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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Will anyone sing for the Brexiters?

The five acts booked to perform at pro-Brexit music festival Bpoplive are down to one.

Do Brexiters like music too? If the lineup of Bpoplive (or more accurately: “Brexit Live presents: Bpop Live”) is anything to go by, the answer is no. Ok, former lineup.

The anti-Europe rally-cum-music festival has already been postponed once, after the drum and bass duo Sigma cancelled saying they “weren’t told Bpoplive was a political event”.

But then earlier this week the party was back on, set for Sunday 19th June, 4 days before the referendum, and a week before Glastonbury, saving music lovers a difficult dilemma. The new lineup had just 5 acts: the 90s boybands East17 and 5ive, Alesha Dixon of Britain’s Got Talent and Strictly Come Dancing fame, family act Sister Sledge and Gwen Dickey of Rose Royce.

Unfortunately for those who have already shelled out £23 for a ticket, that 5 is now down to 1. First to pull out were 5ive, who told the Mirror that “as a band [they] have no political allegiances or opinions for either side.” Instead, they said, their “allegiance is first and foremost to their fans”. All 4our of them.

Next to drop was Alesha Dixon, whose spokesperson said that that she decided to withdraw when it became clear that the event was to be “more of a political rally with entertainment included” than “a multi-artist pop concert in a fantastic venue in the heart of the UK”. Some reports suggested she was wary of sharing a platform with Nigel Farage, though she has no qualms about sitting behind a big desk with Simon Cowell

A spokesperson for Sister Sledge then told Political Scrapbook that they had left the Brexit family too, swiftly followed by East 17 who decided not to stay another day.

So, it’s down to Gwen Dickey.

Dickey seems as yet disinclined to exit the Brexit stage, telling the Mirror: "I am not allowed to get into political matters in this lovely country and vote. It is not allowed as a American citizen living here. I have enough going on in my head and heart regarding matters in my own country at this time. Who will be the next President of the USA is of greater concern to me and for you?"

With the event in flux, it doesn’t look like the tickets are selling quickly.

In February, as David Cameron’s EU renegotiation floundered, the Daily Mail ran a front-page editorial asking “Who will speak for England?” Watch out for tomorrow’s update: “Who will sing for the Brexiters?”

I'm a mole, innit.