What Happens When a Lending Platform Goes Under?

You’ve heard by now that short-term lending platform Wonga has shut down after launching in 2007. All drama aside, the scenario offers a real-life look at what would happen if a large payday lender closed its doors.

Wonga has received an increase in complaints over the past few years that it did not sufficiently verify that borrowers were able to repay their loans. These complaints, which were generally regarding loans made before new rules were introduced in 2014, lead to a large rise in compensation payouts. According to Wonga’s website, more than 24,800 complaints have been opened, 22,000 have been closed, 31% of which have been upheld.

This unexpected expense lead to financial trouble that prompted an injection of $13 million in capital earlier this year. Despite the funds and efforts from investors, Wonga’s financial situation remains untenable. Notably, two other U.K. startups, Cash Genie and Cheque Centre, both closed due to similar pressure.

At this point, three appointees from Grant Thornton U.K., Chris Laverty, Daniel Smith, and Andrew Charters, have been appointed as joint administrators of Wonga. Here’s what will follow:

  • The platform is closed to new lending activity.
  • Borrowers must still repay loans.
  • Unless Wonga has already agreed to pay a claim, complaint claims are not likely to be paid out, since the recipient is seen as an unsecured creditor.
  • The administrators will wind down the business, sell the assets, and begin identifying all creditors in accordance with their obligations.

This may end up having a small negative effect on peer-to-peer lenders, such as U.K.-based Zopa and U.S. based Lending Club, as they rely on balancing investor funds with borrower demand. If too many investors fear a shutdown, they may be more hesitant to lend, making it more difficult for the platforms to meet borrower demand.

Founded by Errol Damelin, Jonty Hurwitz, Wonga demonstrated at FinovateFall 2010. The company had raised a total of $159 million. Sky News reported earlier this year that the company “once had ambitions of a New York listing that could have valued it at well over $1 billion (£769m).”

Wonga Raises $13 Million in New Funding

 

Accel Partners and Balderton Capital have pitched in to help U.K.-based payday lender Wonga with a cash infusion of nearly $13 million (£10 million). The capital will be used to help Wonga satisfy what the company’s spokesperson called a “marked increase” in compensation claims for legacy loans from claims management companies.

“Wonga continues to make progress against the transformation plan set out for the business,” a spokesperson for the company said in a statement to Sky News. However, a rise in the number of claims on old loans, those taken out before the current management team took over in 2014, encouraged the company to seek additional financing.

“As a result,” the Wonga spokesperson explained, “the team has raised £10m of new capital from existing shareholders, who remain fully supportive of management’s plans for the business.”

Before the new capital, Wonga had an estimated valuation of $30 million (£23 million). In 2014, Wonga wrote off £220 million in debt for 330,000 customers as part of a review of its lending practices and the implementation of new affordability checks. The company has since attempted to diversify its business to include more flexible loan solutions such as its three- and six-month Flexi Loans. Rates remain high for Wonga products, with published representative rates north of 1,286% APR. Last year, Wonga also launched its Cash Smart personal finance education portal, which provides free information on debt and borrowing, savings, and budgeting.

To help shore up its balance sheet, Wonga has sold assets like its Everline business to small business lender Ezbob. Last year, the company sold Billpay, the German online payment provider it acquired in 2013, to Klarna for $75 million.

Founded in 2006, Wonga demonstrated its iPhone app at FinovateFall 2010. Tara Kneafsey is CEO.

Finovate Alumni News

On Finovate.com

  • Wonga Raises $13 Million in New Funding.
  • TransUnion Teams Up with EXL for CECL Compliance.
  • RightCapital Adds Student Loan Functionality to its Platform.

Around the web

  • PasswordPing wins Startup of the Year at 13th Annual 2018 IT World Awards. See PasswordPing at FinovateFall in New York next month.
  • Zopa to finance loans for CommuterClub season tickets, courtesy of a new partnership.
  • Xero announces integration with GoCardless.
  • PYMNTS.com profiles payroll, benefits, and HR platform, Gusto.
  • MicroStrategy appoints Marge Breya as Chief Marketing Officer.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

Finovate Alumni News

On Finovate.com

  • Practicing Perfection Before FinovateEurope 2017.

Around the web

  • BAI’s Banking Strategies takes a look at Wells Fargo’s deployment of eyeprintID from EyeVerify. Catch EyeVerify at FinovateEurope this week.
  • Entersekt CIO Gerhard Oosthuizen shares advice on passwords and protecting personal data in Moneyweb.
  • HotDocs teams up with Irish enterprise scale applications and infrastructure provider, Codec-dss. See HotDocs at FinovateEurope in London this week.
  • Klarna acquires German online payment provider BillPay from Wonga.
  • Icon Solutions joins forces with Featurespace to bring anti-fraud protection to instant payments. Meet Icon Solutions at FinovateEurope this week in London.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

Alt-Lender EZBOB Deepens Pockets by $46 Million

EZBOBHomepage

U.K.-based alternative lending company EZBOB this week announced it pulled in $46 million in funding. The full amount of the Series C round was supplied by Oaktree Capital and brings the company’s total funding to $66.5 million.

According to The Telegraph, EZBOB will use the new funds to refinance existing debt and increase its loan offerings to small businesses.

This is the company’s second large announcement this year. In February, EZBOB purchased Everline, Wonga’s lesser-known small business finance arm. Both EZBOB and Everline are now rolled up underneath an umbrella group, Orange Money.

Combined, the two companies have furnished U.K.-based SMEs with more than 6,000 loans totaling $83+ million.

Orange Money, which offers an average interest rate of 16%, does not view its services as competitive toward traditional banks. Orange Money CEO Tomer Guriel says, “We’re complementary to the banks and are there to provide access to capital for business owners that have been rejected by their bank.”

EZBOB demonstrated its online application process at FinovateEurope 2014 in London. Wonga debuted its iPhone app at FinovateFall 2010 in New York.

Alumni News– October 7, 2014

  • Finovate-F-Logo.jpgMatchi opens global fintech challenge 
  • New Frontier Group to integrate BehavioSec’s behavioral authentication solution in online banking.
  • Boku acquires competitor Mopay, now covers 5 billion users.
  • BBC: Wonga to write off £220m of debts for 330,000 customers.
  • Financial Planning features FutureAdvisor.
  • Tradeshift announces new operations in Japan and Europe, new executive appointments.
  • Merchant Customer Exchange (MCX) partners with InComm to leverage its POS integrations.
  • WallStreetSurvivor.com launches Financial Education Courses.
  • Vista Equity Partners to take Tibco Software private for about $4.3 billion.
  • Expensify announces $3.5 million round led by Barracuda Networks.
  • Blockchain raises $30 million in growth capital.
  • Credit Karma announces equity investment of $75 million; $1 billion valuation.
  • Spreedly announces new investment; raises $750,000 in equity financing.
This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

19 Finovate Alums Selected for 2014 European FinTech 50 Awards

The FinTech 50 awards highlight 50 European-based companies to watch over the coming year. The companies are selected by a panel of 15 fintech professionals. This year, 19 of the selected companies are Finovate alums.

Here are the Finovate alums selected, listed in alphabetical order:


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AcceptEmail, for its electronic billing and payment system that allows customers to make payments straight from their email.

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BehavioSec, for its technology that uses behavioral biometrics to verify users, creating a secure environment without extra friction.

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Credit Agricole Apps, for its online app store where financial apps are co-created between clients and developers.

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eToro, for its social trading and investment network

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ETRONIKA, for its full suite of ebanking channels and BANKTRON management platform.

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Fidor Bank, for its innovative online banking community.

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Five Degrees, for its integrated banking platform that extends from back-end systems to client-facing technology.

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FreeAgent, for its SMB-focused online accounting system.

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Help my Cash, for its recommendation engine that informs consumers of their options when choosing and negotiating financial services.
Holvi, for its smart checking account for group activities.
Ixaris, for its innovative global applications based on open-loop prepaid card schemes.

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Klarna, for its e-commerce payment solutions.

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mBank, for its Bank 3.0 approach to online and mobile banking.

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Meniga, for its white-labeled PFM and next-generation online banking solutions.

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Nutmeg, for its online savings and investing service that helps users manage their money.

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The Currency Cloud, for its Cross Border Payments as a Service product that optimizes exchange rates and payment networks for both parties in a currency exchange.

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TransferWise, for its platform that allows expats, foreign exchange students and businesses to move money globally.

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Wonga, for its service that provides small, short term cash advances to UK consumers online.

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Zopa, for its P2P money lending service that allows borrowers and lenders to deal with each other directly.

Finovate Alumni News– October 18, 2013

  • Finovate-F-Logo.jpgInComm partners with Utah Transit Authority to launch FAREPAY Card.
  • Xero CEO Rod Drury wins the New Zealand Ernst and Young Entrepreneur of the Year Award.
  • TechCrunch reports: E-Loan Specialist Wonga Buys BillPay, The PayPal Of Germany.
This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

Finovate Alumni News– August 7, 2013

  • FinovateLOGO.jpgMasterCard CEO Ajay Banga announces MasterPass digital wallet now accepted by more than 20,000 merchants.
  • EyeVerify reaches finals in four categories of the 2013 Silicon Prairie Awards.
  • Ralph Marcuccilli, president and founder of Allied Payment Network, talks about the benefits of photo bill pay.
  • ProfitStars introduces hosted version PROFITstar Budget Manager, supported by Windows Azure for cloud computing. First Interstate Bank replaces Excel-based budgeting process.
  • U.S. PayPal users given option to withdraw money using MoneyGram.
  • London Loves Business blog highlights Nutmeg, Zopa, and Wonga as well-known London-based fintech startups.
  • Cardlytics names Jim Morgan as first CFO. Come see Cardlytics demo at FinovateFall in New York September 10 and 11.
  • PreCash launches PayConnect mobile and online bill pay platform.
This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

Fourteen Alums Recognized in AlwaysOn Global 250 Awards

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This year, 12 Finovate alums were selected among 250 other winners in the AlwaysOn Global 250 awards, and two Finovate alums were identified among 50 other Companies to Watch.

The awards honor the top 250 U.S.-based private tech companies, plus recognize 50 to watch. Some of the underlying themes in this group of 300 innovative companies include mobile technology, cloud-based solutions, and social network integration.

Here are the 12 Finovate alum winners of the 250 Awards, listed in alphabetical order:

BillFloat

    • Category: Consumer Internet
    • Headquarters: San Francisco, CA
    • Founded: 2009
    • CEO: Ryan Gilbert
    • Total funding: $32.5 million
    • FinovateSpring 2011 demo video
    • Category: B2B Applications- SaaS and Enterprise
    • Headquarters: Lexington, MA
    • Founded: 2005
    • CEO: Tom Beecher
    • Total funding: $21.2 million
    • FinovateFall 2011 demo video
    • Category: Consumer Internet
    • Headquarters: Atlanta, GA
    • Founded: 2009
    • CEO: Rob Frohwein
    • Total funding: $53.7 million (plus $91.7 million in debt funding)
    • FinovateSpring 2013 demo video
    • Category: Consumer Internet
    • Headquarters: San Francisco, CA
    • Founded: 2006
    • CEO: Renaud Laplanche
    • Total funding: $220 million
    • FinovateStartup 2009 demo video
    • Category: B2B Applications- SaaS and Enterprise
    • Headquarters: New York, NY
    • Founded: 2007
    • CEO: Noah Breslow
    • Total funding: $102 million
    • FinovateSpring 2012 demo video
    • Category: B2B Applications- SaaS and Enterprise
    • Headquarters: Denver, CO
    • Founded: 2002
    • CEO: Andre Durand
    • Total funding: $78 million
    • FinovateEurope 2012 demo video
Placecast 

    • Category: B2B Applications – Mobile
    • Headquarters: San Francisco, CA
    • Founded: 2005
    • CEO: Alistair Goodman
    • Total funding: $8 million
    • FinovateSpring demo video
    • Category: B2B Applications- SaaS and Enterprise
    • Headquarters: San Jose, CA
    • Founded: 2005
    • CEO: Reed Taussig
    • Total funding: $36.2 million
    • FinovateStartup 2009 demo video
    • Category: Consumer Internet
    • Headquarters: London, UK
    • Founded: 2007
    • CEO: Errol Damelin
    • Total funding: $145 million
    • FinovateFall 2010 demo video
    • Category: Consumer Internet
    • Headquarters: Redwood City, CA
    • Founded: 1999
    • CEO: Anil Arora
    • Total funding: $116 million
    • FinovateFall 2010 demo video
Here are the two listed in the Companies to Watch category:

All companies were selected by industry experts in the following organizations:

  • The AlwaysOn editorial team
  • Morgan Stanley
  • KPMG
  • GSV Capital
  • Greylock
  • Google Ventures
  • New Enterprise Associates
  • Flybridge Capital Partners
  • Accel Ventures
  • Bridge Bank
  • Venrock
  • SV Angel
  • Roth Capital Partners
  • Intel Capital
  • Menlo Ventures
  • Khosla Ventures
  • FirstMark Capital
  • Doll Capital Management
  • Benchmark Capital
  • Cooley
  • GGV Capital