non-standard finance plc - 1 july 2016/media/files/n/non-standard...jono gillespie chief financial...
TRANSCRIPT
1 July 2016
1
Agenda
• Highlights
• Management team
• Vision and strategy
• Market and economy
• Customer profile
• Agents
• Products
• Customer recruitment
• Further lending
• Collections
• Risk and compliance
• Technology
2
• Established in 1938, Loans at Home has over 77 years of experience in the
Home Collect market
• Operates from 44 branches throughout England, Wales and Scotland
• Previously a subsidiary of S&U PLC, a UK listed speciality finance lender
• Business acquired in August 2015 for £82.4m
• National infrastructure and platform for future growth and business
development
• Has over 300 employees and over 800 self-employed agents
• Home Credit not covered by FCA price cap (payday/high-cost-short-term credit)
• Loans at Home operating under interim permissions, full license application
submitted by vendor on 30 June 2015 meeting FCA timetable. Revised
Regulatory Business plan submitted December 2015
• Regulatory due diligence on Loans at Home was undertaken by Walker Morris
Net loan book £28m
Average loan size
(individual)
£272
Average loan size
(customer total)
£550
Total customers 92,892
Total households 85,393
Loans at Home highlights
As at 31/12/15
3
Post acquisition actions
• New management team recruited
• Review of accounting policy
• Review of all regulatory and compliance matters
• New suite of policies and procedures
• Strategy and vision developed
• Growth plans in place
• Increase number of agents and customers – fill the void left by PFG
• Investment in technology and systems
• Secure debt finance for loan book
4
A highly experienced management team
Mark
Bardsley
CEO
Lindsay
Banbridge
Risk
Director
Paul Gill
Compliance
Director
(Interim)
Jono
Gillespie
CFO
Chris
Graham
Commercial
Director
Neil
Lewis
National
Operations
Manager
Jonathan
Hague
Head of
Credit Risk
Sam
Beardsley
Head of
Operational
Risk
Manjeet
Bhogal
Management
Accountant
Chris
Pearson
Head of FPA
Jamie Place
Head of IT
Kat Hackett
Head of
Marketing
David
Thompson
Head of
Central
Operations
Christine
Rangeley
Head of HR
Contact Centre
Help Desk
Field Admin
Policies
Procedures
2 senior Credit
Controllers
21 Credit
Controllers
Risk Management
Compliance
Manager
Customer care &
compliance
managers
Marketing
Products
Acquisitions
Corp Comms
Strategy
Company
Secretary Regional Managers
Area Managers
Business Managers
Agents
5
Loans at Home management team
Mark Bardsley Chief Executive Officer – joined August 2015 - Mark has 30 years’ experience in home credit.
- The last 20 years have been spent as CEO/MD of home credit businesses overseas (Czech Republic, Poland, Russia for International Personal Finance plc) and in the U.K (Morses & Shopacheck Financial Services (SFS)).
- He has extensive experience of operating in highly regulated financial services environments with successful records of balancing good customer outcomes with financial returns.
Lindsay Bainbridge Risk Director – joined August 2015 - Lindsay has over 10 years’ risk experience ( 6 years in home credit)
- She has worked for a variety of financial institutions including HSBC, National Australia Group, SFS and Provident Financial.
- She has extensive experience of developing and implementing risk and financial crime decision and control environments which balance customer outcomes against profitable return.
Chris Graham Commercial Director – joined August 2015 - Chris has 25 years’ experience in financial services across retail banking, insurance
and consumer credit.
- He has worked in home credit for almost 20 years with 10 of those as Director either at Provident Financial or SFS.
- He has significant experience of growing home credit businesses in particular through online customer acquisition
- His responsibilities at SFS included overseeing the implementation of a programme of activity in preparation for FCA regulation.
Paul Gill Interim Compliance Director – joined 1st February 2016 - Paul has almost 20 years’ experience in Financial Services covering a variety of roles
a number of retail banks, consumer credit providers and Building Societies.
- He has held senior management positions within Risk and Compliance at Deloitte and, most recently, at Metro Bank.
- He has significant experience interacting with the FCA
Jono Gillespie Chief Financial Officer – joined January 2016 - Jono has almost 20 years’ experience in home credit
- He joined Provident Financial in 1997 as Management Accountant, progressing through a series of promotions to Finance Director of their Home Credit Division
- For the last 5 years he has had responsibility for the significant IT and Change programmes that has seen Provident Financial introduce mobile technology into their field operations
- Jono has responsibility for both Finance and IT at Loans at Home
6
Vision
7
• To become the second largest, and best, home credit
company in the UK
• To put good customer outcomes at the heart of
everything we do and have an outstanding regulatory
and compliance culture
• To treat customers, agents and employees fairly
• To become the home credit company of choice
for customers, agents and employees
Strategy & Supports
8
Loans at Home objective and strategy
Objective
To double the size (customers and receivables) of the business within 4 years and achieve return on assets of 20%+
Strategy
• Build and grow home credit business through significantly growing our customer numbers and agents
• Attract experienced home credit agents and management to our business by being THE best business to work
for
• Continue to drive customer recruitment by existing agents building on recent momentum
• Develop online lead generation to complement more traditional customer recruitment channels
• Lend more, where appropriate, to our best customers
• Acquire quality HC businesses where suitable opportunities arise
9
Loans at Home strategy
Key Strategic Supports
• Highly effective business culture that is founded on openness, compliance, achievement, fairness
and with attractive rewards making us the best business to work for
• Introduce modern technology, including mobile devices to support processes, service and compliance
• Introduce technology automation and decision science to support agents in making good lending
decisions
• Develop industry-leading online customer acquisition capability
• Provide training and career opportunities for all staff
10
Market & Economy
11
Changes in household income by income percentile 2007-08 to 2015-16
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
95
Cu
mu
lative
ch
an
ge
in
ho
useh
old
inco
me
Percentile point
2007–08 to 2015–16
Source: IFS 12
Unemployment falling & consumer credit growing
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Mar
-May
19
92
Ap
r-Ju
n 1
99
3
May
-Ju
l 19
94
Jun
-Au
g 19
95
Jul-
Sep
19
96
Au
g-O
ct 1
99
7
Sep
-No
v 1
998
Oct
-Dec
19
99
No
v-Ja
n 2
00
1
Dec
-Feb
20
02
Jan
-Mar
20
03
Feb
-Ap
r 20
04
Mar
-May
20
05
Ap
r-Ju
n 2
00
6
May
-Ju
l 20
07
Jun
-Au
g 20
08
Jul-
Sep
20
09
Au
g-O
ct 2
01
0
Sep
-No
v 2
011
Oct
-Dec
20
12
No
v-Ja
n 2
01
4
Dec
-Feb
20
15
% Unemployment rate Consumer credit Seasonally adjusted
13
• Around 3 million regular users of which 1.5m to 2.0m borrow at any one time.
• Customer incomes approximately £10,000 to £15,000 in C2, D and E socio-economic groups.
• Customers by market participant:
• Typical loan size £100 to £1,000.
• Weekly collections from the customer's home.
• Regulated by the FCA from 1st April 2014 (formerly OFT).
UK home credit market
c.0.9m
c.0.2m
c.0.1m
c.0.5m Others
14
Regulatory
• 576 home credit companies applied for full permission:
- 403 authorised
- 22 withdrawn
- 31 withdrawn from home credit
- 2 refused
• Our own Full Permission expected in H2 2016
• Thematic review into home credit – “FCA state no plans to undertake”
• FCA Business Plan highlights reviews which might have a bearing on home credit:
- Early arrears
- Financially vulnerable customers
- Staff remuneration
15
Customer Profile
16
Customer profile
• 95% have a mobile phone
• 88% have online access
• 86% have a bank account
• 22% overdraft facility
• 15% have direct debit loan
• 19% have goods on credit
• 20% use other home credit
• c.80% aged 21-50
• c.70% female
• c.95% C2DE
• c.50% have employed person in household
• 89% rent
• 61% receive benefits excl. child benefit
• Average annual household income £14,500 pa
17
Customer profile
Use of loan
• 27% home improvement
• 26% presents
• 9% holidays
• 5% car expenses
• 5% baby/child expenses
18
Customer satisfaction
93
94
95
96
97
98
99
100
Very/Quite Satisfied Use next Time Need to Borrow
%
Customer Satisfaction
Source: Customer research undertaken by PCP Market Research among 400 customers
Other NPS scores taken from Satmetrix.com – UK consumer net promoter benchmark
0
10
20
30
40
50
60
70
80
90
Loans at Home First Direct Santander (credit card) Prudential (health ins.)
Net Promoter Score
19
Agent Value Proposition
20
Why agents choose us At Loans at Home we really value agents. We know that they are key to our long term success. We believe
that we’re the best home credit company that an agent can work with. Here are some reasons why:
• We have a Management Team with over 184 years’ experience in Home Credit.
• We have exciting and ambitious growth plans - we’re looking to build and grow our business; not just rationalise
and cut costs.
• We’re investing in technology to support our agents and allow them to maximise their own earning potential
• We have highly competitive and straight forward commission rates. We pay flat commission based on what is
collected providing agents with certainty regarding their income, avoiding any nasty surprises.
• All size of journeys and agencies are welcome - an agent doesn’t have to have hundreds of customers to be a
good agent. We want our agents to have successful businesses but we also know that one size doesn’t fit all.
• We’re committed to great customer service and being fair and clear to our customers, our agents and our
people.
21
Agents
• All agents self-employed
• Majority are female – reflecting customer base
• Many have come to us from competitors
• All agents DBS checked and credit searched
• Rigorous 12-week induction programme with support from existing agents and managers
• Additional ongoing training via Learning Management System
• Agents earn 10% of collections (8% on cards) – no commission is paid on sales
• Earn reward for new customers – reflecting time and cost involved
• Weekly meetings with managers to discuss and support
• Managers undertake dual visits
• Agencies grew from 557 in August 2015 to c.700 in February 2016 and over 800 now
22
Products
All loans issued in cash in customer’s home
No default fees or default interest charged on any loans
Term in Weeks Charges
per £100 Total Payable Weekly Rate APR
24 £60 £160 £6.67 732.70%
33 £65 £165 £5 433.40%
45 £80 £180 £4 340.00%
75 £87.50 £187.50 £2.50 163.80%
23
Why customers use us
• Customers like accessible and inclusive nature of product
• Like to deal with people who take time to understand their circumstances and treat them as an
individual
• Product gives customers total control – unlike problems people sometimes encounter with revolving
credit
• No default fees or default interest give customers certainty and means they have no fear of spiralling
debt
• Ability to budget weekly means repayments affordable
• Home service is convenient
• Customers grew from 87k in August 2015 to 92k in February 2016 and are over 97k now
24
Customer recruitment
Ag
en
t activ
ity
Reco
mm
en
datio
n
On
line
25
Digital plans & new website
• Complete redesign of website
• New site is fully responsive
• Paid search and search engine optimisation in development
• Developing relationships with third parties to further drive customer reach
• We will start slowly and build over time – tracking and refining marketing and credit decisions
26
New website
27
Customer recruitment process
Agent generates
lead
Agent calls contact
centre with customer
details
Decision in principle
Agent visits
customer, assesses
affordability, final
decision
Customer calls
contact centre
Decision in principle
Lead allocated to
agent
Agent visits
customer, assesses
affordability, final
decision
Customer applies
online
Decision in principle
Lead allocated to
agent
Agent visits
customer, assesses
affordability, final
decision
AGENT TELEPHONE ONLINE
28
Decision in principle process
1) Collect customer name,
address, date of birth
2) Check against internal
data:
Current/previous customer
Previous write off
Out of area
3) Callcredit data pull
4) Scorecard + check for
bankruptcy, sequestration,
DMA, IVA
5) Decision in principle
• Decision engine produces result in seconds
• Continual process of scorecard improvement
• Affordability and sustainability assessment involves individual income and expenditure check
which is validated and documented
6) Affordability
assessment by agent in
home
29
Further lending to current customers
• Most customers visited weekly by agents
• 75% of lending to existing customers
• Opportunity to discuss any needs
• Customer must meet strict payment performance criteria to receive a further loan
• Behavioural scoring will be introduced to further support agent decisions
• Affordability assessment is documented and validated for every loan
• Agent always makes final decision – company may say ‘no’, but never ‘yes’
30
Collections
• Loans collected weekly in cash by agents at customers’ homes. In some circumstances card
payments may be accepted
• Agents receive 10% of cash collected as commission (8% on cards)
• Agents attend weekly meetings with managers to discuss customer performance
• If customer misses a payment there are no additional charges and there is no default interest – built-
in forbearance
• If a customer is identified as suffering financial difficulty e.g. missing multiple payments or telling an
agent their circumstances have changed, a new affordability assessment will be undertaken and a
formal payment arrangement made
• Home credit is uniquely positioned to identify and understand vulnerable customers. Loans at Home
has clear vulnerable customer policies and procedures and all staff and agents are trained in
identifying and managing vulnerable customers
31
Support
32
Risk & compliance developments
• FCA took control of Consumer Credit regulation on 1 April 2014
• Committed to ensuring Risk & Compliance resources and processes keep pace
with growth of the business
• Management of risk and compliance is central to the long term success of the business
• Risk & Compliance Committee
• Branch assurance and thematic reviews undertaken
• Three lines of defence embedded in business
• Compliance reporting developed
• Transfer of complaint handling and reporting to Customer Services
• Monthly training for all colleagues via Learning Management System
• Policy review
33
Mobile technology developments
Stage 1 – Collections
All collections will be keyed directly into central systems by agents via mobile device
Increased efficiency
Instant access to customer status – quicker decisions
Reduce manual errors
Remove paper collecting lists
Stage 2 - Balancing
Centralisation of remaining administrative tasks in Customer Service Centre
Reduction/removal of unnecessary balancing and reconciliation tasks currently undertaken
in Head Office
Stage 3 - Lending
Ability to lend via mobile device
Electronic agreements, request to call forms and affordability assessment forms
Greatly enhanced agent and customer experience
Processes built to ensure regulatory compliance
Stage 4 - Integration
All fully integrated with new application process via website, brokers and Customer
Service Centre
Decision engine rules built into new application process
34
Mobile technology examples
35
Sharon Stone
41 Tommy Ave, Widnester, WA9 OTB
Mick Mouse
Summary
• Successful acquisition
• Initial post-acquisition stabilisation and compliance assurance activities undertaken
• Significant market opportunity
• Most experienced management team in home credit recruited
• Clear, differentiated proposition for agents
• Very high satisfaction among customers – supports customer recruitment and retention
• Implementing best in class compliance standards and processes
• Product has built in forbearance
• Sector uniquely positioned to recognise and support vulnerable customers
• Online developments will support customer growth
• New credit decision engine marries sophisticated decision science with agent knowledge, experience and
insight. Home visit facilitates affordability assessments
• Mobile technology deployment will improve efficiency, compliance and service
36