Brian Cantwell speaks to Johnnie Halliday, Linedata director of sales, lending and leasing software Solutions, about the challenges of operating a leasing business in the UK market and how to overcome them, as well as market trends and analysis.
The UK market has seen increasing level of competition in the past year, driven by new entrants looking to take advantage of the market and to set up businesses in asset finance.
Think of US lender White Oak’s acquisition of UK lender LDF; Conister Bank acquiring lending business Bluestar Leasing; and motor finance lender MotoNovo moving into the commercial finance space.
This disruption brings raised expectations about digital point-of-sale capabilities, the speed of service to customers, and new entrants without legacy systems setting the pace of change.
So, whether it is Open Banking or a raft of regulation, there is a constant need to keep up – and it does not matter which country you are in, says Johnnie Halliday, Linedata’s director of sales, lending and leasing software solutions.
“You’re being hit by technological advances, regulation, all sorts of margin pressures from competitive environments as well,” says Halliday.
Halliday began his career at captive Pitney Bowes in 1980, and worked from the lessor side of the industry to the systems side via stints at Five Arrows Leasing, LPM, CQ Systems (now NetSol), Cassiopae and Linedata.
The UK market is one of change and challenge at the moment. Ceaseless acquisitions and new market entrants have put margins under pressure and driven the need to compete up the agenda, says Halliday.
“I think one of the things that is so easy to do from a lessor’s point of view is to react too quickly to market conditions. But we’re in that febrile, dynamic environment where you’ve got to be able to do things very quickly,” Halliday observes.
“The challenge is: what do we do in this environment in terms of competitive advantage? You would be unsurprised to learn that every single request for information that we get in this environment is about improving the customer journey, and making it more frictionless.
“We get requests for information, which is usually stage one of a bank or a finance company or a startup saying: ‘OK, looking out there, this is our vision: how can you help us?’ Then you move on in a more formal world to a tender process which is an RFP [request for proposals], which includes things like costs.
“It’s all about the dash for growth. How do I switch the limited amount of demand in the UK market – a population of 60m people, and where there are 30 new banking licences in the pipeline?
“You’re chasing a limited number of wallets in the UK for lending opportunities – asset, motor or consumer.”
Some lessors, like Shawbrook, have moved into the consumer motor finance space in order to support their growth, which has raised its own challenges.
“If you step across from motor to asset finance, it’s important to have the right people, systems and asset-management depreciation knowledge, which you need to be consumer- and FCA-regulated and better prepared for an automated process,” says Halliday.
On top of market issues, there are the threats from fintech and the digital revolution. And a lot of the own-broker, small-book providers are being swept along with larger businesses consolidating the market, like Star or Cabot, says Halliday. As a result, there is still too much money chasing too little demand.
“The consolidations are happening in the UK market because people can’t keep up with the competition. They can’t keep up with systems changes, regulation and other pressures. Tat’s resulting in too much money chasing too little demand, and with the threat of rising interest rates on the consumer business world, I think that’s going to have a knock-on eﬀect in the business world.
Halliday continues: “If 90% of the businesses in the UK are SMEs, they are owner-occupiers with their own homes, they are having the same thoughts about whether they invest in the UK, given Brexit uncertainty in particular.”
The leasing industry needs to be aware about disruptive players, like the online banks or large digital entities like Amazon, which could use their take on systems to displace traditional players.
“Most of our systems in the leasing industry, despite their creator, have been built from the back. Ten you have added middle office, and point of sale,” notes Halliday.
“The guys who are coming at the issue from the other perspective – customer-centric, with cross-selling and consumer-selling a product – they’re in a better position. Integrated CRM is a way forward to widening your market.”