Monzo testing high-cost short-term credit products

In an announcement on the bank’s website, product manager Richard Cadman said the start-up wanted to make it easier for customers to apply for loans in a way “that’s fair and more transparent”.

Monzo stressed it would be seeking to provide credit to customers who otherwise have difficulty accessing traditional loan products.

“In the right circumstances, borrowing can be a useful way to manage your money. From unexpected emergency purchases to a big undertaking like buying a house, using the right kind of credit and managing it in the right way can help you do the things you want to do,” Cadman’s announcement said.

“We believe we can find an approach to lending that’s fair and more transparent. One that helps you feel better about borrowing, by designing products that help you stay in control.”

The move comes after Wonga, which was synonymous with the high-cost short-term credit sector, collapsed into administration in August. It had been inundated with historical compensation claims relating to loans issued before 2014, which had earlier caused it to seek £10m of emergency funds from its investors.

That round of funding only gained it a stay of execution, though, and Chris Laverty, Daniel Smith and Andrew Charters of Grant Thornton UK were appointed to conduct an orderly wind-down of Wonga.