P2P Money Blog

The mention of Wonga will stir strong emotions amongst people.  Some see them as a saviour for helping people obtain short term credit where their bank or building society may have turned them down.  Others see them as parasites, praying on the poorest in society, and charging them astronomical interest rates.  Perhaps both viewpoints are equally valid?

The company that brought us Wonga (who changed their name from Wonga.com Limited in May 2013 to WDFC UK Limited) have recently launched their own peer-to-peer lending site under the brand "Invest and Borrow".  The small print on the site states as follows:

Invest and Borrow is a trading style of WDFC UK Limited.  WDFC UK Limited is a UK based company that provides a number of innovative digital financial services.

It doesn't mention "Wonga" as one of those innovative digital financial services.

Rather than the representative 5853% APR on Wonga itself, Invest and Borrow charge borrowers a "lower" representative 75% ARP, but pay lenders an even smaller 7.35% AER.  If a borrower were to default, lenders are repaid the outstanding capital.  Invest and Borrow's margin of around 90% of the interest and fees is rather large, but without knowing their estimated default rates we cannot calculate determine how "large" this actually is.

Peer-to-peer lending has grown over the last few years for a variety of reasons.  Some are from lenders looking for higher returns than they can get in the bank.  Others want to diversify their portfolio to include assets such as these.  There are, however, a moderate number of lenders who chose peer-to-peer lending because they no longer trusted their bank or other financial institutional services such as Wonga.

Wonga has been, rightly or wrongly, hugely successful and is a well known brand.  Lending Well launched a payday peer-to-peer offering previously, but this only lasted a year.  How successful Wonga will be in peer-to-peer lending will be decided by the lenders and borrowers who choose to use their site.

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