Wonga considers savings accounts
Short-term lender Wonga is considering a move into the savings market, according to chief executive Errol Damelin.
Speaking at an Albion Society event in London, Damelin says that the payday lending firm is considering offering more financial products than just short-term consumer credit, including online deposit-based savings accounts.
The chief executive believes that the financial services industry will experience the same "revolution" that hit the media and telecoms business. He argues that the traditional model of high-street bank lending has become "bankrupt", thus opening the way for technology-forward platforms such as Wonga.
Damelin adds: "We are thinking about the problems that people have, and then match the company's capabilities to consumer needs that aren't being filled. We're thinking of different ways to move and save money."
Wonga is not regulated by the Financial Services Authority (FSA), although it is licensed by the Office of Fair Trading. For it to offer deposit accounts however, it would have to be regulated by the FSA, something Damelin would like to see across the various online financial services platforms such as Wonga and social lending platform Zopa.
The name given to a certain type of financial transaction which takes place directly between individuals or “peers” without the use of a traditional financial institution such as a bank. Various social lending websites incorporate a number of strong risk controls, and screen all potential borrowers by checking their credit history. Lenders agree to lend a specific amount for a stated return and lenders’ cash is pooled between borrowers, spreading the risk. The major social lending companies are Zopa, RateSetter, Funding Circle, Quakle and Yes-Secure.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.