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Online Microlenders In UK Taking On High Street Banks

by Jim ONeil on July 22, 2011

in uk loans news

Statistics indicate that more UK consumers are taking advantage of short-term credit provided by online lenders. Individuals running these businesses report that the trend is not a response to less cash and restricted credit.

It is because traditional lenders have stopped listening to their customers. The result is a new type of lending market for the electronic age.

Ferratum is a Finnish microlender established by Jorma Jokela in 2005. Its customers complete an online application to borrow an average of 160 euros for no longer than 30 days.

A loan decision is supplied within about 4.5 minutes and customers receive their cash within ten minutes. Ferratum now has just under one million customers in 16 countries, the UK being one of its newest.

Mr. Jokela commented on the amount of “old-school lenders” in the UK market. He said his company will secure a large market share from these lenders. Ferratum is not the only business focusing on this audience.

Wonga, another lender, has been doing the same thing for close to four years. Wonga advertises throughout the London transport system and has gained attention for its huge loans APR, which can exceed 2,500 percent.

Both the founders of Wonga and Mr. Jokela developed their companies in response to perceived complacency by credit card companies and traditional lenders. Wonga co-founder Errol Damelin stated that these entities were not designing products that met customer needs. Some of them even went so far as to rip off customers.

Mr. Damelin and Mr. Jokela saw the opportunity to use data and technology to provide consumers with better lending solutions. Critics of lending services like theirs believe the entities serve as loan sharks.

Both company owners take issue with this, noting their high rejection rates and the fact that the majority of their customers are employed full-time.

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