Door-to-Door Lenders Go Online to Drive Growth


The UK’s traditional home lenders, whose agents collect money from borrowers in some of the country’s hardest hit areas, are moving online.

Walruses Club, listed on Aim in May and the second largest company in the sector with 200,000 clients, announces the launch of an online loan this year.

It would follow Provident Financial, the financial services company of the FTSE 100, which owns an online business Satsuma that offers loans repaid on a weekly basis. The company says this division is on track to break even this year and plans to launch a monthly repayment product.

With the financial watchdog imposing a rate cap and other regulatory restrictions on payday lenders, Provident and Walruses believe there is an opportunity for traditional door-to-door lenders to structure in-line products with more transparent prices and sustainable reimbursement conditions.

“This is a whole new set of customers for us,” said Paul Smith, managing director of Walrus, who plans to reveal the terms of the new product during the company’s first financial results in early October.

He adds that the company “receives 125,000 visits to our website each month and 75% of them search for loans online.”

Walrus, owner of the Shopacheck brand, was listed on the stock exchange when Rcapital, its private shareholders, issued 49% of the shares. Its share price, which fell after the initial public offering, has rallied in recent weeks and traded at 112.5 pence on Friday, against a floating price of 108 pence.

Industry analysts say there are up to 12 million consumers in the UK who do not meet the credit criteria of traditional banks.

Of this total, the traditional home loan market comprises around 2 million consumers. These borrowers typically rely on benefits or irregular employment and have little or no credit history. They depend on high cost credit from lenders such as Provident and Walruses for emergency household expenses and money for special occasions such as children’s birthdays.

Peter Crook, Managing Director of Provident Financial, says: “If you looked back 10 years, you would have found the home loan business for teachers, nurses and public sector workers. For these customers, online is another option.

However, some subprime lenders warn that online loans carry additional risks.

John van Kuffeler, who heads Non-Standard Finance, a London-listed lender that operates under the Loans At Home brand, says: [consumer group] does not work. You either have to take out mortgage, go to the door, or you have a branch system. Meeting people face to face produces a much better credit score than you will ever get online.

Prior to the 2008 credit crunch, the total UK market for short-term, low-value unsecured loans was around £ 12 billion, with Barclays, Lloyds and other large-scale lenders all active.

But as credit conditions tightened, the volume of loans taken out by traditional banks dried up. Payday companies, offering short-term loans at penal interest rates, have stepped in where conventional lenders have pulled out.

Donald Tait, analyst at Panmure Gordon, expects Walrus to approach online lending with caution. He points out that the rapid expansion of unsecured loans caused the collapse of his former parent company, the London Scottish Bank in 2008.

James Hamilton, an analyst at Numis Securities, said the subprime market sector would sometimes be in permanent recession. But “the opportunity is there if you can get the fair price for the risk you are taking.

“People want to be able to buy things from AO World,” he said, referring to the online electrical retailer. “They don’t want to have to go down to Currys with money in their pockets anymore.”

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