For weeks now we’ve been crowing about how gloriously the economy is doing: unemployment is down, consumer spending is up, and everyone’s having a lovely summer.
Why, then, have profits at payday lender Wonga increased by a more than a third? The company – which recently caused embarrassment for the Archbishop of Canterbury when it turned out, after he criticised the business heavily, that the Church of England has a stake in it – published figures today showing pre-tax profits rose to £84.5m last year, up 36% from £62.4m the year before.
Lending rose by 68% to £1.2bn across more than a million customers, while turnover rose by 67% to £309.3m.
The fact that more people are turning to a payday loans company to cover their costs has got to be indicative of something being awry in the economy, no?
No, says Wonga chief exec Errol Damelin: he reckons it’s more to do with people wanting to avoid banks.
‘This is not about people on breadlines being desperate… this is about us serving customers who want to take a loan and know they can pay it back in three days – that is in the same way that they want to buy one song on iTunes,’ he said.
In fact, if this tweet from Channel 4 economics editor Faisal Islam is to be believed, Damelin thinks it’s the yoof who are increasingly using Wonga:
Wonga boss Errol Damelin told me typical customer is young digitally savvy and saving money by avoiding bank unauthorised overdraft charges— Faisal Islam (@faisalislam) September 3, 2013
What’s interesting is that Wonga is clearly keen to position itself as a more responsible corporate citizen than its rivals. Not only did Damelin point out that it turns down two-thirds of people who apply for loans, but he also said the company had paid more than £21m in corporation tax last year. No tax avoiding here.
For a business as heavily lambasted as Wonga, it won’t be enough to silence its most vociferous critics. For the economy’s sake, we hope Damelin is right, and this is a sign of people losing trust in banks, rather than something more endemic.