Payday lender Wonga to drop toxic name and advert puppets after losses
Payday lender Wonga is planning to replace its toxic brand with a new name and a range of products beyond its core payday lending business, its bosses said yesterday.
The online loans firm made a £37.3m loss in 2014 on falling lending and a sharp rise in costs.
It is under financial strain as it meets tough new regulations, pays compensation to mistreated customers and cancels inappropriate loans which it should never have made.
“With the cap on interest rates and lower fees, the margins have shrunk for individual profits,” chief finance officer Paul Miles told City A.M.
Tara Kneafsey heads Wonga’s UK arm and is coming up with new products for the lender
“If we were setting up from scratch, we could build a sustainably profitable business. But we have the issue of our legacy, and how we manage our cost base.”
One way around that is to expand Wonga’s product base beyond the 3m potential payday loan customers and into the wider 13m Britons who are cash or credit constrained.
“We have worked hard to repair our position with the short-term loan product, and coming out of that we have 600,000 loyal customers who like the brand and use the product in the right way,” said UK chief Tara Kneafsey.
“But in the wider 13m market, we have to ask how far the brand travels. There are different customers with different needs.”
That means the firm is looking to re-brand, before launching TV adverts again later this year.
“No puppets will feature, nor anything that looks like a puppet,” said Kneafsey.
Although the firm is currently financially robust with a cash pile of £125m, it expects to obtain debt finance in the coming years – so far it has been entirely funded by equity investors and by retained profits.