Every year, millions of Australians turn to short term loans to help make ends meet. Unfortunately, when they most need a helping hand, they end up getting gouged with unreasonable interest rates and hidden fees. This leads to spiralling debt and financial instability, leaving people stuck in a cycle of worsening debt.
In partnership with Good Shepherd Microfinance, NAB invited Today to help develop a first-of-its-kind: an ethical short term loan for those experiencing financial stress that looks to improve their financial wellbeing, rather than prey on their disadvantage.
We ran a strategy workshop for both organisations to set up the right space for collaboration. In the workshop, people nominated hopes and fears, and got sharp about what must happen and must not happen for the product to be a success.
Our early discussions were captured in a product strategy, which locked down some of the decisions and importantly established a framework to make decisions and set priorities.
We worked with Good Shepherd Microfinance and NAB to envision a new product that offered people a better way forward: Speckle, a small loan with nothing to hide. Speckle needed to be just as quick and easy as its competitors, but leave people feeling comfortable with the choice they’d made.
Our first involvement was to help establish a solid base for a working relationship between GSM and NAB. The short-term lending products in Australia had effectively become predatory, enticing people in with fast access to money with minimal questions, but them stinging them with high interest rates and punishing fees. The proposition around this new, not-for-profit product was to provide the convenience, but give them a fair go.
For both organisations, this product stretched away from their comfort zones. NAB had a strong stance against pay-day lenders, but this product saw them effectively becoming one, albeit an ethical one. Good Shepherd Microfinance's existing products were delivered face-to-face, so they had more control over who was lending the money, and how it might be used.
Working in partnership to deliver a very new kind of product was not going to be easy, but both organisations were passionate about providing fairer financial products to market. These products are often used by people already experiencing financial stress, and can make things a lot worse. We heard accounts from customers who had taken out a loan for a few thousand dollars, are were still paying it off, along with fees and charges, years later.
My personal experiences with financial abuse have led me to my career at Good Shepherd Microfinancewhere our purpose is to support women’s financial wellbeing. Unfortunately, new research reveals that the number of women using payday loans has been increasing, and women are also more likely to use payday loans from a younger age than men.
These loans may offer a quick fix to unexpected expenses such as back-to-school costs or car repairs, yet for many people, they’re often left feeling trapped in a vicious cycle of debt.
General Manager at Good Shepherd Microfinance
We spent time with a diverse range of people in their homes and workplaces as they experienced the daily circumstances that lead to short term loans. We learned people often don’t self-identify as being “financially excluded”. This stigma can push them to secretive behaviour that makes financial matters worse.
"There’s a stigma... you know, the dodgy guys going to cashies"
"They hit you with more fees when you haven’t been able to pay...don’t they get it?”
Prioritising human outcomes over loan conversion mean Speckle isn’t just transparent and accessible, but offers support that better suits people’s needs, and initiates a conversation about healthier financial behaviour.
Some of the features developed for Speckle include:
Fairer, lower interest rates and fees
Complete transparency of fees and costs
An easy to use repayment calculator which shows the real cost of any loan
Highly accessible design and language to ensure no one gets lost in the fine print
Easy to find guidance for seeking financial counselling and warnings about borrowing
Speckle launched publicly in February 2018, so far they've helped more than 5,000 people with short-term loans, saving them more than $1,000,000 in fees and interest.
In the long term, success is providing a fair short term loan, but also helping people become more financially secure so they can avoid these loans altogether.