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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The good, the bad, and the meaningless: Jeremy Corbyn’s “digital democracy” decoded

The Labour leader has promised to “democratise the internet” but which parts of his manifesto would actually work?

Jeremy Corbyn has promised to “democratise the internet”, speaking this morning at the launch of his eight-point digital manifesto at Newspeak House in east London.

“Labour under my leadership will utilise the advances of digital technology to mobilise the most visible general election campaign ever,” said Corbyn, in a clip you might have watched via a livestream on his Facebook page, before it crashed.

His manifesto sets out how Labour hopes to democratise the internet so that “no one and no community is left behind”. Unfortunately, some of the terminology used isn’t so universal. In a bid to leave no one behind, we thought we’d decode the manifesto here.

The good

Universal Service Network

It’s hard to argue with Corbyn’s first and largest proposal – that high speed broadband should be accessible across the country. According to the Labour leader, this would cost £25bn to implement and would be funded by his proposed National Investment Bank, “at minimal cost to the taxpayer”.

Although this is good idea, it isn’t a new one. The Conservatives already announced plans for a similar Universal Service Obligation (USO) in March, whereby everyone has a legal right to request download speeds of at least 10Mbps. A report published by Ofcom last week shows the government faces resistance from internet service providers who don’t want to pick up the extra costs.

The People’s Charter of Digital Liberties

Corbyn’s second most eye-catching suggestion, a digital bill of rights, is a win for anyone wary of Theresa May’s Snoopers Charter. He promises to protect personal privacy and “[enhance] the on-line rights of every individual”.

Platform Cooperatives

Corbyn hopes to “foster the cooperative ownership of digital platforms for distributing labour and selling services”, which essentially means he wants services like Airbnb, Deliveroo, and Uber to be community-run (or, if you want to go there, nationalised). The National Investment Bank would fund these websites and apps, which in turn would allow greater regulations of employment contracts. It’s quite a utopian vision and it's easy to be cynical about how this could work in practice, but were it to work, it could arguably transform the entire economy. 

The bad

Digital Citizen Passport

“We will develop a voluntary scheme that provides British citizens with a secure and portable identity for their on-line activities,” claims the manifesto, explaining this can be used to interact with public services like health, welfare, education and housing. Without even considering any potential security or privacy issues, the largest criticism of this proposal is that it already exists, as Gov.uk’s Verify.

Programming For Everyone

By encouraging publicly funded software and hardware to be released under an Open Source License, Corbyn dreams of a world where everyone can share code and learn from one another. Unfortunately, this opens up multiple privacy and security concerns, and Corbyn's other suggestions for teaching code also already exist, as the EU’s All You Need Is (C<3de) programme. 

The meaningless

Open Knowledge Library

At first glance, Corbyn’s proposal for a “free-to-use on-line hub of learning resources for the National Education Service” is undeniably a good idea. The problem is that the idea ends there, with no real discussion of what it is and how it will work. At present, it simply sounds like a publicly-funded version of resources that are already available (Wikipedia, anyone?).

Community Media Freedom

The entirety of this policy basically boils down to “free speech, yo”, which is, unarguably, fantastic. Unfortunately, the manifesto offers little in the way of explaining how its goals, such as stopping the “manipulation of software algorithms for private gain”, will actually be achieved.

Massive Multi-Person On-line Deliberation

Corbyn’s plan to “organise online . . . meetings for individuals and communities to deliberate about pressing political issues and participate in devising new legislation” is Twitter. It’s just Twitter.

The extras

Outside of this eight-point manifesto, here are some other things we learned today about Labour’s digital plans:

  • According to Corbyn, some MPs don’t turn on their computers because they do not know how to, which, honestly, shall we deal with that first?
  • Team Corbyn hopes that technology – and the visibility it allows – will be Labour’s "path to victory", which is nice, but what he really means is: memes.
  • Corbyn reveals he has an “open mind” about nationalising the broadband network.
  • Corbyn calls online abuse appalling and says that Labour is chasing down offensive material.
  • A team of coders called Coders for Corbyn have released some digital tools to show your support for the leader. Yes, the Corbyn emoji  Jeremoji  is about to be a thing.
  • The entire manifesto features “online” written as “on-line” and really, that is the real issue here.

Amelia Tait is a technology and digital culture writer at the New Statesman.