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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“I felt very lonely”: addressing the untold story of isolation among young mothers

With one in five young mothers lonely “all the time”, it’s time for employers and services to step up.

“Despite having my child with me all the time, I felt very lonely,” says Laura Davies. A member of an advisory panel for the Young Women’s Trust, she had her son age 20. Now, with a new report suggesting that one in five young mums “feels lonely all the time”, she’s sharing her story.

Polling commissioned by the Young Women’s Trust has highlighted the isolation that young motherhood can bring. Of course, getting out and about the same as you did before is never easy once there’s a young child in the picture. For young mothers, however, the situation can be particularly difficult.

According to the report, over a quarter of young mothers leave the house just once a week or less, with some leaving just once a month.

Aside from all the usual challenges – like wrestling a colicky infant into their jacket, or pumping milk for the trip with one hand while making sure no-one is crawling into anything dangerous with the other – young mothers are more likely to suffer from a lack of support network, or to lack the confidence to approach mother-baby groups and other organisations designed to help. In fact, some 68 per cent of young mothers said they had felt unwelcome in a parent and toddler group.

Davies paints what research suggests is a common picture.

“Motherhood had alienated me from my past. While all my friends were off forging a future for themselves, I was under a mountain of baby clothes trying to navigate my new life. Our schedules were different and it became hard to find the time.”

“No one ever tells you that when you have a child you will feel an overwhelming sense of love that you cannot describe, but also an overwhelming sense of loneliness when you realise that your life won’t be the same again.

More than half of 16 to 24-year-olds surveyed said that they felt lonelier since becoming a mother, with more than two-thirds saying they had fewer friends than before. Yet making new friends can be hard, too, especially given the judgement young mothers can face. In fact, 73 per cent of young mothers polled said they’d experienced rudeness or unpleasant behaviour when out with their children in public.

As Davies puts it, “Trying to find mum friends when your self-confidence is at rock bottom is daunting. I found it easier to reach out for support online than meet people face to face. Knowing they couldn’t judge me on my age gave me comfort.”

While online support can help, however, loneliness can still become a problem without friends to visit or a workplace to go to. Many young mothers said they would be pleased to go back to work – and would prefer to earn money rather than rely on benefits. After all, typing some invoices, or getting back on the tills, doesn’t just mean a paycheck – it’s also a change to speak to someone old enough to understand the words “type”, “invoice” and “till”.

As Young Women’s Trust chief executive Dr Carole Easton explains, “More support is needed for young mothers who want to work. This could include mentoring to help ease women’s move back into education or employment.”

But mothers going back to work don’t only have to grapple with childcare arrangements, time management and their own self-confidence – they also have to negotiate with employers. Although the 2003 Employment Act introduced the right for parents of young children to apply to work flexibly, there is no obligation for their employer to agree. (Even though 83 per cent of women surveyed by the Young Women’s Trust said flexible hours would help them find secure work, 26 per cent said they had had a request turned down.)

Dr Easton concludes: “The report recommends access to affordable childcare, better support for young women at job centres and advertising jobs on a flexible, part-time or job share basis by default.”

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland