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Wonga: another web disruption for loans

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During the week, I enjoyed lunch with a venture capitalist who works with start-up firms that are innovating in financial services. One of the businesses he’s investing in is Wonga, another business that appears to be disrupting banks' business models in the same way as Zopa has been.

I’d never heard of Wonga before, except in the colloquial English context where it means ‘money’, so my interest was immediately piqued.

Googling the word when I got home, sure enough the first hit was their homepage,

How imaginative!

I also then noticed that they appeared at FinovateStartup last year along with Mint, Prosper, Loanio and Wesabe, so they’ve been in good company (unfortunately, the presentation was confidential so it's not available on Finovate's website).

So what exactly do Wonga do?


They provide short-term loans through a 100% online process, with the funds typically transferred to your bank account within an hour.

It’s that last bit that’s key and their elevator pitch: "we process loans without paper, totally electronically and immediately".

They need your name, address, marital status and employment details to do credit checks of course.

Once clear, they send you a confirmation email and a unique PIN to your mobile.

Then all you do is link back to the website to finish the application. This bit requires your debit card and bank details, the former for repayment on the date you set and the bank details to deposit the loan.

On first application, you’re limited to £200 ($300) and, assuming you prove you’re trustworthy, that can be increased over time. The loan is for a maximum of 30 days and no more, so it’s not a credit service but a ‘tide-me-over’ service.

Mind you, with a £5:50 ($10) transmission fee and an interest rate of 1% per day (that’s an APR of 2,334%!), you wouldn’t want to keep the money for long.

In fact, the cost of a one-month loan, including fees, works out to be 36.7%, so it’s not advisable to keep money on Wonga for too long.

Even with all this, they’re pretty popular as this video from their customers shows:

The company launched in 2006. The site went live in 2007, and fully operational in summer 2008.

According to the Guardian, one of the few newspapers to have reported on the firm, Chief Executive Errol Damelin (a former investment banker) says that they "served over 50,000 customers during our testing phase and expect to help many more over the next 12 months."

You can see Errol interviewed at LeWeb08 in December in Paris.

Although the background noise is annoying, the interview is worth watching if you want to understand more of their model.

In particular, Errol makes it 100% clear that this is not microfinance, but commercial lending.

At those rates he’s right, although he does point out that it’s good value for money if you’re looking at these rates compared to bank interest rates and fees on overdrafts.

They’ve also made the Red Herring lists for the Top 100 European technology companies and Top 200 worldwide.

I can't say I'm surprised at this, as their whole business is completely automated with no humans involved in Wonga loans as all.  That’s why they only have 37 staff in London, with the rest of the development team in the Ukraine.


Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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