By Gareth Vaughan
A British payday lender that's starting to offer loans to New Zealanders via the internet and a British call centre, says it's following the Reserve Bank's move to restrict banks' high loan-to-value ratio (LVR) residential mortgage lending with interest.
A spokeswoman for 24·7moneybox, Ria Dool, told interest.co.nz the firm would initially offer lending in the form of "a small sum, short-term product" tied to a customer's pay dates.
"Our research shows there is clear demand, a high degree of consumer enthusiasm for technology and a continued reluctance by traditional sources of finance to meet this need," Dool suggested.
She said 24·7moneybox targets demand for a small amount of money to be repaid within days. The business was "funded internally" and interest rates charged would be "comparable to other providers in the market."
The Reserve Bank announced last week banks must restrict new residential mortgage lending at LVRs of over 80% to no more than 10% of the dollar value of their new housing lending flows from October 1. Allowing for exemptions, the Reserve Bank estimates this 10% "speed limit" will effectively restrict the banks’ high-LVR lending flows to about 15% of their new residential lending.
Dool said although the Reserve Bank's move was "not strictly" behind her firm's push into NZ, it was being followed with interest.
"Will this increase demand for other types of products to fill the gap...possibly. This is the sort of opportunity we seized to build an incredibly flexible lending platform that allows us to plug and play with any type of credit product," she said.
"An example is our commercial credit product for eBay and Amazon sellers here in the UK."
Active Securities, 24·7moneybox's parent company, is owned by former investment bankers Mark Hannay and Nick Mordin. Its website features a picture of the Auckland skyline. Hannay and Mordin are also the directors of Active Securities (New Zealand) Limited, which they've registered via the NZ Companies Office.
Dool said the initial NZ launch would be run from the group's British call centre, with online loan applications, but the group "very much" plans to recruit staff in NZ.
"Going forward any type of personal, or indeed niche commercial credit product, is on the table (for NZ)," said Dool.
She said NZ had a high degree of similarity to Britain, in terms of the regulatory environment, a high quality labour market, and developed banking network. On top of this there was similar consumer apathy to traditional sources of finance and very limited credit products on offer, Dool suggested. NZ was also viewed as an excellent gateway into the Asia-Pacific region.
"Since 2008 banks across the world have become increasingly inward facing as with other industries (such as) movies, audio etc," Dool said. "Innovation comes from focused, nimble and lean operations hiring the best talent to rework, reimagine and reengineer established practices to not only fulfil current demand better, but also create new markets."
"Our founders are set on disrupting financial services in the same way as iTunes to music or Netflix to movies. We're a tech company first, feeding on data and lots of it, who happen to be disrupting financial services," added Dool.
"Credit is a truly global product."
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"Our founders are set on disrupting financial services in the same way as iTunes to music or Netflix to movies. We're a tech company first, feeding on data and lots of it, who happen to be disrupting financial services," added Dool.
They better hurry up. Bloomberg had this to say:
The risk that the Fed’s trimming of bond buying will hurt economies from India to Turkey by sparking an exodus of cash and higher borrowing costs was a dominant theme at the annual meeting of central bankers and economists in Jackson Hole, Wyoming, that ended Aug. 24. An index of emerging-market stocks last week fell 2.7 percent, the steepest in two months, compared with a 0.5 percent gain in the Standard & Poor’s 500 Index.
Such selloffs aren’t an issue for Fed officials who said their sole focus is the U.S. economy as they consider when to start reining in $85 billion of monthly asset purchases that have swelled the central bank’s balance sheet to $3.65 trillion. Even as the Fed officials advised emerging markets to protect themselves, they were pressed by the International Monetary Fund and Mexican central banker Agustin Carstens to spell out their intentions better in the interest of safeguarding global growth.
“You have to remember that we are a legal creature of Congress and that we only have a mandate to concern ourselves with the interest of the United States,” Dennis Lockhart, president of the Atlanta Fed, told Bloomberg Television’s Michael McKee. “Other countries simply have to take that as a reality and adjust to us if that’s something important for their economies.”
And adjust they will - the advent of payday loan costs of credit will make all but the most hardy Kiwis wince - the essence of usury coming to a place near you- paradise doesn't come in a nicer shade of red. Well done Mr Key - you certainly kept your promise about international banking - just not in the manner we expected.
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