Vanquis Banking Group PLC · LSE:VANQ
Vanquis Banking — Provident Financial — Investor Day (2006)
63 slides from Vanquis Banking's investor day presentation, 2006
Slide 1: UK home credit
Provident Financial UK home credit
Slide 2: Peter Crook, Managing Director
Provident Financial UK home credit Peter Crook Managing Director
Slide 3: Agenda
Provident Financial UK home credit Agenda • Business overview • Market trends • Key priorities • Multi-channel distribution • Customer segmentation • Product development • Credit and arrears management • Field efficiency initiatives • Technology enhancements • Summary
Slide 4: Overview
Provident Financial UK home credit Overview • Leading provider of home credit • Unique relationship-based service • Cash generative business • Market conditions competitive
Slide 5: UK home credit: management
Provident Financial UK home credit: management Peter Crook UK home credit board of directors Managing Director Dave Spiers Finance Director Chris Graham Marketing Director Mike Palmer Operations Director Charles Taylor Credit Director Phil Kettle Business Support Director Paul Thrustle IT Director S
Slide 6: Peter Crook, Managing Director
Provident Financial UK home credit: management Peter Crook Managing Director • Graduated in economics • Qualified chartered accountant • MBA • Halifax plc – various roles held between 1990 and 1997 • Barclaycard, finance director, 1999 • Barclaycard, managing director, 2000 • Barclaycard, managing d
Slide 7: Dave Spiers, Finance Director
Provident Financial UK home credit: management Dave Spiers Finance Director • Graduated in finance and economics • Qualified chartered accountant • MBA • Provident Financial, UK home credit: • management accountant 1991-1993 • senior management accountant 1993-1995 • head of strategic marketing 1995
Slide 8: Overview
Provident Financial UK home credit Overview Total customers 1.5m employees 2,725 agents 11,755
Slide 9: Field organisation
Provident Financial UK home credit Field organisation 7 30 194 1,136 11,755 Divisional Regional Area Development Agents operation operation managers managers managers managers
Slide 10: Products
Provident Financial UK home credit Products Borrow Repay Cash loan 55 weeks £100 £165 Vouchers 25 weeks £100 £125 NO EXTRA CHARGES NO DEFAULT INTEREST
Slide 11: Customer profile
Provident Financial UK home credit Customer profile • Female 70% • Male 30% • Socio-demographics C1/C2, D, E • Age groups all ages well represented • Tenure rent 77%, own home 23%
Slide 12: Market trends
Provident Financial UK home credit Market trends • Recent macro–economic environment: • rising income levels • minimum wage and tax credits • low interest rates • stable unemployment • Customers’ circumstances changed: • increased competition from remote lenders • greater access to other credit prod
Slide 13: Market trends
Provident Financial UK home credit Market trends • Current macro–economic environment: • unemployment and CCJ’s increasing • mainstream banks lending criteria tightened • Focus on credit quality • affordability is key • new and existing customer credit scoring essential • Home credit provides an adv
Slide 14: Customers and credit issued
Provident Financial UK home credit Customers and credit issued Customer Credit numbers issued `000 £m 1,800 1,000 1,600 900 1,400 800 700 1,200 600 1,000 500 800 400 600 300 400 200 200 100 0 0 92 93 94 95 96 97 98 99 00 01 02 03 04 05 Customer numbers ('000) Credit issued (£m)
Slide 15: Growth is the key priority
Provident Financial UK home credit Growth is the key priority • 2003 onwards, decline in customers • 2005 issue growth from longer, larger loans • 2006 growth in customers in June • Growth in issue without growth in customers isn’t sustainable Key priority is to grow by recruiting and retaining prof
Slide 16: Changes to deliver growth
Provident Financial UK home credit Changes to deliver growth • New distribution channels • Improved customer segmentation • Product innovation • Enhanced credit and arrears management • Streamlined field organisation • New ways of working enabled by technology
Slide 17: Evolution of the business model
Provident Financial UK home credit Evolution of the business model • Build on key strengths and capabilities: • agent force • national field coverage • flexible, simple, transparent approach • Evolution via: • multi-channel distribution • customer segmentation • product development • Supported by: •
Slide 18: Chris Graham, Marketing Director
Provident Financial UK home credit Chris Graham Marketing Director
Slide 19: Chris Graham, Marketing Director
Provident Financial UK – Management Team Chris Graham Marketing Director • Graduated in Managerial and Administrative studies • Chartered Institute of Marketing Diploma • MBA • Previous marketing roles at HSBC and First Direct • Provident Financial, motor insurance: • marketing manager 1994-1998 • P
Slide 20: Customer recruitment
Provident Financial UK home credit Customer recruitment • Agents produce majority of new customers 94% customer satisfaction
Slide 21: Attracting new customers through marketing
Provident Financial UK home credit Attracting new customers through marketing • Supplement valuable source of agent recommendation • Additional approaches required for growth • direct response activity • internet • partnerships / affinity • face-to-face sales • Success seen through customer growth i
Slide 22: Direct response
Provident Financial UK home credit Direct response Direct Mail Internet Direct Response Directories Inserts Press
Slide 23: Direct mail
Provident Financial UK home credit Direct mail • Strong growth • Targeting models developed • Test and learn: creative Response Conversion Experian / internal data Third parties Targeting
Slide 24: Internet
Provident Financial UK home credit Internet • Important source and response handling vehicle • Growth area • Specialised internet marketing resource
Slide 25: Partnerships
Provident Financial UK home credit Partnerships • Retailers • Mail order Sources of declined • Finance & loan companies applications • Credit card providers • Brokers Coverage combined with high density is key competitive advantage
Slide 26: Face-to-Face
Provident Financial UK home credit Face-to-Face • Shopping malls Customer • High footfall areas opportunities • Specialist 3rd parties
Slide 27: Sales & retention activity
Provident Financial UK home credit Sales & retention activity • Strong sales & retention via direct customer contact • Core activity: mailings to customers Targeting Control modelling & behavioural scoring seasonality Creative Frequency approach continual test continual test
Slide 28: Customer segmentation
Provident Financial UK home credit Customer segmentation • Creation of customer insight team • Drive customer relationship management via data modelling • Customer proposition development to: • maximise profitable sales • maximise customer retention
Slide 29: Segmentation strategy
Provident Financial UK home credit Segmentation strategy Products TYPE Remote Monthly Card Loan Term Amount collect home credit Models Channel WHO & WHEN HOW Direct Propensity mail Optimised targeting Reducer SMS Attrition Phone New Agent/DM customer h/held Life time Email value
Slide 30: Example programmes
Provident Financial UK home credit Example programmes New customers Loyalty Retention
Slide 31: Genuine relationship management
Provident Financial UK home credit Genuine relationship management Centrally data driven One to one relationship SALES, LOYALTY, SATISFACTION
Slide 32: Longer, larger loans
Provident Financial UK home credit Longer, larger loans • Rationale: • customers using other credit sources for larger amounts • desire for larger amounts from UK home credit
Slide 33: Longer, larger loans
Provident Financial UK home credit Longer, larger loans • Progress: • launched in 2005 • significant sales generated • credit quality maintained
Slide 34: Plastic card developments
Provident Financial UK home credit Plastic card developments Rationale • Plastic has significant kudos appeal in sub prime market • Practical value: • easy purchase transaction • access to other means of purchase: telephone, internet • Combine with core home credit benefits: • simplicity • transpare
Slide 35: Store-specific plastic
Provident Financial UK home credit Store-specific plastic • Key retailer partnerships: • Argos • Woolworths • Key seasonal sales times: • Christmas/January sales • Easter • back to School • Customer benefits: • flexible offer • controlled, fixed value so can’t overspend
Slide 36: Visa
Provident Financial UK home credit Visa • Developed in conjunction with Vanquis Bank • Debit card, not a credit card • Fixed value loaded onto non-personalised Visa card • Customer can use until value spent • Recruitment and retention potential
Slide 37: Charles Taylor, Credit Director
Provident Financial UK home credit Charles Taylor Credit Director
Slide 38: Charles Taylor, Credit Director
Provident Financial UK – Management Team Charles Taylor Credit Director • Graduated in Theoretical Physics • Certificate of Advanced Mathematics • MSc in Operational Research • CCN (became Experian), various roles 1984-1995 • Consultancy, own business, managing director 1996-1999 • Experian, directo
Slide 39: Enhanced credit management
Provident Financial UK home credit Enhanced credit management • Historically, new customer decisions driven by agents • multi-channel scoring for new customers recently introduced • lend more to lower risk and less to higher risk customers • Behavioural scoring system introduced in 2002 • credit gra
Slide 40: Credit Management Enablers
Provident Financial UK home credit Credit Management Enablers • Credit scoring for new customers • Behavioural scoring • Structured arrears process
Slide 41: Credit Management Enablers
Provident Financial UK home credit Credit Management Enablers • Credit scoring for new customers
Slide 42: Credit scoring for new customers
Provident Financial UK home credit Credit scoring for new customers • Phase 1 has just been rolled-out across all channels • agent • internet • contact centre • Uses internal data only • Accessed through a free phone number • Agents like it
Slide 43: Credit scoring for new customers
Provident Financial UK home credit Credit scoring for new customers • Phase 2 will be rolled-out in H2 2006 • Considers much more data • Applies to all new customers • Powerful tool to identify new customer behaviour: • top 10% have less than 5% chance of going bad • bottom 10% have more than 60% ch
Slide 44: Credit scoring for new customers
Provident Financial UK home credit Credit scoring for new customers • Introduces segmented lending strategy • Agents can lend more generously to lower risk customers • Ability to grant small sum credit remotely e.g. for loans < £300 • Greater control over credit policy
Slide 45: Credit Management Enablers: Behavioural scoring
Provident Financial UK home credit Credit Management Enablers • Behavioural scoring
Slide 46: Behavioural scoring
+ Provident Financial UK home credit Behavioural scoring • Categorises existing customers into five risk grades (A to E) • Avoid lending to grade E, cautious with grade D • Recently improved using new data: • 17% of risk grade C will be treated as risk grade D • 25% of risk grade D will be treated a
Slide 47: Credit Management Enablers: Structured arrears process
Provident Financial UK home credit Credit Management Enablers • Structured arrears process
Slide 48: Structured arrears process
Provident Financial UK home credit Structured arrears process • Arrears management historically locally driven • Major field process • Structured arrears process introduced to target visits intelligently • Segmented strategies based on nature of arrears • Central telephony and improved letters to su
Slide 49: Structured arrears process
Provident Financial UK home credit Structured arrears process • Workflow system identifies appropriate action • Use low cost methods where possible • Low risk customers receive friendly reminders • Actions escalate as a customer fails to respond • Phase 1 rolled-out, May 2006
Slide 50: Structured arrears process
Provident Financial UK home credit Structured arrears process • Phase 2 currently being developed • scorecard to identify riskier customers • remote payment ability • Use champion/challenger to target the use of: • visits • telephone calls • Ongoing refinements
Slide 51: Credit Management Enablers
Provident Financial UK home credit Credit Management Enablers • Credit scoring for new customers • Behavioural scoring • Structured arrears process
Slide 52: Peter Crook, Managing Director
Provident Financial UK home credit Peter Crook Managing Director
Slide 53: Streamlined field organisation
Provident Financial UK home credit Streamlined field organisation • Combine field management and administration of two brands: • Provident Personal Credit (PPC) • Greenwood Personal Credit (GPC) • Improved efficiency, reduced costs • Supports growth through a single management and cost structure • I
Slide 54: UK home credit
Provident Financial UK home credit
Slide 55: What is Insight?
Provident Financial UK home credit What is Insight? • Replaces old paper administration processes • Technology for agents and managers using ‘Focus’ platform • Improved customer service • Reduction of costs • Platform to improve agent effectiveness
Slide 56: Summary: Now vs Future
Provident Financial UK home credit Summary Now Future Collect Thursday to Tuesday 24/7 Two hours of paperwork Easier balancing No round order Record of date / time Limited information More information Old-fashioned Professional image Customer and sale risks Reduces risks
Slide 57: Insight
Provident Financial UK home credit Day 1 agent benefits Best collection times Credit Professional scoring on-line insight More Card flexible payments week
Slide 58: Enabling Profitable Growth
Provident Financial UK home credit Insight Attract better Create more agents time Enabling Profitable Growth Bigger Handle more agencies customers
Slide 59: Insight: the benefits
Provident Financial UK home credit Insight: the benefits • Better technology • wider use • resilient • cost effective • Detailed work on processes • Importance of managing change
Slide 60: Timeline
Provident Financial UK home credit Timeline 2006 2007 Jan Apr Jul Oct Jan Apr Jul Oct Mar Jun Sep Dec Mar Jun Sep Dec PCs in branches New arrears process New customer scoring PPC & GPC Merger Insight development Insight test Begin Insight roll-out
Slide 61: Points of differentiation
Provident Financial UK home credit Points of differentiation • v home credit lenders • v mainstream lenders e.g. Cattles, LSB, S&U e.g. Capital One, Barclays • Product range • Sub-prime experience • Multi-channel distribution • Community based • Leading edge technology • Superior customer service •
Slide 62: Future developments
Provident Financial UK home credit Future developments Collections Home Remote Home Issue Remote
Slide 63: Summary
Provident Financial UK home credit Summary • Long established business with good competitive position • Proven business model now evolving via innovation of: • distribution channels • customer segmentation • product development • credit and arrears management • ways of working enabled by technology