Mr. Hurwitz designed the technology, specifically the “sliders” on the website that show how much it costs to borrow money over different periods of time. The numbers change for different borrowers, depending on what the algorithm can glean from the digital fingerprints they leave on their computers – their choice of web browser, IP addresses, Facebook profiles, whether they have arrived. directly on the website or through an advertisement.
Wonga employs more than 650 people, including 150 data engineers. And while the bulk of its loans are in Britain, the company also operates in Canada, Poland, South Africa and Spain. Although these countries cap interest rates, Wonga has found ways to increase other fees to ensure a profit.
Much of Wonga’s success is based on the lack of regulation in Britain, which has prompted some US companies to open offices, including MEM Consumer Finance (PaydayUK), the Dollar Financial Group (the Money Shop) and Cash America. (QuickQuid).
“Britain was the golden jug at the end of the payday rainbow for business,” said Lewis, the personal finance expert. “They are not doing anything against our law. The problem, however, is our law.
Usurious lending is illegal in Britain, but there is no cap on high-cost borrowing – as is the case, for example, in Germany and France, which have credit limits of about 16% and 20%. In the United States, regulations differ from state to state. But 15 states have banned payday loans altogether, while others have imposed laws to limit interest rates and the number of loans that can be made to each client.
Now the UK government is offering caps on payday loans and fees. And next spring, officials of the Financial conduct authority plan to impose new rules, including requiring clearer advertising warnings and limiting the number of times a loan can be extended.
Mr. Damelin said he too wanted better regulation. “Bad guys make it difficult for anyone innovating in financial services,” he told The Telegraph. “Wonga just happens to be a poster because we built a brand that is well recognized today and we built a ladder.”