Evening Standard - Doing for money-lending what Amazon did for booksWhen small, unfashionable Blackpool made it to the Premiership last summer, a newspaper ran the headline: "2689 reasons why Blackpool love affair is tainted already".
It was a reference to the club's shirt sponsor, Wonga, a short-term money lender and the annual percentage rate it charged: 2689%. Blimey. But, as he greets me, Errol Damelin, the boss of Wonga, does not look like the devil.
He looks fit and lean (as well he should for someone who lists marathon running as a past-time and runs most days from Hampstead home to office) with trendy spectacles - far removed from a heavy-weight Tony Soprano loan enforcer. When he speaks, it's with a soft South African accent, which makes him seem smooth. There you go: a snake-oil charmer! He runs Wonga, which exploits the plight of the poor and vulnerable, lends them the dosh they so desperately require, and then clobbers them with an APR that is off the scale. The nasty so-and-so!
However, once Damelin begins explaining himself, thoughts of making the sign of the cross in his direction start to recede. He's an ex-investment banker (well, he would be, wouldn't he?) with a penchant for technology. A bit of a serial entrepreneur, he founded Wonga four years ago, and it's just made its one-and-a-half-millionth loan.
After selling his software company, he was casting around for an industry that was "crying out for change, one where the incumbents had no incentive to change because to do so would upset their business models".
He alighted on internet money lending.
He says by way of an example that if you were to borrow "£130 for 13 days", Wonga will charge £22.87 in interest and fees. If the customer pays back early, they're only charged for the days they borrowed the money. "About a quarter of our clients every month do that - they might borrow for 13 and pay us after five."
Yes, but what about that APR? He sighs. "APR is a mathematical formula, it's a compounding formula, driven by European laws. The fact is we don't compound - we only make short-term loans. The APR assumes the compounded interest for a year and we don't lend for anywhere near that length." And those who don't pay? "Our bad debts are a single-digit number. It's lower than for the credit-card companies."
At 60 days, he stresses, Wonga has "a default system that kicks in - at 60 days, the amount a customer must repay is frozen. We know that someone is in a challenging situation and we will do our best to help them, provided they are open with us. We will always try to do the correct thing.
"We want to get the customer back to where they were - there's no point in us being aggressive."
To that end, he says, Wonga does not employ outside, tough-guy debt collectors, "we do all our collecting in-house".
Wonga as well, he maintains, is not a "payday" lender. "That's a very specific product where money is taken until the end of the month - to payday. Then it must be repaid in full, with a fixed fee. Even if it can be paid back early, they still want that same fee. We don't do that - we're a daily loan company. If we're paid back early, we will take less - we're about providing people with money when they really need it."
Payday lenders tend to operate in poorer areas. Wonga, he insists, is catering for a younger crowd who are wanting money to tide them over - so they can go clubbing or buy something they've seen.
Rather than ask their parents or a friend, they go straight to Wonga. He describes this clientele as "the Facebook generation - people who buy online and on their mobiles. They are divided equally between the sexes. They're not from council estates. They just want the money for a fee - they don't even look at the APR. They see us like black cabs - they want a cab and they hail it. Or like iTunes or Amazon".
On the latter, he says: "If you think about Amazon, they're not doing something other retailers have not done before - they're just doing it better. They state the price and they deliver within 24 hours. We're the same - except our product is money."
So at the weekend, he says, Wonga experienced a surge in applications from young people who were looking to buy Olympic tickets before yesterday's deadline. To bid successfully for a 2012 ticket, the money had to be in the account already - hence the rush of Wonga users seeking to shore up their balances. The trick, he claims, is that everything Wonga does is upfront. The whole process of applying for a loan is short and conducted over the internet. Wonga has developed software that, as the would-be borrower fills in his or her details, assesses their suitability.
He says it is also highly secure, using encryption and meeting or exceeding industry standards. "There are 12 pieces of information we need - it takes a minute or two to check them." Within 15 minutes of being approved, the loan of up to £400 for a first-time borrower is in their bank account - they only make payments direct to bank accounts, never cash or cheque.
The highest amount they will lend is £1000, "but we don't encourage it. That depends on your situation and how well we know you. We prefer it if people borrow smaller amounts for a shorter period of time - our average loan is £180 for 14 days. Wonga enables people to borrow what they want, when they want. It's a 24/7 service which is more an online retailer than a bank or doorstep lender".
This is the part, says Damelin, that the critics just don't get. "We are the same as Amazon, Apple, Google - whatever. People like being treated fairly, like adults, and they want a service 24/7 - their financial issues aren't confined to office hours. We're to money what iTunes is to music - iTunes is a great way to buy music. You hear something and you want it. You want one song, not the whole album, and you want it now - and it's 9pm. You can do that with iTunes. We're the same."
At its London offices, Wonga has about 100 employees. "There literally isn't a single banker or person from the payday loans business. If you're going to get someone to do something that is different, you don't want someone who says what's great because they worked at the best bank - you want someone who will embrace change."
Wonga is backed by venture capital. It may do an IPO at some point. But "right now we're growing at a rate and scale that make us one of the five fastest-growing tech start-ups of all time [alongside Google, Facebook - he's serious]".
Damelin leans back and opines: "We're a real British success story."
In other words, I can take my APR and put it somewhere painful.