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Will Nobody Rid Me of This Turbulent Priest?

07/07/2014 16:42 BST | Updated 03/09/2014 10:59 BST

The hitmen allegedly hired by Henry II to sort out Thomas Beckett may be back in business if the current Archbishop of Canterbury continues to make waves over the plight of those exploited by exorbitant APRs. But they won't be hired by the Crown this time, more likely by the loan sharks.

His lecture on the future of banking standards suggests that the instant eradication of payday lenders might not be an altogether brilliant idea. Hallelujah! His concerns are that these types of companies fill a gap in the market which, in turn, help keep more usurious and dangerous forces at bay (think: knock on the door, knock on the head).

The Most Rev is on track-ish. But like many commentators and politicians, he has not done his segmentation analysis to A-grade standard. His focus is too much on the "what" and not enough on the "for whom", which is a marketing motherhood error.

The Archbishop's concern is mainly with the grip of poverty that forces the zero-income, deprived and desperate sections of society deeper into the darkness of debt. He is bringing his formidable intelligence and experience to bear in highlighting their plight and is contributing significantly to bringing them alternative and better support. To have an Anglican Primate showing the wit and will to do more than posture and politicise, is a refreshing novelty for the Church of England. His ideas around the Credit Champions Network and for using the churches as financial advisory centres for those in poverty are genuinely original. After all, when Jesus threw over the tables of money-changers in the temple of Jerusalem, he didn't specifically object to advisory-only services.

But, knowingly or not, The Archbishop is nonetheless grossly over simplifying the situation by claiming that the Credit Unions' "responsible credit and saving are real alternatives to the services currently provided by payday lenders".

If he or his advisors pop down from Lambeth Palace to their local Credit Union, they would understand quickly that the customers here are not your normal Wonga-users. Credit Unions are utterly brilliant community banks that lend money to the people that no commercial organisation can realistically hope to serve. They meet face-to-face, advise, re-organise finances, and where necessary, lend small amounts of money over longer periods to get people back on their feet. It is a business based around trust, sense of duty, and no requirement for a financial upside. It often has a high rate of default. As such it is local, hard to scale, and not for the majority.

Wonga is none of these things, and nor are other payday lenders. They are lending for a few days, weeks at most, and never meet their customers in person. It is a digital journey, driven by algorithms and commercial upside. I doubt that many of the users of a Credit Union would ever pass the criteria for a payday loan. In the first instance the clue is in the moniker. Payday lenders lend to people with pay packets. Credit Unions and Community Finance Schemes serve those with no such income streams. Nor are they likely to lend to people with credit records that are even worse than Greece. If mates and family members are a bit tight then the only real alternatives to Credit Unions are the loan sharks, and pawn shops, and certainly not Wonga.

His Grace is a very smart chap. But if he is keen on seeing the high-rate, payday hucksters run out of town, then he might like to raise his game. He isn't going to do it with good intentions alone, or by energising an already well-established Credit Union sector. Defeating the new breed of digital money-lenders will take more than some well-meaning words, church-based advice and support for Credit Unions. That will no more hurt the payday opportunists than Jesus' spat in the temple. Those shysters re-erected their tables immediately and simply traded on.

What Wonga and all the other high-rate lenders need is lower-priced competition, better, faster digital delivery and products that help customers, rather than entrap them. That though is an endorsement of good old market-based capitalism, and it may be a doctrine too radical and too off-message for even this Most Turbulent Priest to promote.

Alex Letts is Chief Executive of digital current account provider, Ffrees.