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.

Photo: Getty
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Like it or hate it, it doesn't matter: Brexit is happening, and we've got to make a success of it

It's time to stop complaining and start campaigning, says Stella Creasy.

A shortage of Marmite, arguments over exporting jam and angry Belgians. And that’s just this month.  As the Canadian trade deal stalls, and the government decides which cottage industry its will pick next as saviour for the nation, the British people are still no clearer getting an answer to what Brexit actually means. And they are also no clearer as to how they can have a say in how that question is answered.

To date there have been three stages to Brexit. The first was ideological: an ever-rising euroscepticism, rooted in a feeling that the costs the compromises working with others require were not comparable to the benefits. It oozed out, almost unnoticed, from its dormant home deep in the Labour left and the Tory right, stoked by Ukip to devastating effect.

The second stage was the campaign of that referendum itself: a focus on immigration over-riding a wider debate about free trade, and underpinned by the tempting and vague claim that, in an unstable, unfair world, control could be taken back. With any deal dependent on the agreement of twenty eight other countries, it has already proved a hollow victory.

For the last few months, these consequences of these two stages have dominated discussion, generating heat, but not light about what happens next. Neither has anything helped to bring back together those who feel their lives are increasingly at the mercy of a political and economic elite and those who fear Britain is retreating from being a world leader to a back water.

Little wonder the analogy most commonly and easily reached for by commentators has been that of a divorce. They speculate our coming separation from our EU partners is going to be messy, combative and rancorous. Trash talk from some - including those in charge of negotiating -  further feeds this perception. That’s why it is time for all sides to push onto Brexit part three: the practical stage. How and when is it actually going to happen?

A more constructive framework to use than marriage is one of a changing business, rather than a changing relationship. Whatever the solid economic benefits of EU membership, the British people decided the social and democratic costs had become too great. So now we must adapt.

Brexit should be as much about innovating in what we make and create as it is about seeking to renew our trading deals with the world. New products must be sought alongside new markets. This doesn’t have to mean cutting corners or cutting jobs, but it does mean being prepared to learn new skills and invest in helping those in industries that are struggling to make this leap to move on. The UK has an incredible and varied set of services and products to offer the world, but will need to focus on what we do well and uniquely here to thrive. This is easier said than done, but can also offer hope. Specialising and skilling up also means we can resist those who want us to jettison hard-won environmental and social protections as an alternative. 

Most accept such a transition will take time. But what is contested is that it will require openness. However, handing the public a done deal - however well mediated - will do little to address the division within our country. Ensuring the best deal in a way that can garner the public support it needs to work requires strong feedback channels. That is why transparency about the government's plans for Brexit is so important. Of course, a balance needs to be struck with the need to protect negotiating positions, but scrutiny by parliament- and by extension the public- will be vital. With so many differing factors at stake and choices to be made, MPs have to be able and willing to bring their constituents into the discussion not just about what Brexit actually entails, but also what kind of country Britain will be during and after the result - and their role in making it happen. 

Those who want to claim the engagement of parliament and the public undermines the referendum result are still in stages one and two of this debate, looking for someone to blame for past injustices, not building a better future for all. Our Marmite may be safe for the moment, but Brexit can’t remain a love it or hate it phenomenon. It’s time for everyone to get practical.