Wonga does something similar to payday lending in the US: it loans small amounts of cash to people who want to make ends meet. It competitive advantage is that it uses an algorithm, not humans, to decide on the loans.
The company has come under criticism because its yearly interest rates are high, but they respond that they make short-term loans that people use as an alternative to bank overdraft fees, and that its customers actually tend to be affluent young people with an average loan size of roughly $300. That’s unlike payday lending in the US, which is controversial and whose target customer tends to be poor.
The company plans to use the cash to double down on its torrid UK growth and strengthen its balance sheet, which is important since its business is handing out cash. Interestingly given criticisms of the European venture industry, most of the investors in this round are from the US, with the round led by Oak Investment Partners.