Wonga not wronger

Robert Peston essentially says there is nothing wrong with Wonga, thereby maintaining his position as a sane voice within the BBC's business/economic reporting staff.

Anthony Hilton (consistently interesting) puts it like this: banks "lost touch with their customers, and had no real idea of what they wanted any more so they kept inventing things no one really needed and then had to go to extreme lengths to get them sold", while by contrast Wonga has "a clear unvarnished vision of who its customers [are], what they needed and how their demands could be met".

I was at a conference yesterday (more interesting than it sounds) which certainly bore out Hilton's comment about banks selling things no one needed - and going to great lengths to do so. On the other hand, something that people did want was clear pricing. This did not always help them: a free plain vanilla swap (in other words, fixing the rate on your loan) was often preferred, even if would have been better to have paid a premium in exchange for a better product (e.g. a cap).

Perhaps Hilton is being generous to say that banks didn't know what people wanted; perhaps they knew quite well that what customers wanted was to participate in their low-margin businesses, while banks wanted to move them to higher-margin areas.

But what seems to be right is that customers' desire for clear and transparent pricing allows businesses to charge lots of money, so long as it is clear how much will be charged and that it won't go up.

Lawyers often charge a lot of money, but their pricing is not that clear. I suspect that they could get away with charging even higher sums if they were fixed and predictable, rather than hourly-rate and obscure.