Opera the parent company of OPay, a payment company with major operations in Nigeria has been accused of violating Google’s policy on predatory lending by Hindenburg Research, an accusation that puts it at risk of being sanctioned by Google.
The US-based Hindenburg Research which bets on falling share prices claims Opera was involved in predatory short-term loans in Africa and India, deploying deceptive ‘bait and switch’ tactics to lure in borrowers and charging egregious interest rates ranging from 365 to 876 percent. Hindenburg says Opera is doing because its core business – Opera browser – is facing stiff competition from Chrome and Safari, with market share down about 30 percent globally.
“When a new management team takes over a declining business, it can become a race against the clock to cash out,” the report noted. “This is what we think is going on at Opera, a company based around a once-popular web browser that is now seeing its userbase erode.”
Since the report was published, the share price of Opera has fluctuated from 7.72 percent to 7.38 percent as at the time of writing this article on Thursday. Hindenburg Research would benefit immensely from short-selling shares of Opera. A short sale is the sale of an asset or stock the seller does not own. It is generally a transaction in which an investor sells borrowed securities in anticipation of a price decline.
Hindenburg suggested Opera’s stock should trade at around $2.50, around a 70% discount to Opera’s $9 share-price before the report was released on January 16.
“The report mentioned is from a firm that specialises in making short calls, often sensational in nature, with their conclusions being designed for that single purpose,” Alejandro Viquez, Opera’s Communications Manager told BusinessDay. “As communicated in our statement, we believe that the report contains numerous errors, unsubstantiated statements, and misleading conclusions and interpretations regarding the business and events relating to us.”
Viquez also said providing more than 60 days repayment options for users is common with Opera’s lending services.
From Hindenburg Research’s report, Opera may have offended a Google policy that states that the tech company does not allow apps that promote personal loans with repayment in full in 60 days or less from the date the loan is issued. The policy applies to apps that offer loans directly, lead generators, and those who connect consumers with third-party lenders.
Google had in October 2019, published an updated financial policy which it said was aimed at helping users have adequate information to make informed financial decisions by allowing them to weigh the costs associated with financial products and services, and to protect from harmful or deceitful practices.
Google also requires lending apps on its Play Store to include details of loans in their meta-data. Apps for personal loans must disclose the minimum and maximum period for repayment and the maximum Annual Percentage Rate (APR) in their meta-data. The APR includes the interest rate plus fees, other costs for a year, or similar other rates calculated consistently with local law. The app must also include a representative example of the total cost of the loan, including all applicable fees.
Since it kicked off its aggressive expansion in Africa and India, Opera through its four fintech platforms including OPay, OKash, Cashbean, and Opesa, has been offering instant loans to users in Nigeria, Kenya, and India. As of the time of submitting this article, an Okash application was still listed on the Play Store with information clearly stating tenure from 61 to 365 days but it was registered to Blue Ridge Microfinance Bank with an office in Lagos.
“OKash is available as a standalone app on Google Play Store,” Dare Oyegbola, who works with Boomerang Havas Africa, Opera’s PR agency in Nigeria told BusinessDay. Viquez also confirmed that Blue Ridge Microfinance Bank is a subsidiary of Opera.
OPesa and Cashbean – both standalone apps – also appear to be missing on the Play Store. But Viques explained that the apps might not be visible in the Google Play Store as they are only listed in specific markets such as Nigeria, Kenya, and India. All the apps are available to download in Google Play.
“Our Google Play Developer Policies are designed to protect users and keep them safe, and we recently expanded our Financial Services policy to help protect people from deceptive and exploitative personal loan terms. When violations are found, we take action,” a Google spokesperson told BusinessDay via email.
While Google houses the largest number of mobile applications, there are concerns that it is facilitating and providing an environment for predatory lending apps in emerging markets.
“Google has become the primary facilitator of these predatory lending apps by virtue of Android’s dominance in these markets,” said Nate Anderson, founder of Hindenburg Research. “Ultimately, our hope is that Google steps up and addresses the big issue here.”
