Qualco technology debate for the industry

As the credit and collections industry continues to go through a period of intense change, senior professionals are set to gather to discuss some of the major trends in Collections Technology, in association with Qualco.

The debate will focus on several key pillars: framework and methodology, regulations, data, people, and how this reflects from the C-suite through to the collections floor.

The latest of CCRMagazine’s informed discussion events will again see the industry share its ideas, perspectives, and knowledge.

Stephen Kiely, editor of CCRMagazine, said: “In the ever-changing environment, it is crucial to share experiences, and consider whether your view of how you see the future is shared by other industry experts.

“We are proud to be working with Qualco on this discussion that we hope will be both thought-provoking and extremely interesting. Collections technology is hugely significant for the industry, so this debate promises to provide an opportunity for knowledge-sharing and insight. There is always a positive future for the industry, but we can only get there via debate.”

More than half of all landlords will purchase next property through a limited company

The latest landlord research from Foundation Home Loans, the intermediary-only, specialist lender has revealed that of those landlords who intend to add to their portfolios over the next year, over half are likely to do so within a limited company vehicle.

Foundation says that the research – undertaken by BVA BDRC and carried out in March 2019 with the results based on 829 online interviews with landlords – also shows that portfolio landlords (those with four or more buy-to-let mortgaged properties) are even more likely to purchase via a limited company, with almost seven in 10 of landlords with more than 11 properties in a portfolio, intending to do so in this way.

Just over a quarter of landlords intend to remortgage in the next year, although this rises to one in three for portfolio landlords. 29% of all landlords took out a new remortgage in the last year.

The use of mortgage advisers by landlords to secure their property finance also remains strong, with the research revealing that seven in 10 landlords used an adviser to arrange their most recent mortgage, however 23% did deal direct with a lender. Foundation believes mortgage advisers could utilise a strong marketing campaign to secure greater activity levels with those landlords who have previously gone direct.

When asked how they had first come across their mortgage adviser, 44% of landlords said it had been through a recommendation, 13% through an internet search and 9% via membership of a landlord body.

The research also reveals a number of key financial measures with regard to the ‘average’ UK landlord – the typical one has 10 properties in their portfolio, over half of which are owned via a buy-to-let mortgage, with the average LTV of those mortgaged properties down below 50%.

The average market value of a portfolio is £1.4m with average gross rental income of £66k. The amount of borrowing for each landlord is £427k across their portfolio, although there is a marked difference between those who own only one to three properties (£334k) and those with more than four properties (£1.073m).

Finally, 19% of landlords said they had seen an increase in tenant demand over the last three months, down 5% from the last iteration of the research. 37% had seen no change, 21% had seen demand fall and 22% were unsure. Those landlords in the Midlands are currently reporting the strongest tenant demand in the UK.

Jeff Knight, Director of Marketing at Foundation Home Loans, said: “Overall the report back from landlords seems pretty positive albeit with obvious concerns about falls in tenant demand and how existing and future regulatory and economic change is going to affect their portfolios.

“What we are clearly seeing is far more portfolio landlords active in the sector, and while there has not been the great exodus that many were predicting, it’s less likely that those with only one or two properties are going to add to them.

“Overall, portfolio landlords are showing serious ambitions for the future, while holding relatively low levels of mortgage debt and therefore risk for lenders. The market value of their portfolios is solid as is their annual rental incomes and, looking at these numbers, it’s obvious to see why they stress they’re in this market for the long-term.

“When it comes to both anticipated purchase and remortgage activity, many landlords intend to do either or both within the next 12 months – which is clearly good news for advisers – and for purchasing especially this is now far more likely to be within a limited company structure, plus we have more landlords remortgaging properties out of their individual name into a company. Advisers do however have an opportunity to pick up more business, given that over two in 10 went direct to a lender for their last buy-to-let mortgage.

“The growth in portfolio activity certainly chimes with our own business results for April with 62% of all our mortgage applications coming from portfolio landlords and 53% for limited company business. Our focus therefore remains on ensuring that we support advisers with these clients with an easy-to-understand limited company/portfolio landlord proposition that takes away much of the administration demands and presents products with flexible criteria and highly-competitive rates which are not higher just because the client is utilising a limited company.

“We believe the market will continue to head in this direction and our specialist focus in this area will continue to help advisers who are likely to see a growth in client numbers over the months and years ahead.”

Foundation’s range of buy-to-let products for those who are purchasing or refinancing through a limited company is currently available up to 80% LTV, is offered at an ICR of 125 times the pay rate for five-year fixed rates, has no maximum age, accepts newly-incorporated limited companies, and has a maximum loan size of £1.5m.

‘Brexit uncertainty puts more UK businesses into significant distress’

Grimsby-based Forbes Burton, a company rescue and insolvency specialist has warned that ongoing uncertainty over Brexit means more companies could be facing financial difficulties in the months to come.

This warning has come as new figures from risk management specialists Red Flag Alert and The Insolvency Service have been revealed, showing that almost 1 in 5 UK businesses are classified as being in ‘significant distress’.

Rick Smith, Managing Director at Forbes Burton says: “This is a real concern and should be taken seriously. For example, in the Yorkshire and Humber area, companies with Critical Problems (companies with County Court Judgements totalling £5,000 or more) rose from 130 Q1 2018 to 172 Q1 2019 and in the East of England, which includes Lincolnshire, the figures were up from 155 to 168 over the same period.

“The impact of the uncertainty around Brexit is really starting to take hold now and we may see even more increases in the number of businesses facing problems in the future.”

The construction industry, usually used as a ‘bellweather’ for the UK economy showed a 9% increase in businesses in financial difficulty. The East of England specifically showed a 6% increase from the from Q4 2018 to Q1 2019.

Rick added: “The hotels and leisure industry have also been hit hard by Brexit uncertainty. The reduced labour supply as the number of foreign workers falls and the cost of a 5% increase in the national living wage has pushed 9% more hotel businesses into financial distress as last year.”

Rick explains that the lack of business travel could have had the biggest impact on hotel profits, as businesses cut back on travel in light of the uncertainty over whether or not the UK can scramble together a Brexit deal.

Premier Inn owner Whitbread also recently reported a 40% decrease in annual sales since the Brexit referendum and blames lack of business travel as a major factor.

Rick continued: “Many businesses have been preparing for a no-deal Brexit for a while now, but if you haven’t, now is certainly the time.

“A no-deal Brexit has the potential to seriously disrupt business in the UK for an extended period. Every business should be ensuring that it has good cash flow and that all financial accounts are up to date. Should the country hit a period of even more economic uncertainty, it is essential that you know how healthy your business is and how well you can weather out the Brexit storm.”

“It’s also a good idea to check on your suppliers. I would always recommend you keep your options open. If your most trusted clients start to feel the pressure, ensure you can fall back to another more stable supplier. It’ll help keep your business strong and prepared for the future.”

It isn’t too late for businesses in the UK to find themselves back out of financial distress, as Rick explains: “The UK economy is generally in good shape and we are seeing a record number of people in employment. Hopefully, the government will be able to provide greater certainty around Brexit over the next couple of months which should increase confidence.”

Spring has sprung for UK retailers

The UK’s retail sector experienced big year-on-year growth in March, but department stores remain on red alert

The key findings from the Office for National Statistics showed

  • In the three months to March 2019 (Quarter 1), the quantity bought in retail sales increased by 1.6% when compared with Quarter 4 (Oct to Dec) 2018, following sustained growth throughout the first three months of the year.
  • All store types except department stores and household goods stores increased in the quantity bought in the three months to March 2019, when compared with the previous three months.
  • The monthly growth rate in the quantity bought in March 2019 increased by 1.1%, with food stores and non-store retailing providing the largest contributions to this growth.
  • Year-on-year growth in the quantity bought increased by 6.7% in March 2019, the highest since October 2016, with a range of stores noting that the milder weather this year helped boost sales in comparison with the “Beast from the East” impacting sales in March 2018.
  • Department stores were the only store type to decrease in the quantity bought when compared with March 2018, with a fall of 0.3% in March 2019.
  • Online sales as a proportion of all retailing increased to 18.6% in March 2019, from the 18.1% reported in February 2019.

Phil Mullis, Partner and Head of Retail and Wholesale at leading accountancy firm, Wilkins Kennedy, said: “These figures reinforce just how much of an impact last year’s ‘Beast from the East’ had on the UK high street; with this March’s mild weather helping strong year-on-year growth in respect of the value spent (7.3%) and the quantity bought (6.7%).

“Food stores contributed a significant chunk of this growth thanks, in part, to Mother’s Day (and food inflation), but on the flip side, people still aren’t going for big ticket items, which is driving the downfall at some household goods and department stores.

“The ongoing uncertainty surrounding Brexit and the fluctuation of the pound are some of the main reasons consumers are so reluctant to splurge at the minute.

“Given the volatility of the pound in response to Brexit movements, retailers importing goods would be wise to hedge against exposure to foreign exchange to aid budgeting certainty.

“While these statistics of growth are encouraging news for the sector, it was disappointing, yet hardly surprising, to see Debenhams enter administration.

“And finally, it is important to remember that retail isn’t dying, it is evolving to reflect what consumers now want when they are visiting the high street, and part of this process involves businesses either shutting down or receiving wake up calls to change and tailor their offering in order to survive.”

Over half of SMEs predict UK recession as Brexit bites

More than half (57%) of small and medium sized enterprises (SMEs) believe the UK economy will fall into recession this year, according to the latest SME Confidence Tracker from leading independent financial services provider, Bibby Financial Services (BFS). In line with this belief, confidence[1] among SMEs has declined by 5.6 points year-on-year, with UK businesses experiencing their least confident start to a new year since 2014.

This has had a knock-on effect on investment decisions; with the average amount of capital SMEs plan to invest in their business falling for the fourth consecutive quarter – from £103,648 in Q1 2018 to £64,600 Q1 2019.

This drop comes as an increasing proportion of businesses say they are holding back investment due to the uncertain economic environment within the UK, increasing from a quarter (26%) in Q4 2018 to a third (33%) in Q1 2019, the highest level since 2015. A similar proportion (30%) cite that uncertainty arising from the UK’s exit from the EU is holding them back, indicating there has been an impact on UK business investment because of Brexit.

Edward Winterton, UK CEO, Bibby Financial Services, commented: “If SMEs are the warning lights of our economy, this quarter signals to us that they see trouble ahead. We typically observe a seasonal bounce in SME confidence at the start of a year, as businesses begin with renewed optimism. This year, the bounce was lower than ever before, highlighting how Brexit uncertainty is taking its toll on UK SMEs.

“Political uncertainty is acting as a brake on the economy. It needs to end. Regardless of whether you supported leave or remain, Brexit has been an agonisingly slow process resulting in our SMEs pulling back on investment when our economy needs stimulus to grow.”

The data found that SMEs are calling for further support from the Government to help them through Brexit. Over two thirds (68%) would like the Government to introduce tax breaks for businesses, while almost two thirds (65%) want lower business rates, and half (50%) think the Government should ensure that tariffs on goods to the EU are avoided.

Winterton added: “There is often talk of protecting the City of London from Brexit, but our SMEs need protection too. I hope the Government will act to reduce the impact of Brexit on UK businesses.”

Operationally, SMEs are facing other challenges too, with almost a fifth (19%) telling us that rising costs were their biggest challenge. While others believed increased competition from other firms (16%) and late payment (16%) were their biggest threats.

[1] The SME Confidence Index is compiled by equally weighting SME sales performance over the past three months with anticipated sales performance over the three-month period ahead.

Consumer car finance market up by 2% in February

New figures released today by the Finance & Leasing Association (FLA) show that new business in the point of sale (POS) consumer car finance market increased 2% by volume and 6% by value in February 2019, compared with the same month in 2018.

The percentage of private new car sales financed by FLA members through the POS was 91.1% in the twelve months to February, 0.1 percentage points lower than in the same period to January 2019.

The POS consumer used car finance market reported new business in February up 2% by volume and 7% by value, compared with the same month in 2018.

Commenting on the figures, Geraldine Kilkelly, Head of Research and Chief Economist at the FLA, said: “The POS consumer car finance market reported further modest new business volumes growth in February, as consumer confidence remained subdued amid uncertainty about the outlook for the economy.”

“We continue to expect new business volumes in 2019 overall to be at a similar level to 2018 if there is a reduction in Brexit-related uncertainty.”

Investment in the UK set to rise, according to new research

According to new research by Master Investor Ltd. (‘Master Investor’), 85% of investors are actively looking to invest in the UK in 2019 with more than a third (37%) highlighting that this number has increased over the last few years.

The research by Master Investor, the UK based investment media and events company that delivers independent, financial commentary and analysis to UK private investors and traders, featured respondents that were on average 54 years old and in the majority, either self-directed or ISA investors. They claimed to have around £387,000 in investable assets for 2019 which was up 31% compared to 2018.

According to Master Investor’s research, Healthcare (16%) and Technology (15%) are currently the most favoured UK sectors for investments. They were followed by Real estate (9%), Financials (8%) and Energy (8%). 7% selected both Infrastructure and Consumer staples while 6% selected IT and Telecoms.

The research also showed that nearly a fifth (18%) of respondents said they are most likely to favour UK small caps or AIM shares in 2019. This compared to 14% who chose UK blue chip equities.

One of the biggest investment trends in the last twelve months in the UK has been the growth in ethical investing. Indeed since 2008, assets in ethical funds have qrown almost four-fold from £4.5 billion to £16.9 billion towards the end of 2018. Master Investor’s research seems to support this trend with more than a third of (37%) respondents suggesting that they would be actively seeking more ethical investments in 2019.

James Faulkner, Master Investor, commented on the research: “The UK remains very popular for investors and is set to be even more popular despite a background of increasing economic uncertainty. We were interested to see the popularity of healthcare and technology which both offer a wide range of growth and value investments. Furthermore, ethical investing which remains a hot topic in the investment community, is something that we are seeing greater demand in.”

Master Investor organises the UK’s leading annual event for private investors. The Master Investor Show will be held on 6th April 2019 in London and will open its doors to more than 5,000 private investors. Attendees can learn from expert speakers on how to make the most of savings, talk directly to CEOs of companies they can invest in and hear leading entrepreneurs, investors and fund managers speak about future trends and opportunities.

James Faulkner continues: “We are focussed on helping as many private investors as we can – whether this is through our events, free monthly magazine or online community. It’s an incredibly interesting time to invest and we are very much looking forward to our show on 6th April where we will be welcoming a record number of attendees.”

First-time buyers take advantage of cautious housing market

NAEA Propertymark is today issuing its February Housing Report.

Demand for housing

  • The number of house hunters registered per estate agent branch fell by 15 per cent in February, from 297 in January, to 252
  • This is the lowest figure since July 2013, when agents recorded 250 prospective buyers on average per branch
  • Year-on-year, demand for housing has fallen by a fifth (18 per cent) from 309 in February 2018, more than two fifths (41 per cent) from 2017 and 46 per cent from 2016 when there were 463 house hunters per branch.

Sales to FTBs

  • FTBs took advantage of reduced competition in the market last month; as demand fell, sales to the group increased, hitting a seven-month high of 30 per cent
  • The last time FTBs experienced this rate of sales was July 2018 when they benefited from the annual summer lull
  • Month-on-month, this figure has increased by four percentage points from 26 per cent in January.

Supply of available properties

  • The supply of available housing fell from an average of 36 properties per member branch in January to 34 in February
  • This figure has not moved significantly from February 2018 when there were 35 properties available to buy per branch.

Sales agreed

  • The number of sales agreed rose in January, and remained high in February, with seven recorded per branch
  • Year-on-year, this fell slightly from eight in February 2018.

Mark Hayward, Chief Executive, NAEA Propertymark said: “With demand at a seven-year low, buyers are approaching the market with caution. As we move into spring, we would usually expect to see an increase in activity, but house hunters are evidently delaying their plans until the impact of Brexit is clearer. Over the last seven months however, we’ve seen periods where FTBs have taken advantage of reduced competition and driven their transactions forward, and this really picked up in February.

“The next few months will be very telling – will activity pick up once there’s further clarity on what Brexit means, or will it push the housing market into a deeper pool of uncertainty? Time will tell, but in the meantime both buyers and sellers should feel positive. There are still house hunters searching for properties and there are still new homes coming onto the market.”

Online learning tops university IT wish lists

Online learning tools have been ranked as the most important technology for British universities, proving twice as popular than any other type of tech.

A new survey carried out by Jisc and ucisa, also finds that 68% of higher education (HE) digital leaders feel the effective use of this technology is key to digital transformation projects, with artificial intelligence (AI) and machine learning in joint second (32%). Improving student experience is the biggest driver for tech adoption (91%), above improving workforce productivity (71%), saving costs across the organisation (41%) and improving staff morale (11%).

The Digital leadership in HE report also highlights the progress made by universities in strategic digital transformation. More than half (53%) have a digital strategy in place, while a further 21% stated their strategy is integrated with others in the organisation.

There are barriers that need to be overcome before digital technologies are embraced at UK universities, however. Organisational culture was touted as the top challenge (70%), followed by financial constraints (48%) and a lack of capability or capacity in IT (41%).

For online learning, some raise concerns that such tools undermine the worth of a physical campus, but almost half (48%) of academic staff have digital tools embedded into their ways of working.

Josh Fry, Director of Cloud at Jisc, commented: “It’s heartening to see HE institutions throughout the UK increasingly making progress with their digital strategies. I truly believe that the technology priorities recognised in the report – such as online learning, AI and machine learning – can result in improved experiences and greater accessibility for a wider range of students, whilst continuing to make the UK the most digitally advanced education and research nation in the world.

“Innovation must have a purpose, and it is important to take a whole-campus approach to a digital strategy before implementing new tools; technology initiatives work much better when aligned with an organisation’s business and teaching and learning strategy. Digital leaders in HE must work out how ‘disruptive’ technologies can be introduced into methods of working in a way that encourages engagement from academic and support staff.”

Trevor Baxter, IT Solutions Director at King’s College London highlighted that learning tools such as MOOCs (Massive Open Online Courses), Virtual Reality, Mixed Reality and 3D are beneficial for learning purposes. He said: “We need to start looking into these technologies more because if we don’t, we can actually lose students coming from abroad to study in our universities.”

John Beaver, Director of IT Services at Bath Spa University, added: “For us, AI is a big interest, both as a technology that we may apply for student experience purposes, such as an AI that might find books of interest in the library for a student knowing what they’re doing or recommend particular modules or courses that may be of interest to them.”

Peter Tinson, Executive Director at ucisa, said: “In the age of Education 4.0, when we must constantly adapt to prepare our students for the changing landscape of the job market, it’s critical that universities continue on their digital transformation journeys in order to ensure the premium experience student expect. This report highlights some really exciting examples to follow, and we look forward to hearing more in the coming weeks and months.”

Prospects for Open Banking

David Firth, head of product for TransUnion Open Banking, talks
to CCRMagazine about what lies ahead.


How will Open Banking bring new data to the industry?

Open Banking paves the way for a data revolution, allowing consumers to quickly and securely share their banking information with accredited third parties. This new data will have a significant impact on how consumers apply for financial products in the future, and how businesses use this data to offer improved services and carry out more detailed affordability and creditworthiness assessments, ensuring that products are appropriate and sustainable.

Consumers can now login directly with their bank to grant consent for FCA-registered third parties to access their financial information. This information is in a digital format, rather than a printed or a PDF statement, and, therefore, can be automatically categorised, so that creditworthiness and affordability assessments are much quicker, or even automated.

As Open Banking becomes more widely adopted across the lending industry, we may see it start to become commonplace during those customer journeys that do not fit the norm, such as consumers with a thin credit file, where a decision cannot be made using the standard lending policies. In the future, we may also see Open Banking form a core part of the standard application process because the data can be used to better ensure products are suitable and sustainable for consumers.

What technical innovations will be needed to allow that to happen?

Open Banking relies heavily on governance and standards that are coordinated by the Open Banking Implementation Entity (OBIE), which has been a significant programme of collaborative work across banks and third parties.

Beyond the industry standards, there are a number of technical innovations that are required to ensure Open Banking can be used to its full potential. Key to this is the creation of a streamlined consumer journey and experience that guides users through the consent, bank authentication, and authorisation journey. The fundamental next step is where the industry will see a focus of innovation over the coming years, focusing on how the consumer’s data is processed to ensure accuracy and depths of insight.

The data returned through Open Banking is in a machine readable, but raw format. It must be categorised so we can understand what each line of data means in as much detail as is necessary. Once understood, it must then be reviewed against affordability and creditworthiness rules set to help inform a lending decision. This must all be done within a number of seconds, and with utmost accuracy to ensure a fair and suitable outcome is reached.

Which sectors have been the quickest to adapt to the new possibilities and why?

As is often the case, it is not necessarily a specific sector that is moving faster, but rather fast technology adopters across a number of sectors. These fast movers will tend to be the more cutting-edge companies who prioritise new technology developments and want to utilise them as soon as possible, to realise the range of benefits they bring.

Our experience shows that, unsurprisingly, the lending industry and surrounding sectors have a keen interest in Open Banking. This was confirmed in the research we conducted with Forrester Consulting which showed that eight out of 10 financial firms are either adopting or planning to adopt Open Banking, or are interested in doing so. We expect 2019 to be a transformational year for Open Banking as many more companies adopt and trial new services.

What do the customers think of this, and how should the industry seek to educate them?

Open Banking is largely unknown to consumers at the moment, as our own consumer poll illustrated, with one in four saying they had not heard of it. This is not overly surprising. Consumers are often unaware of the underlying technology or services that are powering their experiences or journeys. They do, however, respond to adopting new services if the benefits and value exchange are clear, so there needs to be greater awareness of these.

There are substantial benefits for firms in adopting Open Banking, due to processing efficiencies or better decisioning, but there are also a range of consumer benefits. These include quicker application journeys and the availability of a wider selection of products and services. The benefits realised by both consumers and businesses will see a gradual adoption of Open Banking, and it will become a mainstream process in the years to come, assuming that the benefits exchange remains the focus.