Wonga are blinding critics with science

The payday loan company shows off about its algorithm, but lends to the same vulnerable people.

I read Michael Brooks' article, Doing Science the Wonga Way, with great interest.

I have had the algorithm Wonga uses to distinguish between applicants explained to me, and it is fascinating. It makes the most of the fact that the internet is replete with thousands of pieces of information about us that, in aggregate, paint a reasonable picture of who we are. More importantly for Wonga, they also paint a picture of how creditworthy we might be. It doesn't take this lightly: I've been told it uses 6-8000 data points about the each of the people it checks.

The problem was that I only had the algorithm explained to me after its accuracy was seriously put in to question.

Wonga has a weekly survey of people who they consider to be good customers, and they brag about them to journalists. When the Guardian's Amelia Gentleman interviewed Errol Damelin, the chief executive of Wonga, he and his team had a chance to show that their model worked. When they put names of potential customers through their high-tech filters, the system ought to tell them whether they would be good customers. They would then only lend if it would be responsible to. After all, Wonga says that it turns away two-thirds of applicants.

Rather than the "web-savvy young professionals" that the company says that it lends to, one of the "good customers" on their weekly survey was Susan, an unemployed former nurse dependent on disability benefits. She uses the loans she receives from Wonga to buy food when she is short of cash. In fact, at the time of the Guardian interview, she had taken out 6 loans with Wonga, nearly double the amount of payday loans the average customer takes out (3.5).

We have two options here. Either we can assume Wonga purposefully targets people who are not median income, employed and web-savvy, unlike what they say, or their algorithm doesn't work as well as they say.

In the same interview with the Guardian, John Morwood, Wonga's communications director, said:

Sometimes we will make loans to people on significant benefits, but it is not something we do very frequently. It is very infrequent. I’m not going to say it doesn’t happen.

Dr Brooks is correct to say that the company has enjoyed some fantastic and enviable funding from several organisations. Last time I looked, Wonga were the beneficiaries of £3.7m from Balderton Capital in 2007, £14m from Accel Partners (also investors in Facebook) in 2009, then £73m from Oak Investment Partners, Meritech Partners and the Wellcome Trust.

I can't be certain, but my assumption is that at least some of these backers are interested in Wonga as an example of good science put into action by business, and aren't particularly interested in funding legal loansharking.

But Wonga's algorithm clearly doesn't alter the fundamentals of their business as much as they claim. Even with their flashy, investor-attracting scientific background, they still lend to people whose custom they admit they ought not to take.

Wonga itself is either misusing its own system to justify lending to people who should be served by less expensive lenders such as credit unions (which I think payday lenders should be obliged to advertise to low-income customers), or its algorithm needs a lot more work than it says.

As it stands, if the system confuses repeat borrowers who are unemployed and on benefits to buy food for people who are middle class, have bank accounts, are in full time employment and need the cash for minor financial shocks here and there, then there is a major issue.

Photograph: Getty Images

Carl Packman is a writer, researcher and blogger. He is the author of the forthcoming book Loan Sharks to be released by Searching Finance. He has previously published in the Guardian, Tribune Magazine, The Philosopher's Magazine and the International Journal for Žižek Studies.
 

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How English identity politics will shape the 2017 general election

"English" voters are more likely to vote Conservative and Ukip. But the Tories are playing identity politics in Scotland and Wales too. 

Recent polls have challenged some widely shared assumptions about the direction of UK elections. For some time each part of the UK has seemed to be evolving quite distinctly. Different political cultures in each nation were contested by different political parties and with different parties emerging victorious in each.

This view is now being challenged. Early general election surveys that show the Tories leading in Wales and taking up to a third of the vote in Scotland. At first sight, this looks a lot more like 1997 (though less enjoyable for Labour): an increasingly hegemonic mainland party only challenged sporadically and in certain places.

Is this, then, a return to "politics as normal"? Perhaps the Tories are becoming, once again, the Conservative and Unionist Party. Maybe identity politics is getting back into its box post Brexit, the decline of Ukip, and weak support for a second independence referendum. We won’t really know until the election is over. However, I doubt that we’ve seen the back of identity politics. It may actually bite more sharply than ever before.

Although there’s talk about "identity politics" as a new phenomenon, most votes have always been cast on a sense of "who do I identify with?" or "who will stand up for someone like us?" Many voters take little notice of the ideology and policy beloved of activists, often voting against their "objective interests" to support a party they trust. The new "identity politics" simply reflects the breakdown of long-established political identities, which were in turn based on social class and collective experiences. In their place, come new identities based around people, nations and place. Brexit was never really about the technocratic calculation of profit and loss, but about what sort of country we are becoming, and what we want to be. 

Most social democratic parties in Europe are struggling with this change. Labour is no different. At the start of the general election, it faces a perfect storm of changing identities. Its relationship with working-class voters continues to decline. This is not because the working class has disappeared, but because old industries, with their large workplaces, shared communities and strong unions are no longer there to generate a labour identity. 

Labour is badly adrift in England. The English electorate has become increasingly assertive (and increasingly English). The Brexit vote was most strongly endorsed by the voters who felt most intensely English. In the previous year’s general election, it was fear of Scottish National Party influence on a Labour minority government that almost certainly gave the Tories the English seats needed for an overall majority. In that same election, Labour’s support amongst "English only" voters was half its support amongst "British only" voters. The more "English" the voters, the more likely they were to vote Ukip or Conservative. It shouldn’t be a surprise if Ukip voters now go Tory. Those who think that Ukip somehow groomed Labour voters to become Tories are missing the crucial role that identity may be playing.

So strong are these issues that, until recently, it looked as though the next election - whenever it was called - would be an English election - fought almost entirely in English battlegrounds, on English issues, and by a Tory party that was, increasingly, an English National Conservative Party in all but name. Two powerful identity issues are confounding that assumption.

Brexit has brought a distinctly British issue into play. It is enabling the Tories to consolidate support as the Brexit party in England, and at the same time reach many Leave voters in Wales, and maybe Scotland too. This serendipitous consequence of David Cameron’s referendum doesn’t mean the Tories are yet fully transformed. The Conservative Party in England is indeed increasingly focused on England. Its members believe devolution has harmed England and are remarkably sanguine about a break up of the union. But the new ability to appeal to Leave voters outside England is a further problem for Labour. The Brexit issue also cuts both ways. Without a clear appeal cutting through to Leave and Remain voters, Labour will be under pressure from both sides.

North of the border, the Tories seemed to have found - by accident or design - the way to articulate a familial relationship between the party in Scotland and the party in England. Scottish Conservative leader Ruth Davidson appears to combine conservatism, unionism and distance from English politics more successfully than Scottish Labour, which must ride the two horses of "near home rule" and committed unionism. Scottish Labour has a perfectly good call for a reformed union, but it is undermined by the failure of Labour in England to mobilise enough popular support to make the prospect credible.

Identity politics is not, of course, the be all and end all of politics. Plenty of voters do cast their ballots on the traditional tests of leadership, economic competence, and policy. Labour’s campaign will have to make big inroads here too. But, paradoxically, Labour’s best chance of a strong result lies in taking identity politics head on, and not trying to shift the conversation onto bread and butter policy, as the leaked "talking points" seem to suggest. Plenty of voters will worry what Theresa May would do with the untrammelled power she seeks. Challenging her right or ability to speak for the nation, as Keir Starmer has done, is Labour’s best bet.

 

John Denham was a Labour MP from 1992 to 2015, and a Secretary of State 2007 to 2010. He is Director of the Centre for English Identity and Politics at Winchester University

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