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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MP after a moonlighting job? I've got the perfect opportunity

If it's really about staying in touch with the real world, how about something menial and underpaid? Or reforming parliamentary rules on second jobs...

There she stood outside Number 10 on 13 July last year, the new Prime Minister pledging with earnest sincerity her mission to fight injustice and inequality, to “make Britain a country that works not for a privileged few, but for every one of us”.

 “When it comes to opportunity,” she promised the ‘just managing’ millions, “we won’t entrench the advantages of the fortunate few". Another new day had dawned

But predictably since then it’s been business as usual. If we needed proof, George Osborne has provided it: those who have so little must continue to go without so that the man with so much can have it all.

What would it take for Tory backbenchers to trouble Theresa May’s serenity? Not her u-turn on Brexit. Nor her denial of Parliament’s right to scrutinise the terms of the UK's uncertain future. Certainly not a rampant Labour opposition.

But were she to suggest that they give up their adventures in the black economy and focus on the job their constituents pay them for, she would face a revolt too bloody to contemplate.

Fifteen years ago, I introduced the short-lived Members of Parliament (Employment Disqualification) Bill. My argument was simply that being an MP is a full-time job for which MPs are paid a full-time salary. If they can find time to augment an income already three times the national average, they can’t be taking it seriously or doing it properly.

Imagine the scandal if other public servants - teachers perhaps or firefighters – were to clock off whenever they fancied to attend to their nice little earners on the side. What would become of Britain’s economy if employers were unable to prevent their workers from taking home full pay packets but turning up to work only when they felt inclined?

But that’s what happens in the House of Commons. Back in 2002, my research showed that a quarter of MPs, most of them Conservatives, were in the boardroom or the courtroom or pursuing lucrative consultancies when they should have been serving their communities. And it was clear that their extra-curricular activities were keeping them from their Parliamentary duties. For example, in the six month period I analysed, MPs with paid outside interests participated on average in only 65 per cent of Commons votes while MPs without second jobs took part in 91 per cent.

I doubt that much has changed since then. If anything, it’s likely that the proportion of moonlighting Members has risen as the number of Tory MPs has increased with successive elections.

Their defence has always been that outside interests make for better politicians, more in touch with the "real world". That’s entirely bogus. Listening to people in their surgeries or in their local schools, hospitals and workplaces provides all the insight and inspiration a conscientious MP could need. The argument would be stronger were absentee MPs supplementing their experience and income in the menial, insecure and underpaid jobs so many of their constituents are forced to do. But, they aren’t: they’re only where the money is.

It’s always been this way. The Parliamentary timetable was designed centuries ago to allow MPs to pursue a gentleman’s interests. Until relatively recently, the Commons never sat until after noon so that its Members could attend their board meetings – or edit the Evening Standard - and enjoy a good lunch before legislating. The long summer recess allowed them to make the most of the season, indulge in a few country sports and oversee the harvest on their estates.

The world has changed since Parliamentary precedent was established and so has the now overwhelming workload of a diligent MP. There are many of them in all parties. But there are also still plenty like George Osborne whose enduring sense of entitlement encourages them to treat Parliament as a hobby or an inheritance and their duty to their constituents as only a minor obstacle to its enjoyment.

Thanks to Osborne’s arrogance, the Committee on Standards in Public Life now has the unflunkable opportunity to insist on significant, modernising reforms which remind both MPs and their electors that public service should always take precedence over private interest. And if sitting MPs can’t accept that principle or subsist on their current salary, they must make way for those who can. Parliament and their constituents would be better off without them.

Peter Bradley was the Labour MP for The Wrekin between 1997 and 2005.