Welby’s war on Wonga

Are the Archbishop of Canterbury’s plans to take on payday lenders heroic or harebrained?

The Archbishop of Canterbury’s remarks about his desire to compete payday lender Wonga “out of existence” by strengthening credit unions in the UK has got people thinking power has gone to his head.

However, Archbishop Welby could be on to something, if the Church gets its execution right. Just look at the success of Islamic banking to see how religion can be a powerful force in banking. The first question is: why would the Church take on a market leader in its own game from a standing start? The second is whether credit unions are a business the Church should be getting into, given that mainstream lenders steer clear of this sector with a bargepole?

The first answer is pretty simple: the Church loves a fight. Think the Crusades, gay marriage or female priests. Although the latter two show that more recently it’s been internal rather than external conflicts. So Archbishop Welby picking a fight with payday lenders, of which Wonga is the best known, is par for the course. Welby said this could be a “decade-long process”, which again isn’t a concern, since the Crusades lasted 200-odd years. A couple of decades is a cakewalk.

So now to the second question, why do it? Backing credit unions is risky, but could pay off, for several reasons, not least the social good it could generate.  There is little doubt that credit unions represent a small slice of the overall retail /commercial banking, although that is changing. According to the most recent unaudited figures by the Association of British Credit Unions, there are 1,025,438 people in the UK using credit unions, including over 123,000 junior savers. Since 2007, the number of members has increased by almost 50 per cent while the number of credit unions has dropped by 23 per cent. The Department of Work & Pensions say up to seven million people use sources of high cost credit e.g. home credit, pay day lenders and pawnbrokers.

So there is a rising market worth £2bn, with a falling number of competitors – both good and bad news. Good because there’s demand, bad because it’s tough to make money.

A second reason is that the Church has a strong brand to leverage off, a loyal customer base (parishioners) and presumably trust in its overall intentions, something badly lacking from many mainstream retail banks. Thirdly, on the surface, its costs/overheads would be relatively low. It already owns the church halls and properties it’ll operate the credit unions out of – a reason why many mainstream banks have cut back branch numbers. It also has a ready supply of cheap labour. According to Welby, there are plans to encourage church members with relevant skills to volunteer at credit unions. It would need to invest in an easy-to-use and quick technology platform to make the most of its countrywide scale.

Now to the downsides. The main reservation about launching such an initiative is the fact that most financial institutions steer clear of the sub-prime sector because there’s significant risk. Mainstream banks don’t go there because these are high risk loans with a danger of not having them paid back. Although Airdrie Savings Bank has launched its own short-term loan, Co-op is an example of a mutual (so not in itself a credit union) that is clearly not working at the moment. Finally, there is the reputational risk. If Church-backed credit unions were caught up in a PPI-style, or sub-prime mortgage, scandal, it would lose the trust of not only its customers, but its parishioners too – the ultimate death knell for The Church.

So why do it? To provide an alternative for those who can’t get credit from traditional lenders, with a social, rather than profit, motive is a noble cause. I wish them good luck, but with the words from a report by Civitas ringing loudly: "To be effective charities, they must first be effective financial institutions."

The Archbishop of Canterbury, Photograph: Getty Images

Nick Moody is the editor - Private Banker International at Progressive Media Group.

 

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A global marketplace: the internet represents exporting’s biggest opportunity

The advent of the internet age has made the whole world a single marketplace. Selling goods online through digital means offers British businesses huge opportunities for international growth. The UK was one of the earliest adopters of online retail platforms, and UK online sales revenues are growing at around 20 per cent each year, not just driving wider economic growth, but promoting the British brand to an enthusiastic audience.

Global e-commerce turnover grew at a similar rate in 2014-15 to over $2.2trln. The Asia-Pacific region, for example, is embracing e-marketplaces with 28 per cent growth in 2015 to over $1trln of sales. This demonstrates the massive opportunities for UK exporters to sell their goods more easily to the world’s largest consumer markets. My department, the Department for International Trade, is committed to being a leader in promoting these opportunities. We are supporting UK businesses in identifying these markets, and are providing access to services and support to exploit this dramatic growth in digital commerce.

With the UK leading innovation, it is one of the responsibilities of government to demonstrate just what can be done. My department is investing more in digital services to reach and support many more businesses, and last November we launched our new digital trade hub: www.great.gov.uk. Working with partners such as Lloyds Banking Group, the new site will make it easier for UK businesses to access overseas business opportunities and to take those first steps to exporting.

The ‘Selling Online Overseas Tool’ within the hub was launched in collaboration with 37 e-marketplaces including Amazon and Rakuten, who collectively represent over 2bn online consumers across the globe. The first government service of its kind, the tool allows UK exporters to apply to some of the world’s leading overseas e-marketplaces in order to sell their products to customers they otherwise would not have reached. Companies can also access thousands of pounds’ worth of discounts, including waived commission and special marketing packages, created exclusively for Department for International Trade clients and the e-exporting programme team plans to deliver additional online promotions with some of the world’s leading e-marketplaces across priority markets.

We are also working with over 50 private sector partners to promote our Exporting is GREAT campaign, and to support the development and launch of our digital trade platform. The government’s Exporting is GREAT campaign is targeting potential partners across the world as our export trade hub launches in key international markets to open direct export opportunities for UK businesses. Overseas buyers will now be able to access our new ‘Find a Supplier’ service on the website which will match them with exporters across the UK who have created profiles and will be able to meet their needs.

With Lloyds in particular we are pleased that our partnership last year helped over 6,000 UK businesses to start trading overseas, and are proud of our association with the International Trade Portal. Digital marketplaces have revolutionised retail in the UK, and are now connecting consumers across the world. UK businesses need to seize this opportunity to offer their products to potentially billions of buyers and we, along with partners like Lloyds, will do all we can to help them do just that.

Taken from the New Statesman roundtable supplement Going Digital, Going Global: How digital skills can help any business trade internationally

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