Our next step is to bring together the Housing Associations that were involved in the research along with other support agencies at an event we are hosting on the 9th October. This will be an opportunity to discuss further discuss the results and launch our full research report, but more importantly the event is also to look at how we can introduce more innovation into provision for the financially underserved.

So whilst we bask in the light of getting this work done, we would welcome any feedback you have on the summary or more general comments about our ambitions for MSM. Producing this has made us even more inspired and motivated than ever before, so we are grateful for any feedback.

Finally I would like to end on a thank you. Firstly, many thanks to our research partners Voluntas, especially Dylan and Katy who did a great job coordinating the Housing Associations. Secondly, thanks also to our investors Solve for their advice and support, and to our fellow alumni from the Public Service Launchpad who helped keep us motivated and focusing on the light at the end of the tunnel! Thanks also to Paper for their excellent prototyping workshops, and last but certainly not least to Hilary, our hotshot designer, without whom this wouldn’t have been possible and who is an absolute star! They say a team is only as good as their support network, well, with you lot behind us we can’t be doing half bad.

James Perkins
Co-Founder

Money Saving Movement   
www.moneysavingmovement.com
@somoneysaving