Latest / The Payments Shed / Ep. 33 - The Credit Revolution: How Embedded Finance and BNPL are Redefining Payments, with Lindsey Lindsay, CMO, Snap Finance UK

Transcript

Ep. 33 - The Credit Revolution: How Embedded Finance and BNPL are Redefining Payments, with Lindsey Lindsay, CMO, Snap Finance UK · The Payments Shed

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Welcome to the Payment Shed Podcast, the weekly podcast that
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dives into the big topics, trends and people shaping the
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world's of payments, fintech and business leadership with your
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two Co hosts, myself Grant Evans and Justin Hanna.
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Welcome back to the Payment Shed Podcast.
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Today we are joined by Lindsay Lindsay, Chief Marketing Officer
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at Snap Finance. Thank you for joining us,
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Lindsay. No problem.
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Tell us a bit more about yourself.
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Oh. So worked in consumer finance
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and credit for what feels like when you say 25 years out loud
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makes you feel super, super old. But yeah, that is that is the
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reality of it. So yeah, I guess from my
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perspective, worked, worked in the industry a number of years
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across a number of different businesses.
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Always though really in a near prime, mid prime space and that
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was really, you know, my first entry into credit backup
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Provident in 2000 and and one. But I think the one thing the
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whole 25 years has got in common has been this, I guess, need or
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requirement to work with what I would class as the underdog, the
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underserved and making sure that we're bringing credit products
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to a market that is not always fulfilled.
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Nice. And what kind of first attracted
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you to the the credit and finance world?
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Oh. It was a total accident.
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So. I, I'd had enough with college
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and it was one of those parental moments of you need to go find a
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job. So my first introduction into
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finance actually was in a building society.
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So like totally, totally different to what I do now and
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did that for a couple of years and then like most marketeers
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had this like great idea that I wanted to go and work agency
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side. Anyway that lasted 6 months and
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I absolutely hated it. My I guess control freak in May
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decided the not being on the client end is not for me.
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But whilst I was there, one of our clients was Provident
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obviously no longer with us now Vanquis Banking Group, but we
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had them as a client and like looking in, I was like, wow,
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this business charges really super high Aprs and you're
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looking at it going, can I get comfortable with this product?
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And the more I worked on the account, the more I was like,
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this is really interesting. Selling Prime products to Prime
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customers is actually not all that interesting, but going and
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championing customers who are excluded and need these products
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probably more so than anybody else.
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And working for businesses where in some respect from the outside
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in could be heavily criticised for what they do are actually 10
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times more customer centric than any Prime organization.
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So falling into this industry was totally by accident.
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But as I said, here I am 25 years later having worked, as I
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said, near prime, mid prime, P backed, privately owned P backed
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wasn't for me either, but yeah, certainly early.
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Roles really kind of shaped how you look at consumer lending
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today then. Oh, 100% So one of the first
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things that you have to do, or we did when we joined Provident
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was so that was their home collected credit brands.
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So to really understand the product, you needed to go out
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with an agent. So you would get in a car with
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an agent and drive around, you know, estates, you know, quite,
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you know, inner city estates. And the relationships between
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the agents and the customers, irrespective of the APR charges,
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irrespective of the product, like was absolutely eye opening
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and made you appreciate and realise the difference that
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those products actually made in those customers lives.
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Because even now like customers don't necessarily understand AP
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Rs, right? Like they really don't, but what
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they do understand is can I afford on a weekly or a monthly
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basis the payment that I am signing up for?
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So regardless of all the changes that we've all seen in the last
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5-10 years in this industry, the one thing that hasn't changed is
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still the customers like motivation and the customers
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requirement for affordability. And so, yeah.
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What do you think has changed the most in your career when it
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comes to how people think about finance and borrowing?
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I think, I think there's a number of things.
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So I think and we're all here right to talk about post COVID,
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but I think a number of things have really changed during that
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time. So I think if any of us now was
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to go and buy a product or service, like the access and
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availability of credit products is change significantly, almost
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to the point where sometimes you get to check out on a website
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and you think, wow, like I can pay by cash, I can pay by credit
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card. Oh, I'm brilliant.
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You've actually got six other credit options.
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It's actually like in some ways got even more confusing.
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But I think the biggest thing for me is the acceptance and
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almost expectation that these products are now available on
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any of our of our products and service.
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I think also from my perspective, I think especially
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around buy now, pay later is I think customers who typically
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wouldn't have used credit before and, and I include myself in
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that right are actually using buy now, pay later products.
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So I do not need to use Klarna. I don't need to use credit.
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But I'm a woman and I like to shop and I return 75% of what I
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buy. So from my point of view, I see
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it as a deferred payment option. Money's not leaving my account.
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I return what I need to do, clan and credits it, and then I
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actually pay for what I need to like.
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Yeah, but but but we do though. It can't be.
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Dealing. With yeah, exactly.
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But we're almost there's become this normalisation of it.
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I guess that's what I'm getting at is that do we see it as a
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credit product or do we see it as a deferred payment option?
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I think sometimes and I've definitely felt this quite
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overwhelmed when I've got gone to a checkout and he's given me
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a million payment methods. I'm not.
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I just want to use Apple Pay. I don't need to use five these
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different buy now pay later products that are being sent to
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me until I get to maybe someone spending a few 100 lbs.
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So I go actually, maybe I won't put this on my card.
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I could split this payment, I'm still going to pay it, still
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need me an extra, whatever it is I want without using my credit
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card. I might as well just go for it
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and all I've got to do is remember to pay it next month.
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So I think I've seen, sorry, is is, you know, Xavi, Yeah,
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they've got so many different BMPLS on their checkout's just
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got this list and it's like 30 different payment methods, of
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which probably 10 are different BMPLS, right?
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How do you choose? How do you choose and
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especially, I guess in some ways, you know, like a
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customer's now choosing, there's a strength in some of the
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brands, right, Isn't there that there wasn't that there wasn't
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before? And I suppose depending on who
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you are, when you've got PayPal, Klarna, Clearpay and you've got
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three of them all offering a paying three option in a basket.
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I mean, clearly there doesn't need to be 3 paying three
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options. But it, it, it does come down to
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your personal preference of the brand and maybe because a
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payment vehicle you've used before, I think, I think
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customers are getting an affinity with one of the BMPL.
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Brands also, there's a few of them out there that are paying
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retailers to be yeah, the top option yeah, yeah, right.
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So if you've got 3 or 4 BMPL, interest free credit, whatever
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they want to be called providers, whoever's paid that
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payment gateway or merchant, the most amount of money will be at
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the top list. And that and then has impact
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because brand affinity like you mentioned and how people might
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go into clan or might go somewhere else to see what they
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want to buy as opposed to go into retailers website and use
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that as a payment method. Yeah.
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But, but I mean that in some respect is no different than the
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wider, I guess BMPL, embedded finance, point of sale, retail
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finance. Yeah, there's all slight nuances
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dependent on the size of the basket and the length of term,
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but that's no different than subsidies in a prime tier one
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bank backed point of sale lender where you know, sometimes it
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it's a race on price. I don't even necessarily think
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it's it's blowing up the way it has the NPL because it's, you
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know, cheaper in terms of its interest free and it's, you
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know, paying for it. I actually think it just the
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sign up process is slick. It's quick, it's faster speed.
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We talk about speed a lot today. We, we've recorded a few
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episodes today and speed's been front of mine.
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I just think that's the way the world moves now.
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And if you're looking to fund something in a, in a split, like
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you think of like the legacy providers for lending, how many
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different pages did you have to go for?
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And then you're waiting around and it's like, yes, you've been
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approved. You don't want to do that.
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You just want a quick decision. You move on with your life and
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that's where it's done so well in my opinion.
9:36
Yeah, exactly. And I think, and I think again,
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this comes down to, you know, maybe it is broad affinity,
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maybe it is just the ease of doing it.
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But because I have the Klarner app on my phone, I know that if
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a a merchant is offering Klarna, I don't want to download an
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alternative buy now, pay later brands app when it's going to be
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super simple for me to click it. I'm into my app, I'm straight
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out and payment, payment done. But when does it become too
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easy? You've.
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Worked with a range of different.
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Yeah. Companies across, you know,
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let's take more legacy providers and then you kind of trendy
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fintechs out there. What different learnings have
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you taken through working with those different types of
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organisations? I think from my perspective is,
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and it's always going to be grounded in the customer.
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So as I said, going out visiting customer with an agent, seeing
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it through a customer's lens is you have to be where the
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customer is and where and how the customer wants to purchase
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your products. So it was horrifying me when I
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was thinking about this as part of coming on on this today that
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I remember right back in 2003 when we were launching the first
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ever website and it was like, oh, this is a relational
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business. We're never going to be able to
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put, you know, applications through a website.
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And it was like, but our customers don't just transact
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with us. Like this was when Facebook was
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blowing up. It's when Myspace was still a
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thing and customers are comparing your product to what
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they are getting in alternative spaces.
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And if they are in a digital space, regardless of whether
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your business wants to do it or not, you have to be where they
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are at that moment in time. And so I've seen that through
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the course of maybe the last three or four businesses that
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I've been at, you know, Provident in the beginning,
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relational business website never going to work.
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Well, it did join Perfect Home. There was 69 stores.
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We didn't have a website. You know, 18 months later we had
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no stores. Everything had been put online
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and had grown beyond that. Even, you know, Snap now like
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the traditional retail, you know, finance model, we're now
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shifting into a virtual card because customers are seeing it
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in other spaces. Look at Klarna, they've just
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launched their virtual card like none, none of the products that
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we're actually seeing are that innovative.
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We're just taking the best of different parts of products.
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Monza or Flex current account with the buy now, pay later
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feature. Neither of those things are new.
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All we're doing is we're finding ways to configure the best bits
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of what's going on in the market, but it's all because of
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what customers are expecting for those products for where they
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are. Yeah, yeah.
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The consumer. 'S still just the same product,
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right? They're making it feel cool.
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Put a consumer wants his money right, that's their product.
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They don't really care how they're getting it, whether it's
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being split in three, whether it's on a credit card, whether
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it's on on their own bank. For me, if I was a, a bank on
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behalf of a consumer, I'd be wanting to see what they're what
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they're transacting like and say, well, actually, next time
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you go to to use a product, make sure you're using our product.
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It might be paying 3 is automatic.
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So I think banks probably not doing enough right now with
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their data, whereas fintechs that are now becoming banks know
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that the customer UX is so, so important.
13:10
Yeah, absolutely. What's your view on where
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interest bearing credit and embedded finance kind of fits
13:16
within the modern payments ecosystem of the embedded
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finance is kind of like the buzzword.
13:20
Oh, wow, this is what I mean, right?
13:22
This is this is what I find really fascinating about the
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fact that even within one conversation we can interchange
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between buy now, pay later, embedded finance, retail
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finance, point of sale finance and to some degree they are in
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my mind all slightly different. So embedded finance as I would
13:43
talk about it would be almost a brand extension of what that
13:49
retailer is wanting to to offer from a financial perspective.
13:54
So can I make it as easy as possible within the buying
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journey to integrate finance within how the customer checks
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out? And I think some of the people
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that are doing that really, really well at the minute, you
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know, take careers, you know, take their flex pay account, you
14:11
know, creation product. But from a customer's
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perspective, they have absolutely no idea that creation
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is the lender behind the product.
14:19
Because what careers care about is that customers believe that
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that is an embedded product in. But he said that until you go to
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make a payment. But I had, I had ATVI think or
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something on Curry's, whatever, it was like 2.
14:33
And this is only two years ago. I physically couldn't pay by
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Apple Pay really. And it was a huge problem with
14:38
me because I remember being on a golf course once, first world
14:40
problems. I did the golf course once and I
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got a text saying, oh, you've got X months, I'll make the
14:45
payment now. And I didn't have my wallet on
14:47
me, so I couldn't make the payment then and there.
14:51
So they've, if they have improved, that's fantastic.
14:53
But it goes back to the cost of acquisition of getting me in the
14:55
door. And it was a seamless journey to
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get me borrowing the funds. But when I wanted to pay it off,
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it felt like there was so many barriers.
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But I think maybe what you're raising there is a really,
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really valid point, which is you can make it appear embedded
15:10
finance at the beginning of the journey.
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But let's face it, legacy older bank backed retail finance
15:21
lenders, we're not going to see a massive amount of product
15:26
innovation and that could be front end product innovation or
15:30
collections innovation. So I think this is the marketing
15:35
team dressing up the products at the front end.
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But unless those finance businesses are innovating across
15:42
the whole consumer life cycle, maybe to your point, we can, we
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can, we can get them in. We're talking more about the the
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actual payment method you're using to pay off.
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For me, the embedded finance element of that journey is more
15:57
curries monetizing a product that they're hosting themselves
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to a degree of. Rights.
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So they're. Putting their own badge on
16:03
someone else's solution and because they're putting it more
16:05
frankly centre there maybe then taking a margin, whereas before
16:08
you might have gone to a V12 or something like that and they
16:10
probably would have charged Currys.
16:12
For all the. Convenience rather than Currys
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now saying well we're actually taking the owners front end now
16:17
you get a lesser cut where front and center the customer thinks
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it's pay with Currys or whatever it might be so they they
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maintain brand ownership as. Well, and that's the key point
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and I think that's the thing for me around what I'm meaning
16:30
around embedded finance is, let's face it, some of these big
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retailers that invest a heck of a lot in their brand and their
16:36
reputation to then hand that off to a finance company and not
16:40
deliver the same experience, albeit your experience on the
16:43
golf course wasn't what you expected.
16:46
But ultimately that's, that's what I think we're trying to
16:48
achieve here is that does it feel natural within the buy in
16:54
process? And I think that's, that's a, it
16:57
comes back to the speed and and how slick we want the
16:59
application process to be. I think, I think that for me is
17:02
the definition of embedded finance.
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Embedded means it should feel part of the journey that I'm
17:08
already, that I'm already in. But I don't know, like it it it,
17:12
it does feel like a very topical buzzword at the minute.
17:18
I think it it comes out to headless commerce as well,
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right? It's just, it's just one thing
17:23
after another. The consumer, the business wants
17:25
to think the consumer thinks they're only interacting with
17:28
one business, right. And one platform.
17:29
Yeah. What?
17:30
What do you why do you think that the point of sale finance
17:34
world has just exploded in popularity over the last couple
17:37
of years? I actually don't think point of
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sale has exploded. I think buy now pay later has
17:45
exploded. But my definition of the two are
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slightly different. So and this comes back to the, I
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think how we're interchanging words.
17:53
So my view of like buy now, pay later, super short term deferred
17:59
payment, you know, three months typically under £100 balances.
18:05
You've then got more revolving credit, let's call it through
18:09
like some like traditional catalog type credit, right?
18:12
And then you've got what I would class as like point of sale
18:15
retail finance, which is probably more akin to retail
18:19
Park, larger loan advances, maybe over like 4 years,
18:24
typically interest free. If you look at that market, that
18:28
market has hardly grown year on year.
18:30
Yeah, hardly grown. Right.
18:32
That's is that because it's the same big old retailers that have
18:34
been doing the same thing for years, right.
18:36
But I suppose if I walked into office tomorrow and wanted to to
18:40
split my payment of trainers into three, I give them the
18:42
option, whereas I would never even thought of that a few
18:45
years. Ago, no.
18:45
So I think so I think if you ask me why, like why do you think
18:50
buy now, pay later has exploded? I think it's because there's
18:53
just broader, there's broader access.
18:55
There's still 10 million new accounts getting booked every
18:59
month on buy now, pay later. Do you think we're?
19:02
Calling point of sale finance. We're calling buy now, pay
19:04
later. Point of sale, and this is what
19:05
I mean, like I, I don't think they're exactly the same thing.
19:10
So buy now, pay later is all around.
19:13
We've talked about it. It's about ease, it's about
19:14
access, it's about availability. As you said, whether it's a pair
19:18
of trainers, whether it's teeth whitening, whether it's cosmetic
19:21
treatments, whether it's like whatever you now go to buy, we
19:25
expect the there's going to be payment options available.
19:30
Whereas in point of sale, and I have a little bit of a
19:34
hypothesis around this is I think demand is still super,
19:39
super high in point of sale, but I don't think supply is there.
19:43
So if you were to compare traditional point of sale
19:47
lending, which is as I said, like interest free over 4 years,
19:54
it does not have the same breadth of product offering that
19:58
you would see in personal loans where interest free interest
20:02
rates up to what 29, nine, maybe a bit higher credit card market
20:06
promotional 0% balance transfers right up to 59, nine.
20:10
Traditional point of sale doesn't really go beyond 99 and
20:15
and I guess that's. That's what we're trying to
20:18
drive through at Snap is that if there was broader supply, the
20:24
demand's there. I think it's actually been held
20:26
back by merchants. Yeah.
20:31
So I think we would see growth if there was broader, broader
20:33
supply in that space. That's an that's an education
20:36
piece for merchants. Yeah, I think it is.
20:38
I think it is. I mean you look at you look at
20:42
recent survey and reports and we're still saying that you know
20:45
20 million people in the UK are financially underserved, 5
20:49
million a credit invisible when you are only offering
20:54
traditional 0% interest free products.
20:57
There is 20 million people in the UK that you're basically
21:00
saying. Yeah, not to.
21:02
Shut the doors, yeah. There's economic impact as well
21:04
with, you know, cost of living crisis, absolutely larger
21:07
spends, all the interest free, Yeah.
21:09
People are just not looking at those big spend items as
21:12
prevalently as they were before because it's still, yes, it's
21:15
interest free, but do I want to be taking?
21:16
A full yeah. Loan right now.
21:18
But, but I think I think for the, for the point we're talking
21:22
about with the customers we're talking about at the minute,
21:24
actually their requirements of those products are probably even
21:29
more relevant. And I actually think prime
21:32
customers that we would class more as Prime can make a
21:34
decision of a do I want this or do I not want it or actually I
21:37
can pay cash or I'm going to pay credit.
21:40
What we're really talking about, we're not, we're talking about
21:42
an everyday person. We're not, we're not talking
21:44
about somebody that's unemployed.
21:45
We're talking about employment. You know, you know, 4 plus, you
21:51
know, 2 plus whatever kids and just need a way of being able
21:56
to, I guess, whether it's lumpy incomings and outgoings or just
22:01
make sure they're, they're managing their finances on a
22:03
monthly basis. And you know, the availability
22:06
and, and breadth of credit products allows customers to be,
22:09
to be able to do that. So I actually think in in for a
22:13
average UK customer that that credit is probably needed more
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23:03
What are the real differentials then between the zero interest
23:07
be MPL offerings that we're talking about and you know the
23:10
interest bearing models if you're to like the top line?
23:13
Yeah, I mean. Differences from both like a
23:15
consumer and a lender point of view.
23:17
So I guess one of the one of the easy ways to draw
23:21
differentiation between the two is to simply say 1's a regulated
23:25
products, one's an unregulated product.
23:28
So if you take the unregulated BMPL version at the minute, you
23:33
know where this is I guess why the changes are coming in next
23:36
year. We're not all operating on the
23:37
same playing field. You know, there's misalignment
23:41
around affordability, albeit we're talking like, you know,
23:44
sub 100 LB spends. There's nothing in there to, you
23:49
know, evidence check through open banking and beyond where
23:52
the customers can afford that payment.
23:55
From a transparency point of view, there's there isn't the
23:58
same. We talk about ease of
24:00
application and payment mechanism, but there's not a big
24:03
warning stamp on there that says if you don't pay this your
24:07
credit file, you know your credit score is going to be
24:08
impacted because at the minute it isn't.
24:11
And there's taboo stuff. I mean, once we had James
24:13
Neville from Jasper come on and his shelf for shame was buying,
24:17
I'll pay later for really like low value consumable items, for
24:22
example, like food, like takeaways.
24:24
And then we were talking about, you know, the mum that needs to
24:26
buy nappies and that gives her on offer at that moment in time.
24:29
So she wants to buy a load of them because it's more
24:32
affordable long term. And then you're like, well,
24:34
what's right or wrong here? Yeah, who decides what you you
24:37
do and don't? Use, but regulation will sort
24:39
that right? Regulation will start.
24:40
The businesses from offering it to someone that they that maybe
24:42
wouldn't be able to afford. It, yeah.
24:44
And, and, and I think that's it. It's, you know, is it
24:46
affordable? Is it transparent?
24:48
Do you have the same level of protection?
24:50
So obviously there's different, there's differences between
24:53
Section 75 availability and not. And I think, you know,
24:56
ultimately then we're all regulated by the same operator,
24:59
the FCA. So we all fall under the the
25:02
same, the same regime. To your point around, you know,
25:06
should that customer or should any customer be using BMPL for
25:12
takeaways or nappies? I mean like if the customer has
25:15
a good experience, doesn't pay interest and it makes it more
25:17
affordable, I'm sorry but who are we to judge?
25:20
Yeah. Do you think then that embedded
25:23
credit offerings are creating long term loyalty for the
25:26
merchant or is it just kind of a short term boost for sales
25:29
because they had a special offer on nappies that that mother's
25:32
not going to go. I'm so glad I shopped with ex
25:34
merchant. What she wanted was was cash to
25:36
get the nappies. It doesn't really matter which
25:38
business it was that was selling them.
25:39
I don't credit. Card, though with the credit
25:41
card you're paying interest. Right, the access of getting
25:44
with the credit card in the 1st place, right, That's the only
25:46
difference now for regulation, it's just.
25:47
We can see this a lot more and don't get me wrong, I know
25:49
credit cards can actually look and see the purchases and where
25:52
customers are shopping, but like, I don't know, does it
25:57
create trust and loyalty? I mean, I'll be honest, I go
26:01
back and shop at ASOS a because I like, you know, some of the
26:04
products, but equally I know that it's really super easy to
26:06
play by Klarna. So is that is that trust and
26:09
affinity with ASOS or is that trust and affinity with Klarna?
26:12
Maybe maybe when you've got such a prevalent merchant with a
26:15
prevalent by now pay later brand.
26:17
It does. It comes less than a changeable,
26:20
right? Yeah, yeah, if.
26:21
If if Asus stopped doing clan and tomorrow and they had a
26:24
different product that was paying three, you'd probably
26:26
still continue to pay an Asus, right?
26:27
You just pay split it by a different a different how?
26:30
Many times I abandoned wallet or ban.
26:32
Check out if there's no Apple Pay now.
26:34
Oh I I agree, I need to. Put my card.
26:36
Details say especially if it's not already saved, you never
26:38
logged into it before. I completely and not only agree
26:40
like I, I, I will come out of websites and go into another
26:46
website because I know it's I almost stare at on my phone
26:49
thinking why outrageous? Yeah, it's outrageous.
26:54
Why have you not got Apple Pay on this phone?
26:56
I'm not. Getting off my sofa to go all
26:58
the way in there to get my. Yeah, yeah, I am not getting my
27:00
card. Yeah, yeah, definitely.
27:03
The only way I think that it does deliver trust and an ease
27:08
of buying experience is maybe the slightly different revolving
27:13
credit type models. So I think if you're a customer
27:17
of very or Next or maybe Curries like the fact that you've got
27:22
the revolving credit there, I do think that is where you can't
27:26
separate the credit from the brand and it isn't
27:29
interchangeable. I think that's where he gets
27:33
more of the repeat purchase. My wife has a next account
27:36
whenever she goes onto the website and asks him from the
27:38
Kais to choose your next card, that's it.
27:40
She just doesn't have to pay by Apple Pay.
27:42
It's no, it's dangerous at the same time.
27:44
Right. Yeah, and it's in store 24
27:46
hours. Later.
27:46
Yeah. Yeah, she does love that.
27:48
Yeah. Good, good, good.
27:51
And what technologies or partnerships are making embedded
27:54
finance easier to deliver at scale?
27:56
I think particularly the technologies part of that
27:58
question. I think there's some really
28:01
interesting stuff going on in this space at the minute and it
28:05
actually probably plays more into your experience than it
28:09
does mine. I think the, you know, we
28:13
operate in a model where it's lender to merchants.
28:15
So it's 1:00 to 1:00. But I think some of the
28:18
interesting use of technology and partnerships at the minute
28:21
are a firm with World Pay, a firm with Shopify.
28:26
We also know we've got like Zoppa that have bought a payment
28:29
gateway. I think I think there's some
28:31
really interesting things about how lenders are trying to
28:35
integrate within payment gateways.
28:38
So it becomes a one to many opportunity.
28:42
But as I said, like you guys have probably got tons more
28:46
experience in this area than what I have.
28:48
But as an observer, as a lender in terms of how do we integrate
28:53
and put our services into more merchants and therefore how
28:58
those merchants are those gateways making it easier for
29:01
customers to take advantage of those products.
29:04
That whole end to end journey feels like a direction that the
29:10
industry could could be going in.
29:12
What's. The snap strategy in that area
29:14
then. It's something that we have said
29:17
we absolutely want to look at. I think, you know, from our
29:22
perspective, whilst we're UK business, we're we're backed by
29:27
a really large US parent company lending, you know, billions in,
29:32
in, in the US. So I think this is something
29:35
that almost at a snap global level, it's something that we
29:40
certainly want to look at moving into into next year.
29:43
Do you think the industry is kind of matured, kind of
29:46
diversified with with the kind of introduction of all these
29:49
new, new products for consumers? And maybe I don't know, maybe
29:54
maybe a bit of both. I think that some of the more
29:58
established BMPL providers are probably you know maturing out.
30:03
You, you can see a you can see at a portfolio level, the
30:07
collections are are really stabilizing, which would say
30:11
that there's a lot of learning that has already been done and
30:14
the model is maturing. So I do think there is some
30:18
maturity, but I guess it depends what we talk about from an
30:22
innovation perspective. Do I think there's going to be
30:24
tons of products innovation? Probably not.
30:27
I think it's what, you know, like what I said earlier, I
30:28
think what businesses are doing is they're taking the best bits
30:33
of different types of products and working out how to almost
30:36
configure them together. I think the interesting point on
30:42
innovation will be around credit decisioning, around AI, around
30:49
tools and journeys. So as an example, I think that
30:56
application journeys should become a lot more dynamic based
31:02
on the information that the customer has given upstream.
31:04
So do I need to put more or less friction in a journey depending
31:09
on what a customer has told me? Equally like some of the work
31:14
we've we've done over the last few years, we've built our own
31:18
income portal. So I guess in our space, you
31:23
know, credit yes or no, right, black or white credit score
31:26
whereas. Open banking in any of those?
31:29
Yeah. So we do, yes.
31:30
So we have an open banking journey, but for customers
31:33
outside of that, we have built as I said, an income portal,
31:38
which basically it looks at HMRC data, it looks at Universal
31:43
Credit data, it is linked into payroll accounts.
31:47
So what we're not doing is taking a one Bureau view of
31:51
affordability. We're trying to triangulate like
31:54
data from different points to truly to truly work out whether
31:59
something is affordable for a customer or not.
32:01
And I mean, we kind of looked at doing this a couple of years
32:05
ago, but you can now see a lot of the Bureau following suit.
32:09
So you know, you've got TU Experian now looking to build
32:13
more sophisticated affordability decisioning tools.
32:17
So I think whilst we've been doing it for a while, I think
32:20
the rest of the industry will almost need to probably play
32:25
catch up to some to some degree that we're.
32:28
Seeing as well, I feel like there was a real, you know,
32:30
Justin and I met PSP and PISP and I would say we didn't really
32:35
have a huge amount of knowledge on the lending sector, but we
32:38
were very strong within that vertical at that organization
32:41
and we learned a huge amount around prime.
32:43
And so, but the other thing that was very apparent to me, you
32:45
know, there were a couple of platforms we worked with that
32:47
were focused on rebuilding people's credit so they can
32:50
actually access lending. And there really wasn't a lot
32:53
out there, but I think now these platforms exist that help people
32:55
just quite quickly build and repair their credit scores.
32:59
And I think that's something that's interesting for lenders
33:01
as well, because more of those lenders in the market like,
33:04
well, we could do this ourselves to be able to actually then lend
33:07
to people, right? And it's kind of you're too high
33:09
and then you're lender in the ecosystem, but we're also
33:11
helping people to get accessibility to to good
33:13
lending, right? Yeah, exactly.
33:15
And I think, you know, for us, because of the type of customer
33:20
that we're lending to, you know, even though we will typically
33:24
add another 3540% of approvals onto a Tier 1 lender, that still
33:29
means we're declining a lot of customers.
33:32
So I guess from our perspective, you know, where we're looking at
33:35
working with one of the, you know, bureaus at the minute to
33:39
see whether there is a way of being able to integrate some
33:45
credit scoring credit monitoring tools into our login area.
33:51
So that it's a case of no for now.
33:55
But actually let's leave you with a positive experience of if
33:59
something changes in your circumstances, it may mean that
34:04
we can we can lend to you in the future.
34:08
So yeah, like this. But again, I guess if you flip
34:11
that round from a from a retail finance perspective, there's
34:18
still, there's still huge amounts of demand there, but
34:22
there's not always the supply. So whilst we're looking to work
34:25
with a partner to see how we can create a good experience for
34:28
somebody that we say no to, equally there's a reciprocal
34:32
arrangement there, which is you've still got super high
34:36
levels of demand that's been completely unfulfilled in this
34:40
space. So where do you fit in that
34:43
ecosystem as well? School's really fascinating and
34:46
I, I use clear school personally, you know, and I'm in
34:49
a good place now, But when we, my wife, when I before we had
34:52
kids, we did a couple of big building projects and on one of
34:54
them we leveraged ourselves to the hilt, right?
34:56
Overdrafts, credit cuts, the whole, it staggered me like how
35:00
quickly your credit can get estimated.
35:02
Like for, you know, I think a couple of years probably it took
35:06
me to build it back and we didn't go overdrawn at all.
35:08
That was all within the limits. But the way I was being judged
35:11
was not, oh, you've used these facilities that you've had
35:13
approved to do a specific thing. You've repaid everything on
35:18
time. But, you know, I was almost like
35:19
blackpooled for two years off the back of it.
35:22
And then when I'd done that, sort of everything was cleared
35:24
back in the green, accelerated rapidly back into to where it,
35:29
you know, probably is now. Yeah, it did fascinate me
35:31
watching all the different things that impact, you know,
35:33
and there's stuff like Elektra Roll and things like that, that
35:35
people don't necessarily realise that impact your credit score.
35:38
Yeah, it is interesting. But how frustrating is a
35:40
customer though? So you recognise that you've
35:42
done that and you made your payments.
35:45
So you've evidenced that you can afford it, you've evidenced you
35:48
making the repayment, but people will still, at that point in
35:52
time, say no. Yeah.
35:55
Like and and, you know, apart from being maybe over indebted
35:59
as it would look on a Bureau score, there's no, there's no
36:04
defaults on your record. You've borrowed money.
36:07
You've paid it back. Like so in some ways the
36:11
decision in on credit and affordability like super
36:14
important, but it's not I guess sometimes because you've
36:19
explained that we know the person behind that credit score.
36:23
If we'd have seen the score, yeah, but.
36:25
And that's what we judge a lot of people on is the credit
36:27
score. But we don't know the story
36:28
behind the credit score. And from our like, from where we
36:32
are at the minute, that's what we're trying to educate the
36:34
market on is that this genuinely in a lot of instances a reason
36:40
why that customer at that point in time has that credit score.
36:43
Do we think regulation though, has improved the consumer
36:45
outcome then? I mean, it would be super hard
36:47
to say no. Like I mean, obviously like we
36:50
don't do these things and we don't put regulation into not
36:53
improve, improve, you know, situations for customers.
36:57
I think that it's certainly created a more leveller playing
37:01
field across the whole plethora of financial services.
37:04
So whether that be, you know, the industry I'm in or whether
37:06
it be personal loans, whether it be insurance, I guess the point
37:11
that we always have to bear in mind is that yes, it will have
37:16
created a better customer outcome.
37:19
But from a demand supply perspective, the demand is
37:23
probably still there. But regulation normally chokes
37:27
supply and normally reduces the availability of credit.
37:32
So on one hand, you know, I absolutely implore the fact
37:37
that, you know, we need to be delivering good customer
37:39
outcomes, but as an industry we also have to be mindful that we
37:43
do end up reducing supply on the access and availability.
37:45
Of credit business are in business to make money, right?
37:48
Yeah. So you don't want regulations to
37:49
stop the business, you want to make sure you're doing right.
37:51
There's a balance and obviously we've seen in other industries
37:54
where regulation has ultimately led to the demise of certain
38:01
businesses sectors, you know, not being not being able to
38:05
trade anymore. What do you think we can do to
38:08
to educate more than whether that's merchants or consumers?
38:13
So I think, I think from a merchant education pace, I mean
38:18
this is something that we're doing, you know, a lot on at the
38:20
minute. I think that there's still an
38:24
awful lot of talk around MPL, what checkouts are going to look
38:30
like. I think there's still, you know,
38:33
a heavy preference towards interest, you know, free
38:37
financing over longer terms. And I guess from an education
38:41
perspective, from, you know, where I sit at the minute comes
38:45
back to again, you know, 20 million underserved, it's a high
38:49
percentage of the UK population that is just not being catered
38:54
for. And at the minute, you know,
38:56
you've got tier one lenders where it's a price war, but then
39:01
everybody's forgetting about the customers that they won't lend
39:05
to. So there's there's quite a lot
39:06
of education going on in, in that space.
39:10
From a customer perspective, I think education is like, you
39:15
know, as an industry we've tried to educate customers for years
39:18
on APR. But if a, if a customer does not
39:22
want to be educated on APR, coming right back to the
39:24
beginning of the conversation, which is, yeah, you're going to
39:27
charge me something, it feels reasonable, but actually you're
39:31
giving me access to a product or a service that I wouldn't
39:34
normally have been able to get and it's only costing me £2025 a
39:39
month. Brilliant.
39:40
I can afford that. We can do all the education in
39:44
the world, but that is still the one constant that we see in the
39:50
market, we see in our own research, You know, can can I
39:53
afford how this fits within my family's?
39:56
And you have about one minute to educate the customer because
39:58
they just want to buy that product.
39:59
If you say I'll just let me tell you something first.
40:01
I'll go elsewhere and do it then.
40:02
Yeah, we've seen lenders that actually can't, they can't lend.
40:06
They've got these pots of money that they're sat on, they want
40:08
to lend. And again, from a payment
40:11
terminology point of view, we've talked about overzealous fraud
40:14
tools in the past, right, as kind of declining good
40:19
transactions potentially, right, because they're not pulling all
40:22
the relevant data sets together. Is that something you guys
40:24
encounter then where you, you know, you're in a situation now
40:26
and you may be using AI to to leverage some marginal gains
40:31
that are going to allow you to lend more?
40:32
Yeah. I mean I'm just answering the
40:38
fraud point first. Like we do see some of this
40:41
within our business as well. And, and bear in mind that, you
40:44
know, we are a traditional by nature point of sale finance
40:49
provider overzealous like, well, yeah, I mean, whether we've been
40:53
overzealous or not, I mean, at the end of the day, whichever
40:57
business I've worked in, as soon as we have launched a direct to
41:00
consumer product, all of a sudden you like a magnet for
41:05
every single fraudster that I I almost think they've got some
41:07
sort of tool on the website that kind of goes whoa, business wire
41:11
has now started lending. Let's like try and see whether
41:14
we can, you know, buy, buy products fraudulently.
41:17
So like we're, we're having to do quite a lot of learning in
41:20
this space, especially because some of the retailers that we
41:23
work with that may have, you know, smaller electrical items,
41:27
which quite easy to divert your address on.
41:31
And you know, we've, we've decided to go maybe more in the
41:35
overseller space while we learn now then get hit by, you know,
41:41
high, high fraud levels. Are we sat on funds that we
41:46
can't lend. I mean, we've grown 50% year on
41:50
year. We intend to grow another 20%
41:52
next year. We are well funded and backed
41:54
for, for our growth. We're not sat on money that we
41:57
don't think we're not going to lend against.
41:59
So we, we believe we've got significant growth to come, but
42:03
funds available to do it. You know, I, I can't speak for
42:07
others, others balance sheets and it's.
42:10
It's mixed. And I think the the point you
42:12
make around like electrical items is pretty interesting one
42:15
as well. Like the fraudsters are so smart
42:17
in terms of what they go after and where they target.
42:19
And yeah, we've heard hilarious stories really in terms of some
42:23
of the stuff that people have fraudulently acquired.
42:25
Yeah, just because it is that quick flip, like how do you turn
42:28
that into cash fast? Right.
42:29
Yeah, it's like it's, it's been an area that we've had to go
42:33
into eyes wide open, but we would rather go in and have, you
42:39
know, different tools that we've now got in place.
42:42
Obviously we've got fraud monitoring within our card
42:44
platform. You know, we've put in ID and V
42:47
through Persona, we've got threat metrics in place.
42:49
So we've decided to, you know, for a better phrase, we've
42:53
decided to throw the kitchen sink at it and not end up with,
42:57
you know, high bad rates off the back of certain cohorts that
43:00
we're lending to then, you know, get get hurt in the process and.
43:04
Have you looked at open banking as a repayment method again?
43:07
Because something else we saw in the lending space was for ad hoc
43:10
payments rather than doing like a card payment.
43:12
No, I'm not to say that it wouldn't be in our road map
43:17
moving forward, but there are some more intuitive things that
43:22
we need to do first. You know, we're learning our way
43:26
through IVR payments. We're about to put a payment
43:30
portal within our login area. The next iteration of that will
43:36
be to enable Google and Apple Pay as a repayment mechanism
43:40
within our payment portal. So that all sounds great,
43:43
however like however, we're not even at the point.
43:48
In our maturity and having some help you what.
43:52
Is the basic stuff in place? It's so.
43:54
Valid though, because again, we've we've loans, so I've got
43:57
finance on one of our cars and with Black Horse, right.
44:00
Yeah, it's so easy to go in there and just I pay off a bit
44:04
like if I get a little bit of extra disposable income, I quite
44:06
often just go and chip away at it.
44:08
I quite like it when they recalculate the final like
44:11
repayment, like because you know, you, you get rewarded for
44:14
paying it off early with some of these platforms.
44:16
So my total repayment, the interest drops on it.
44:19
So I'll go and I'll chip away at it, but I'll just do that at
44:21
random places like you on the golf course.
44:23
I'll be like, I'll pay a number. Two mindset shift, isn't it?
44:27
But it's, but again, that that's, that's a great outcome
44:30
if a business is doing daily interest calculations.
44:33
So that I mean, these are from a marketer's perspective, these
44:36
are not the sexy things that you advertise when you're selling a
44:39
product, but they're actually super important in terms of the
44:43
mechanics of the product. But you would never go out and
44:46
advertise oh hey, pay off or we do daily interest calculations,
44:51
you know, but. It's good for consumer duty,
44:53
right, Because it's evidence in that you're, you're trying to
44:55
help the consumers that you've lent to.
44:57
Yeah, per. And do you think traditional
45:00
credit will survive or does it ever will move into kind of the
45:03
invisible embedded world? I mean, well, I think 47% of the
45:08
UK population still have a credit card.
45:10
The credit card is the fastest growing market in the UK.
45:13
It's grown 20% year on year. Like it's horses for courses.
45:16
It's different finance products for different for different
45:19
purchases. So I don't think traditional
45:21
credit will go will go anywhere. I think, you know, there's such
45:24
a heavy overlap between. I think it's something like 38%
45:27
of people that have a credit card also used, buy now, pay
45:31
later. Like people are using different
45:34
credit. Yeah, for different
45:36
requirements. Like you look at what people are
45:38
using credit cards for and you are talking like your weekly
45:42
food shop, your petrol maybe every now and again it is a
45:45
holiday that you pay off over instalments.
45:47
But they're much, they're different purchasing cycles than
45:54
a 60 LB buy now, pay later purchase.
45:57
So now I'd, I'd, I think, I think we've got a long way to go
46:01
before we see traditional credit go anywhere and.
46:04
How does all this stuff influence your strategy as ACMO
46:07
within a lender? Because you've got you're,
46:09
you're targeting different demographics with products and
46:13
services, right? There's a lot you need to think
46:15
about around your go to market as a lender.
46:18
How does that world look to you? So I guess, I guess we've got or
46:22
I've got because there's more than two audiences, right.
46:27
But for to be really super simplistic, there's there's a
46:29
couple of audiences, you know, we are promoting our business to
46:34
merchants. So where we fit within their
46:38
financial services product suite, which again coming back
46:41
to the fact that you know larger enterprise merchants still
46:45
heavily dominated by interest free four year deals not
46:52
catering for the average consumer.
46:55
So my role there is more around education of where we fit as a
47:01
brand and how we can support their growth objectives, but
47:05
also support the customers that they like to think they don't
47:10
have. But believe me, when the data
47:12
comes through, they have a broader range of credit
47:16
customers than what they think. So there's an absolute education
47:20
process that goes on within our marketing.
47:23
From a merchant perspective, I guess the one thing that makes
47:27
us a little bit different than some of the larger Tier 1
47:30
lenders is we also have quite a large direct to consumer
47:34
proposition as well. So our direct to consumer
47:37
proposition is 20% of our overall revenue.
47:40
So again, there we leverage the merchant and the merchant
47:47
relationship to put within our card program.
47:51
So it's a virtual card, you know, powered by Visa rails.
47:55
But essentially our marketing in our direct to consumer space is
47:59
slightly flipping the buying journey.
48:02
So if you think about in the merchant space, I've chosen my
48:07
product, I go into the basket, I've seen the wow, the six
48:10
payment options, which one do I choose?
48:13
Am I going to be approved, You know, in the director consumer
48:17
space? What we're basically saying is
48:21
get your budget and know if you'll be approved before you go
48:25
shopping. So you could have up to three
48:27
grand. We're going to load it on a
48:29
virtual Visa card. These are our merchants that you
48:33
can go shop with, but you know when you go to that merchant,
48:39
you've already been approved for credit.
48:40
Now you are choosing what what to buy.
48:44
So we're putting the power in the customers hands of giving
48:50
them the confidence almost of being able to buy what they want
48:55
on credit without having that kind of nervousness in the
48:59
middle around will I be accepted or not.
49:03
Visa direct then to load the issued card.
49:05
How does that setup work? Do we want something?
49:07
Do you use Visa Direct? No.
49:09
So it's just it's an issued card you're.
49:10
The yeah, so yeah. So we our card provider is
49:14
through Infuse. OK.
49:16
Just a load of phone straight on.
49:17
Perfect. Thank.
49:18
You those guys a lot at the. Moment.
49:19
Yeah, they're doing well, aren't they?
49:20
Yeah. So, Lindsay, it's time.
49:23
What in credit, BNPL or consumer finance would you want to bring
49:28
to the shelf of shame that gives you the ick?
49:31
Oh, so do you know what I was racking my brains about this one
49:35
trying to be like super smart. And you know, I've seen other
49:37
people that you had on, but there's like one phrase and it's
49:42
not just within this industry, but honestly, like if my team
49:47
ever use this phrase, they almost go hiding under a desk.
49:50
And the one I'm going to bring to the shelf of shame is MVPI.
49:57
Absolutely hate minimum viable products as far as I am
50:03
concerned. As far as I am concerned, there
50:07
is no minimum viable products where a customer is concerned.
50:12
It either works or it doesn't. And I think MVP was designed by
50:18
developers and IT teams to say I've delivered something, but
50:23
not quite delivered everything that you wanted.
50:27
People love you. Yeah, right.
50:29
So controversial or not, but I absolutely hate that phrase.
50:34
Hate it? As well.
50:36
Hate it. We would definitely add that to
50:38
the shelf with joy. Yeah, Joy.
50:39
No. So what's going on there?
50:41
Definitely. Well, Izzy, thank you so much
50:43
for coming in today. Thank you.
50:44
It's been great to have you on. Where can where can our network
50:47
find you? LinkedIn.
50:50
LinkedIn. Yeah, we're prepared for that
50:53
question. Don't like that answer?
50:54
LinkedIn. Amazing.
50:56
Thank you so much for your time, Lindsay.
50:58
Thank you.