The industry should forget about innovation and return to its roots, says Benoit Chenu of Société Générale Equipment Finance
During the Leasing Life European Conference & Awards 2012 which took place in Barcelona, Spain on 29 November 2012, most of the sessions focused on how our industry should react to the current "capricious" environment.
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It didn’t come as a surprise to hear sentences such as "we need to be innovative", "free your creativity", "let’s break the mould", and "we need to think outside the box". As an industry veteran, I didn’t hesitate to stand up and wrong-foot these ideas.
I encouraged the audience to stop diversifying, to avoid looking for new areas, to stick to what they do the best, in one word: refocus!
We should remember this industry was created because banks were unable to satisfy some of the needs of their customers. These needs required specific answers which we, and only we, were able to satisfy.
Our industry was a collection of specialists: car financiers, IT operating lessors, small-ticket providers, vendor finance specialists, manufacturer captives, and leasing arms of retail banks, all with clear and consistent business models. Our added-value was undisputable and our customers were happy to pay for it.
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By GlobalDataProgressively, however, banking groups and manufacturers have set the cat among the pigeons. Instead of keeping their leasing arms doing their basic job, which is to provide leasing exclusively to their customers, they started to diversify and to expand.
Money was abundant and cheap, capital requirements were low, and the sky was the limit. I belong to an organisation which multiplied its size 13-fold during the past decade.
Pricing and the real profitability of our industry nosedived but nobody cared; double-digit growth is the perfect anaesthetic.
It was fashionable to display the broadest range of activities, from large-ticket aircraft to micro-ticket laptops, through all forms of leasing, loans and receivables, in as many countries as possible.
Suddenly, money is scarce and expensive and regulations have set capital requirements at record highs. It is the final whistle. The game is over.
But are we finished? That depends on what we decide.
Do we want to stay as the ironmongers of our industry, manning a cluttered shop of rarely-used products? If that is the case, then I fear that however creative and innovative we are, we won’t survive.
On the other hand, if we accept that we should resume what has always been our job, then our industry should live happily ever after.
Leasing arms of banks: mind your parent’s customers leasing demands.
Manufacturer’s captives: finance the products that are shipped from your factories.
Small-ticket lessors: stop financing aircraft.
Big-ticket players: avoid flow business.
Vendor finance specialists: stay away from direct customers.
If, after all these years, you’ve lost track of your identity as a business, indulge in a little introspection and decide who you really are. Then focus, focus, focus.
In doing so, sooner or later, your profitability will grow. With less liquidity and less capital, your bottom line will blossom as it will be easier to identify your added-value and customers will pay for that.
Then one day everybody will appraise your innovative mind and your creativity and will say that you really break the mould and think outside the box.
- Benoit Chenu is global head of sales and marketing at Société Générale Equipment Finance
