Wonga to 'disrupt' SA credit market

2012-05-16 14:20
SA Wonga CEO Kevin Hurwitz plans to disrupt the local credit market. (picture provided)

SA Wonga CEO Kevin Hurwitz plans to disrupt the local credit market. (picture provided)

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Cape Town - A new player in the microloan industry says it plans to disrupt the market by offering completely automated loans online.

"When we set out, I think there definitely was the intention to be disruptive, not that we knew how it would pan out, but looking back five years, I think that's exactly what has happened," SA Wonga CEO, Kevin Hurwitz, told News24.

He conceded that the microloan industry had come under increasingly tight scrutiny, but the company sees itself as a technology firm in the credit market.

Wonga offers small, short-term loans and users of the website can see all the charges related to a particular loan upfront before applying with an interactive slider that calculates charges based on user preference.

"There's been lots of national dialogue in countries around the world about the financial services industry and really, what we're trying to do is be very consumer focused," Hurwitz said.

High volume

The Webby award winning company has made waves in the UK market as a high-volume lender. It has made loans to the value of £1bn and Hurwitz hinted that the entry into the South African market was part of an expansion strategy.

"Up until now, Wonga has been one product in one market and we're now looking to be multiple products in multiple markets."

Loans in this sector attract a high interest rate and Wonga charges 60% per annum, but loans are typically paid off in less than 40 days for amounts under R8 000.

Hurwitz said that the speed of the loan granted - about 10 minutes in the UK - made the service an alternate to credit cards, but to ensure minimal risk, the firm only granted about 25% of the applications and default rates in the UK were under 10%.

The company would not share the technology used to help determine whether an applicant was credit worthy, but hinted that data formed the heart of the process.

"We're very data hungry - what we like is raw data - we analyse that very well; we'll get raw data from anywhere and build this into our models.

"That's our secret sauce; I'm not going to divulge that. Our competitors would love to know that information - five years down the line in the UK, guys are still trying to get access to that data," Hurwitz said.

Availability

Wonga defended that cost of credit on the platform, saying that the availability would offset the cost of using it.

"We're not looking to build or offer the cheapest product - generally there's been a nuclear race to the bottom in terms of costing and that's not what we're about," said Hurwitz.

The website uses "public access data points" to monitor consumer behaviour and mitigate against default and the automated process could effectively screen out the majority of fraudulent activity.

"The risk and fraud analysis uses thousands of public access data points. So this [is the] whole notion of affordability when it comes to consumers' risk.

"We're also very conscious of the fact that out of 100% of people that are going to apply, you're going to get people that are going to lie to appear more credit worthy. Our system discounts that by looking at this consumer as a whole," Hurwitz added.

Wonga is registered with the National Credit Regulator and has been granting loans in SA since October 2011 to test the platform.

The company also freezes interest charges after 90 days if a customer has defaulted on the loan.

"We're comfortable if people are using us four to six times a year; we're very uncomfortable if people are using us 12 to 14 times a year and we actually monitor that," Hurwitz said.


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