Consumers’ need for traditional telephonedirectories in the United Kingdom is rapidly declining thanks toInternet online services, which forced one firm there to go in anew direction. Telephone directory firm 118 118 Money has movedinto the personal finance market and is offering unsecured loans toconsumers rejected by financial institutions.
Launched at the end of September, 118118Money.com will offer £1,000(US$1,623) to £5,000 ($8,114) unsecured personal loans with fixedreplacement plans varying in length between one and two years.Depending on the amount loaned, monthly repayment plans could startat as low as £57 ($92.5). The firm moved to launch this newbusiness line because it claims last year some 1 million consumersin the UK were rejected for unsecured personal loans between £1,000and £5,000.
Mark Mayhew, a non-executive director of 118 118 Money, said at thetime of the announcement that, “Five years on from the creditcrunch, lending remains less accessible than it should be for manyhard working consumers. Our new business strives to address this bylending when the banks won’t in the £1,000 to £5,000 range. The newteam at 118 118 Money brings significant experience of consumerlending to develop a more human approach to credit riskassessment.”
The company will provide a robust customer service team that isavailable 24 hours a day, seven days a week through a toll freenumber and will help consumers through their application process,as well as providing support throughout the course of the loan.This is significant as 28 percent of people don’t understand whythey are rejected for a loan and 88 percent don’t know their creditscore, according to 118 118 Money.
The company’s APR of 35.9 percent will be considerably moreexpensive than the leading local financial institutions. Lloydscharges a 12 percent APR on a £5,000 loan over two years. Barclay’scharges a 9.9 percent APR on £5,000 over two years. HSBC charges a7.5 percent APR on £5,000 over two years and the Royal Bank ofScotland charges 11.9 percent APR on £5,000 over two years. But ifthose same financial institutions are unwilling to lend to theunbanked and underbanked consumers, then 118 188 becomes far moreattractive.
Though the payments industry worldwide has seen a number ofnon-traditional payment players in recent years enter the market,the move by telephone directory firm 118 118 Money is one of themore noteworthy given the firm’s history as a directory service andnot payments. But with the number of consumers considered unbankedor underbanked growing, providing services that meet their needscould potentially become very lucrative. Established players maywant to reconsider and or implement services that encourage theseconsumers to re-enter the mainstream payments ecosystem.
Follow Tristan Hugo-Webb on Twitter @THugoWebb.