Despite the recession, the outsourcing game in asset finance appears to be gaining momentum.
A key reason is that as the market begins to pick-up again, and as other parts of financial services become less buoyant, the number of new entrants into leasing is on the rise. These newcomers, some say, will need the services of outsourcing specialists.
Commenting on this, Philip Davies, managing director of LPM Outsourcing, said: “We are soon likely to see completely new leasing ventures that could need outsourced services. New players like Virgin Money could move into the asset finance business.
“There could also be launches of independent Sharia-compliant lessors.”
Taking another look
Another opportunity for outsourcers has been managing of portfolios of assets which lessors no longer wish to lend against.
This practice, known as run-off, has been particularly prevalent in the IT market which players such as Lombard and Barclays Asset & Sales Finance have pulled out from.
The current economic shake-up brings a lot of fluidity in the ownership of leasing portfolios, which may occasion a new look at outsourcing options by some lessors.
Marc Tendler, principal for leasing advisers Alta Group, commented: “We have seen some interest in new outsourcing projects, though it does not seem to be a high priority for a great many lessors just now.
Where collections are concerned, lessors from outside the financial services sector are much more likely to take the outsourcing route compared with banking sector players with relatively stable business volumes.
Manufacturer-captives are natural outsourcing users, especially in sectors like commercial vehicles where manufacturers tend not to have ongoing interface with the customer through equipment servicing arrangements.
So, too, are a variety of types of niche players in leasing. Cisco Capital and Syscap, both specialist supplier/lessors of IT equipment, are among users of LPM’s management services.
An interest in offshoring
Meanwhile, there is understood to still be some limited interest by larger leasing players in the use of offshoring.
At least one of the major UK lessors is understood to have outsourced collection services for some portfolios in India.
In-house ‘near-shoring’, through centralised back office support for pan-European leasing portfolios, is of course a quite different option from third party outsourcing.
This has been done by lessors such as CIT and IBM Financial Services, often taking advantage of the fiscal and other attractions of locations like the Dublin International Financial Services Centre.
“‘Near-shoring’ poses fewer operational challenges than some other outsourcing options,” said Tendler.
“Yet it can have a similar impact on customer perceptions as ‘off-shoring’. Lessees may notice that their accounts are being handled from a different country, especially if service levels slip,” he added.