The Archbishop In The Wonga
Before you open your mouth, it is always best to check your facts or in the case of Justin Welby, your church’s investments. If he had he’d have found that his target yesterday, was a company they’d indirectly invested in. It’s reported here on the BBC.
A few weeks ago, I wrote about Robert Peston’s views on Wonga. I said this.
Obviously, Wonga did a lot of analysis on their data and this has led them to their success, as they have the right model and technology. Peston says Wonga’s technology is world class. If banks such as RBS, Northern Rock and Bradford and Bingley had had world-class technology, they might not have gone bust.
I would add to that now. Perhaps, if when you sign any credit agreement or loan, how many would be refused if versions of Wonga’s technology is used. The success of any loan or credit company depends heavily on the quality of its lenders.
But the downside is that there would be a hard-core of people unable to get any form of credit. No reputable lender, and especially a credit union, would ever touch them.
Archbishop In Cloud Cuckoo Land
This story about how Justin Welby aims to compete Wonga out of business, is on the BBC today. Here’s the jist.
The Archbishop of Canterbury has warned the online lender Wonga that the Church of England plans to force it out of business – by competing against it.
He may have laudible aims, but like the poor, loan sharks, where legal or not, will always be with us.
What the people who use Wonga need is money and if everybody supported credit unions, that wouldn’t give any money directly to those who need it.
Credit unions, like all responsible lenders, don’t lend money to those who would be unable or unwilling to pay it back.
Does Danny Alexander Read My Blog?
Last week I published this post. The key part is this paragraph.
I would like to see a law, where all loan companies from the banks, through peer-to-peer lenders to the legal loan sharks, have to publish the amount of money they lend in various parts of the country.
Today I read this article on the BBC web site. Here’s the first paragraph.
Major UK banks will reveal details from January of their lending in thousands of local areas, Chief Secretary to the Treasury Danny Alexander has announced.
So did he read what I said?
Remember many years ago I used to analyse the costs in the various branches of what was then a major clearing bank. It was amazing the differences you got between branches causes by the odd mistake, malpractice or unforeseen circumstance.
Who Needs Outside Investors?
The Sunday Times has two articles today about very successful companies that have become that way and financially secure, without any external finance.
I’ve known about the first, Martin Baker for many years and in some ways it’s surprising that they haven’t sold out, as anno domini catch up with us all.
The other is a Cambridge company called Real VNC, who provide software for virtual network connections. They have just won the MacRobert Award as is reported here.
I like the quote from Andy Harter, one of the founders of the company.
We need to persuade young people that engineering means the people who built the Olympic Park and the internet, and that it is a great choice of career.
I’ve spend a life in engineering and would thoroughly agree. I’ve even applied engineering principles to banking and finance. Bankers have needed me more, than I’ve needed them!
On the other hand when I needed a good banker, I found an excellent one in my friend David, who came to me because of the quality of my work on an internal project he started in the bank. How many bankers these days would recognise a good engineer or scientist? Only after he’s sold his or her company, I suspect!
Cissé’s Stand On Wonga
Papiss Cissé is adamant he won’t wear a Wonga-branded shirt, as reported here in the Guardian.
I support his stand.
I would like to see a law, where all loan companies from the banks, through peer-to-peer lenders to the legal loan sharks, have to publish the amount of money they lend in various parts of the country.
That way we could see if shirt sponsorship was a good idea for lenders.
Zopa Tweaks The Alogorithm
I am a Control Engineer by training, so I’m supposed to be able to make systems perform in a safe and stable manner. As an example, when your train comes into the station and stops precisely in the right place, or an airliner lands itself automatically, a Control Engineer will have been responsible for working out the principles of how that is done. I have said before that Zopa is in fact a stable system, but now they have tweaked the algorithm to speed up the lending process without losing any of the stability. It’s all described here in their blog.
The most important way to lend money faster is to create a bigger demand. Zopa asks lenders to spread the word to those with good credit ratings, who might want to borrow money for sensible purposes.
But of course, you won’t get a bigger demand unless you have more money in the pot to borrow! So the whole process should spiral and feed in on itself.
The one thing that needs to be maintained to the highest possible level, is the checking of borrowers to make sure, they’re credit worthy.
But even this process should get better, as Zopa learns more about good borrowers and this feeds back into the system.
The whole system is a classic feedback control system, that has the ability to mutate and change itself by learning from its history.
Does your very average bank, like the Royal Bank of UK Taxpayers behave like this? Of course it doesn’t, as those at the top cast a strategy in stone and it gets slavishly followed to the letter. Unfortunately, it has no capacity to learn and change in a Darwinian manner.
But more importantly, it can’t respond easily to increased demand and a changed marketplace. Royal Bank of UK Taxpayers also has constraints placed on it, as regards to parameters like working capital.
Zopa just needs to balance their lending to the amount that is deposited by lenders, or as I prefer savers. If I look at my figures for Zopa over the last year or so, these figures have been moving towards balance.
Now with their Safeguard system enabled, the loop has been closed!
The Future Of Cash Machines
This article raises a few questions about cash machines and how they will look in the future.
I don’t have a problem with the machines themselves, but increasingly over the last few years, I’ve had problems with the placement of a few machines, due to being unable to read them in the sun. And it’s not just cash machines, as this post shows.
I also have problems with some touch-screen technology.
And of course, if they insists on a smart phone in some way, they can forget it!
As they can, if I get charged to take out my money!
I think we’ll see the standard design last a few more years yet!
What Do You Get When You Cross Zopa With Wonga?
At a first glance Zopa and Wonga are at the two ends of the financial spectrum, when it comes to borrowing and lending money.
Zopa, Funding Circle and Ratesetter, and probably a few other peer-to-peer lenders in the UK and around the rest of the world, take in money from those who want a bit more interest on their savings and lend it out to those who after a series of rigorous checks, look like they might be able to repay it.
I have seen figures which show that peer-to-peer lending grew by 300% in the last year and has now lent over half a billion pounds. So they must be doing something right! On a personal note, although my return has dropped a bit in the last year, I still get nearly five percent on my money invested in Zopa before tax, after taking into account all charges and bad debts.
Wonga and the other payday lenders probably lend a lot of their money to people who’d never qualify for a loan from Zopa and their peers. The interest rates are a lot higher and the terms are generally not as favourable as those offered by Zopa.
In some ways what unites Wonga and Zopa is their efficient systems, backed by state-of-the-art computing. Robert Peston talked about Wonga’s systems in this article.
eMoneyUnion is a new peer-to-peer lender, which could be thought as a company, that takes the best practice of Zopa and Wonga and combines them to create a company that can lend to those who wouldn’t get a Zopa loan, but also gives a good return to its investors. This article is about the launch of the company.
So it would appear that eMoneyUnion could be the cross between Zopa and Wonga!
Let’s hope it all works out well. I shall be investing.
Is It Time To Leave Lloyds TSB?
If I was a Lloyds TSB customer, who was being summarily moved to another bank, like the Co-operative Bank or hived off into a subsidiary that was being privatised or perhaps sold to a sovereign wealth fund, I would not be pleased. In fact, given the shenanigans at the bank in this area, over the last couple of years, I would have been long gone.
This disregard of customer wishes is akin to buying a new Sony television and then when it is working well, getting a letter to say, that your new television is being swapped for a Samsung, for no good reason.
It is a matter of my human rights, that I choose where I keep my money and it has nothing to do with the government.
I don’t think that I’m the only person, who thinks like this and it will be interesting to see how many customers Lloyds TSB lose.
Today there is a story on the BBC web site, about how the banks are lining up to take part in the sale of the government’s stake in Lloyds TSB. This will only make matters worse and I suspect, a once-great British institution, will end up in the hands of foreigners.
I certainly will have nothing to do with the Lloyds TSB sale and if it was decided that every UK citizen, should get a few free shares, I’d just say thank you very much, cash them in as soon as I could and then spend the money on something more worthwhile.
Zopa Starts Loans To Sole Traders
Zopa is now moving into new territory by announcing business loans to sole traders. The details are here. Here’s Zopa’s reasoning as reported by the article.
We’ve chosen to start our business loans with sole traders for two reasons:
1. We saw that there were few opportunities for smart sole traders, with a good credit and trading history, to access good-value loans.
2. Sole traders are often looking for loans of a similar size and time period as our personal loan borrowers so offering these loans doesn’t require big changes for our savers to the way they choose to lend
So will it make any difference to the risk of investing in Zopa?
I don’t think it will make much difference at all, especially as I suspect the profile of the sole traders they lend to, won’t be far removed from a typical Zopa personal borrower.
The only problem, I can see is that to support this new area of lending the Government is injecting millions into Zopa. What effect will this have on the rates lenders like myself get, I do not know or wish to predict!
The Anonymous Widower 