Non-bank loans: the end of a free American?
Even this year, excessively indebted people sent back by banks and credit unions may not get a loan from a company outside the official sector. The first of them, Wonga, has just started working with BIK.
Concka.pl is the Polish branch of a British loan company operating in four countries on three continents (Europe, North America, Africa). The entity entered our market in November. Its owner has been operating since 2007 and since then has granted 1 million loans, 6 million clients from Great Britain, South Africa and Canada. Wonga calls itself “the world’s largest online lender” (communication and the entire payout process takes place via the internet and a mobile phone). In 2011, it generated a profit of 46 million pounds, or 250 percent. more than a year ago.
The company has just signed a cooperation agreement with the Credit Information Bureau. It will use its database containing information on the credit history of 21 million Poles, provided that it will itself provide data on the obligations of its consumers, and the latter will agree (these are the two most important clauses set by BIK SA). The exchange of information is expected to start in the first quarter. Until then, the entity will undergo a transitional period during which it will test the speed of connection with the base and attempts to provide the first information. Wonga also uses credit record data in the Islands.
Wonga will pay for access to BIK. How much? – It’s a trade secret. The type of fee paid by the entity using the system is regulated by an individual agreement, while the price list is one for all and is degressive. This means that the more queries Wong generates, the less it will pay for a single report. – The initial fee is a few zlotys.
More non-bank institutions may soon follow in the footsteps of the British company.
Who will benefit from it?
This will increase the security of the entire financial sector. On the access of companies entities subject to strict regulations, i.e. banks and credit unions, will benefit from the BIK database. They will get a full picture of the clients’ situation. – This will reduce a certain information gap within the system, which is a consequence of the growing number of loans granted outside the official market.
Money lenders in the shadow banking zone will also benefit. How? They will be able to build their positive credit history. This will allow them to increase credibility in the eyes of entities from the regulated segment, where the cost of loans is lower (in APRC loan companies at the level of several hundred percent is a standard, and there are often loans with a rate of several thousand).
The non-bank market is growing
It is estimated that several million Poles use the services of non-supervised institutions, who have indebted themselves in this way for PLN 2-3 billion (estimates by Open Finance and Deloitte). The turnover of loan companies is increasing because more and more people are in financial trouble because of the difficult economic situation and their own irresponsibility. Banks or credit unions that require collateral do not want to grant them loans, which is why they contact non-regulated market entities. Such behavior is only worsening for consumers, exacerbating debt that they eventually stop dealing with.
The second reason for the increase in turnover of the non-banking sector is the fact that banks are reluctant to grant loans of medium and low value. It doesn’t pay for them.
BIK data shows that in the first half of 2012, the number of loans decreased by 17%. compared to the same period of 2011. The level of sales of installment loans decreased by 1/3 in relation to the first six months of 2008. The reductions are only partly due to economic reasons. According to BIK analysts, 80,000 are granted monthly in the non-banking sector. loans.