Wonga targets online shoppers

Payday loans firm Wonga is entering the online market by offering shoppers the option of borrowing cash to fund their Web purchases, taking on an industry dominated by PayPal.
Customers are given the choice of paying for their goods with an upfront fee of 7% and three equal monthly instalments, meaning that a £100 purchase would incur a one-off charge of £7 followed by three payments of £33.33.
The company is in the early stages of developing the service – dubbed Wonga Paylater – and will initially work with a small number of retailers.
Furniture business the Cotswold Company is the first to adopt the scheme. However, founder Errol Damelin is reportedly in discussions with some of Britain’s biggest online retailers over the product.
The company has been criticised for an annual percentage rate (APR) of more than 4,000% but argues that this figure is misleading because credit is extended for a much shorter period of time. It also claims to be meeting demand for short-term loans from people shunned by high street banks.
Despite the controversy – payday loan firms have been branded “legal loan sharks” by Labour MP Stella Creasy – online firms would benefit hugely from the scheme.
Many of the largest mail order firms built their businesses on the so-called “never, never” financial offer, which enabled consumers to spread the cost of purchases and opened up the market to a much wider audience.
Currently PayPal offers no such service, meaning that shoppers must have sufficient funds in their accounts to cover purchases.
The move is said to be part of a wider expansion strategy fuelled by the London-based company’s desire to float on the US stock market, which could value the business at more than £1bn.

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