Houston, we have a problemFinance and space might seem worlds apart, but perhaps they aren’t as disparate as they first appear. Siam, you see, is a problem solver at heart, and Welendus was founded on the concept of fixing a problem in finance – giving people much-needed loans, while simultaneously offering investors an attractive return. While most peer-to-peer players tend to focus on longer-term loans with a multi-year maturity, Siam has boldly gone where no one has gone before – focusing instead on short-term loans of around 100 days. Short-term loans that tie a borrower over until their next paypacket will probably trigger harrowing memories of payday lenders. Indeed, Wonga has now become a byword for finance companies with questionable morals. These problems within the payday loan market were actually the catalyst for the idea behind Siam’s business; his light-bulb moment came in early 2015 – around the same time that the regulator was baring its teeth against a payday lending market that had enjoyed a free rein for years. “With all this mistreatment of customers, I thought that there must be a better way to do it. I remember being stuck in traffic and thinking: what if everyone else around me was to lend to each other? Then maybe no one would have to turn to payday lenders.” For Siam – who had no experience in finance before launching the business – this was a challenge worth accepting, and he immediately started researching the peer-to-peer sector.
While there is clearly a demand for short-term loans, there has only really been one model to cater for this sector – the Wonga-style structure. Siam argues that this is the wrong model because it’s designed to extract as much value as possible. “These companies charge as much as possible, and people are prepared to pay the fees because they need the loan. It’s a for-profit structure, and in my opinion that’s unethical.” But there’s a downside to strict regulation too. Consider the millions of people in the UK who have less than £100 in savings, which poses a problem when they have to fork out for an emergency – like if their car breaks down. With lenders pulling away from the market, there is a widening gap for short-term credit, and Siam warns that people are now turning to the black market, which is even worse than the payday-style sector.