Wonga planning to offer savings accounts
Wonga, the payday loan company, is planning to increase its range of financial products this year with a move into the online savings market.
Wonga’s chief executive Errol Demelin confirmed the firm’s expansion plans at a meeting of the Albion Society, which brought together brands considered to be spearheading innovation in the personal finance market.
Mr Demelin said that the traditional model of high-street bank lending has become “bankrupt”, although he acknowledged the importance of banks in providing a safe place to deposit money and carry out transactions.
He suggested that technology-forward platforms such as Wonga could provide innovative, added-value services to match un-filled consumer needs.
However, although Wonga is licensed by the Office of Fair Trading, it is not regulated by the Financial Services Authority (FSA).
The company would need to gain a licence from the FSA before being allowed to offer deposit accounts, a process which takes around nine months to complete.
Wonga is also believed to be planning a £1 billion floatation on New York’s Nasdaq stock market.
The company, which is currently backed by Balderton Capital and Greylock Partner, is seeking two banks to lead the process, although the floatation has not yet received final approval.
Wonga was recently criticised by the OFT for wrongly accusing customers of committing fraud and threatening them with police action.
The OFT ordered the payday lender to change its business practices after investigating claims that it contacted customers by letter and over the phone, with the wrongful accusations.
Wonga and other payday lenders have also been criticised for charging customers high interest rates and exorbitant charges which can soon push customers into a spiral of debt.
Wonga charges an annual percentage rate as high as 4214 per cent on short term loans.