1. introduction ell investor day 2. customer journey/media/files/n/non-standard-financ… · uk’s...

everyday loans for everyday life

ELL Investor Day

3rd December 2018

1. Introduction

2. Customer journey

3. Key performance indicators

4. Analytics

5. Culture

6. Compliance and regulation

7. Key achievements under NSF

8. Strategy for growth

9. Summary


#2

MILES CRESSWELL-TURNER

CEO of Everyday Loans


#33

Growing network of 65 branches nationwide

Expansive

Combines face-to-face model with

latest data technologies for improved

decision-making

Innovative

Face-to-face model allows us to lend

profitably to people that others can’t or

won’t

Unique01

02

03

04

05

UK’s #1 and only branch-based unsecured

subprime lender

Leading

Loans generated through brokers, direct to brand,

and present/former borrowers

Diverse

Key stats:

120k+ total monthly leads

30k+ applications

to branch (ATB)

9.1% conversion*

£167M loan book**

* Conversion defined as loans booked per ATB

** as of 30th June 2018

1.1 Introduction – overview


#4#

4

Our aims: vision and values

“To be the leading provider of non-

standard unsecured finance in the UK”

“To help make a difference to our

customers’ lives, everyday”

1.2 Introduction – who we are


#55

Experienced,

utilising a proven

face-to-face

business model

Creative approach

offering a tailored

solution for

customers

Data driven, using

the latest

technologies

1.3 Introduction – why are we different?


#6


6

1

2

3

4

5

Data-driven risk-based pricing allows us to provide loans at the right price

1.4 Introduction – unique business model


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7

Develop long-term

customer relationship

Affordability checks

are completed in

branch

Allows detailed

evaluation of customer

circumstances

Customers enjoy the

experience

(FEEFO/Trust Pilot)

1 5

2 6Enter Your

Screenshot Here

Removes risk of identity

fraud

Delivers attractive

ROA3 7

Enhances credit decision

making process

Creates high barrier to

entry4 8

1.4 Introduction – unique business model


#8


8

Financial crisis• Large numbers of consumer

finance businesses exited the

market including:

o Black Horse

o Citifinancial

o HFC/Beneficial

o Welcome

o London & Scottish

• Everyday Loans was the only

remaining branch based

consumer lender (not high

cost, short-term) in the UK

Founded in 2006

June 2012

Purchased by

Secure Trust Bank

April 2016

Acquisition

Completed

following

FCA

change of

control

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20182006

August 2017

George Banco

acquired

No. of

branches

^ as at June 2018

December 2015

Purchase by

NSF

Announced

60 67 78 10589 1255447Receivables

(£m)

4127 148

June 2016

Full FCA

Licence granted

167^

2019

26 26 26 26 27 31 34 36 36 41 53 65

1.5 Introduction – timeline


#9


9

Source: LEK

Credit impaired

• CCJs issued over last 6 years

• IBAs issued over last 6 years

• Debt relief orders since 2009

• Debt Management Plans

• Including estimated overlap

• ~4M people

Highly indebted

• Highly indebted

• ~2.5M people

Low credit status or no credit

history• New migrants over last 5

years

• People without bank

accounts

• People on incapacity benefit

• People on unemployment

benefits

• ~8M people

Non-standard total population

(excluding overlap) c.10m

1.6 Introduction – market dynamics


#10


10

£0m

£2,000m

£4,000m

£6,000m

£8,000m

£10,000m

£12,000m

£14,000m

£16,000m

2008 2009 2010 2011 2012 2013 2014 2015 2016

Total outstanding receivables1

Run-off unsecured portfolios

Mail Order

Store cards

Credit Unions

Other unsecured products

Point of sale loan

Off-prime credit cards

UK demand for non-standard finance is strong

1 Executive Insights, Volume XX, Issue 39 - L.E.K. Consulting, July 2018



#11


11

£0m

£500m

£1,000m

£1,500m

£2,000m

£2,500m

£3,000m

£3,500m

2008 2009 2010 2011 2012 2013 2014 2015 2016

Outstanding receivables - other unsecured lending2

Logbook loans (+15.5%)

Online unsecured lenders (+116.8%)

HCSTC Online lenders (-12.5%)

Pawnbroking (-1.9%)

Branch-based lenders (+19.6%)

Guarantor loans (+40.4%)

Home Collected Credit (-4.1%)

Rent to buy (-18%)

Car finance (+31.5%)

Compound annual growth 2014-16


We are in one of the fastest growing segments

2 Executive Insights, Volume XX, Issue 39 - L.E.K. Consulting, July 2018


#12


12

HCSTC Term Loans Guarantor Loans

Online

Branch

1.6 Introduction – market dynamics (Jan ’18)


#13


13

HCSTC Term Loans Guarantor Loans

Online

Branch

1.6 Introduction – market dynamics (Nov ’18)


#14


14

Loan Size

APR

£500

£1000

£5000

30% 50% 75% 100% 200% 1000%

(Lift)

HCSTC price cap

1 Based on latest filings at Companies House


https://www.oakam.com/en2/why-us/lift-loan


#15


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Loan Size

APR

£500

£1000

£5000

30% 50% 75% 100% 200% 1000%

(Lift)

HCSTC price cap

1 Based on latest filings at Companies House


https://www.oakam.com/en2/why-us/lift-loan


#16


16



#17

JON WIGGINS

Managing Director of Everyday Loans


#18


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We originate booked loans from three key lead channels:

We then rigorously underwrite:

We then lend responsibly, key rejection reasons include:

Direct (23%)Broker (48%) Renewals (29%)

Credit

checks

Lack of

affordability

Employment

check

Affordability

checks

Bank

statementsCredit

scores

Mandated

underwriting

Responsible lending at our core

Over-indebtednessAddictive

behaviourBusiness policy

2.1 Our lending journey - origination


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Building a balanced portfolio

Range Average

Loan Amounts £1,000 - £15,000 £3,400

Term 18 - 60 Months 32 Months

2.1 Our lending journey – who are our customers


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Everyday lending to everyday people

A life event drives the need for

credit:

• Bump in the road

• Unexpected expense

• Large purchase

• Debt consolidation

• Holiday

Our customers are nationwide

Amy is 1 of 10 million

potential customers

2.1 Our lending journey – this is Amy


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… arrives at Everyday Loans

Amy begins her search…

… looks for credit at mainstream lenders

2.1 Our lending journey – the search for credit


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Amy’s application is just one of 6,000 applications Everyday

Loans receives every day…

6,000 Gross Applications

1,500 Apps to Branch

300 Appointments

Every dayEveryday Numbers

We then go to work fulfilling Amy’s needs…

2.1 Our lending journey – the search for credit


#23


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…If Amy matches our requirements she is

invited into her local branch for face-to-

face appointment

She personally meets one of our account

managers and together work through the right loan solution for Amy

Allowing us to find the right loan for her

Each proposed loan is then approved by

our branch manager face-to-face

2.1 Our lending journey – the next step


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Central

FINANCIAL BROKERS76% of applications

48% of loans booked

DIRECT22% of applications

23% of loans booked

RENEWALS/FORMERS2% of applications

29% of loans booked

UK RESIDENTS, EARNING AVERAGE INCOMES,

IN NEED OF CREDIT FACILITIES

Duplicates/incorrect

info

Credit score

Credit history

Customerwaterfall

67%

declined

33%accepted

21% receivetelephoneinterview

6% attend branch and

3% get a loan

12% noresponse/decline

15% declined/fail affordability

In-branch

Rigorous management of risk

2.1 Our lending journey – high level waterfall


#2525

QualitySegmented applications go to our branches

1

DataWe use the latest information to make the right decision

2

CompetitionBranches compete againsteach other

3

IncentivesRewarding those who lend prudently,effectively and efficiently

4

GrowthAdd employees andbranches to ensure capacity, and improve productivity to take advantage of our opportunity

5 TrainingConstant training and development of our employees to ensure best-in-class service and outcomes for customers

6

RelationshipsOur employees get tomeet and know their customers personally

7

2.1 Our lending journey – how do we drive conversions


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1,500 Apps to Branch

300 Appointments

150

Loans

When Amy is happy and we are

happy we book the loan

Amy receives the money the

same day allowing her to sleep a

little better at night…

Relationship lending at it’s most powerful

2.1 Our lending journey – in-branch experience


#27


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Of the 150 Loans booked everyday

38% Borrow Further Funds

36% Customers

graduated to cheaper product

Continue to manage relationships

2.1 Our lending journey – customer lifecycle

200

400

600

800

1,000

1,200

1,400

Renewals Booked


Allows effective

monitoring of

delinquency

accounts

Delinquency Buckets

After 150 days a

letter warning loan

charge off is sent

Final Warning

A final letter is sent to

the customer and

the debt could be

sold

Legal

Robust reporting to

track, target and

reduce

delinquency

Data Driven

5-29 30-59 60-89 90-119 120-149 150-179

We engage with the

customer if they

encounter payment

problems

Contact

If unresponsive after 30

days a house visit may

be conducted

Visit

Charge-off

A 3rd party debt

collection agency

may be used

Debt Collector

Current

Skilled branch-based relationship collections28

2.2 Our collections process – how do we do it?


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Up to Date (92%)

5-29 (2%)

30+ (6%)

2. Sickness…

1. Life event – divorce, loss of

income…

3. Unexpected expense

2.2 Our collections process – helping customers over bumps in the road


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Arrears

Curing

Reschedules

Deferments

Customer back in control

Legal Notice Charge OffDebt sale and

recoveries

Support (can’t Pay)We work with our customer to find the

right solution

These include:

Action (won’t Pay)

2.2 Our collections process – supporting customers through the journey


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• Increase in quantity whilst

maintaining and improving quality

• Applications per branch/ per

employee are maintained in their

target zone based on capacity

and opportunity

100

200

300

400

500

600

700

800

900

2015 2016 2017 2018

ATB per Branch

20

40

60

80

100

120

140

160

180

200

2015 2016 2017 2018

ATB per Employee

3.1 Key performance indicators - leads

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5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

50

100

150

200

250

300

350

400

450

(00

0's

)

Gross Application Waterfall

Gross Applications Applications to Branch Gross Conversion


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• Applications growing

• Loans booked increasing• Consistent conversion

• Loans booked per branch/ per

employee consistent with their

target zone based on capacity

and opportunity

3.2 Key performance indicators - conversion

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2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

10

20

30

40

50

60

70

80

90

100

(00

0's

)

New Borrower Application Waterfall

Applications to Branch Loans Booked Conversion

10

20

30

40

50

60

70

80

90

100

2015 2016 2017 2018

Loans Booked per Branch

5

10

15

20

2015 2016 2017 2018

Loans Booked per Employee


#33


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• Receivables have consistently increased

every year, particularly 2017/2018• New cash has consistently increased

every year particularly 2017/18

• At the same time average credit score have improved over time

• Extremely consistent and predictable

scores

Quality and predictable growth

3.3 Key performance indicators - lending

5

10

15

20

25

30

35

40

20

40

60

80

100

120

140

160

180

2012 2013 2014 2015 2016 2017 2018

New

Cas

h (£

Mill

ions

)

Re

ce

iva

ble

s (£

Mill

ion

s)

Total Receivables and New Cash

Receivables New Cash


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• Predictable and stable

delinquency. • Delinquency within target zone

for the last 7 years

• Accounts per branch and

employee have also remained

stable

• Within our capacity and

opportunity model forecasts

3.3 Key performance indicators - collections

Well-managed collections process

0%

2%

4%

6%

8%

10%

12%

14%

2011 2012 2013 2014 2015 2016 2017 2018

Delinquency

% of receivables 5+ days in arrears

200

400

600

800

1,000

1,200

1,400

1,600

2015 2016 2017 2018

Accounts per Branch

50

100

150

200

250

300

350

2015 2016 2017 2018

Accounts per Employee


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Data driven business, which

continuously tracks

performance

Extensive reports detailing

every aspect of the business

Daily performance tracking

to all employees

Real time operation data

4. Analytics – data is at the heart of our traditional business


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Enter Your

Screenshot Here

Comparative and absolute branch information

4. Analytics – detailed dashboards


#37#

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Management Waterfall View Branch List View

Comprehensive suite of management software

4. Analytics – detailed reporting available to all


#38


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One team

5. Culture – engaging our workforce


#39


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Colleagues1. Shared best practice and

training (8,398 hours YTD)

2. Ensuring capacity based on opportunity

3. Rewarding and recognising

our employees

Customers1. Everyday FEEFO

award – Gold trusted

service

2. Trust Pilot score: 8.43. Low level of complaints

Engagement drives performance

Commercials1. Ambition – long term

stable growth

2. Pace –agility of a much

smaller company

3. Financials – we hit our

targets

5. Culture – delivering on our values


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1. FCA authorisation in June 2016

2. No regulatory issues from FCA

3. Three lines of defence

4. Low level of customer complaints

5. FOS cases

Compared to the industry average we

have:

• 43% fewer complaints per 1000 customers

• 17% higher FOS success rates

• 62% lower uphold rates

Disciplined governance

6. Compliance and regulation


#41

STEVEN WHITE

CFO/COO of Everyday Loans


#42


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4. De-risked

Finance,

Marketing, IT

staffing, IT

platform1. Strengthened

senior

management

team

5. Restructured

Network to

introduce

Divisional and

Area

Managers

2. Staff

increased by

116% from 213

to 460

3. Invested in People – Training

days, intranet, employee

forum

7. We have

met every

financial and

operational

target

6. Added,

moved, re-

signed or

refurbished 63

of 67 locations

in 27 months

7. Key achievements since April 2016


#43


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Target of 20% net book loan

growth per annum and 20%

ROA

Our key drivers:

1. More leads

2. Invest in our people

3. More branches4. Process efficiency

8. Strategy for growth


#44


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Pancredit Data Interchange (PDI) will open up a number of untapped opportunities:

• Specific rate quote and in principle approval

• Response times reduce from 10 to sub 3 seconds

• Powerful duplicate management functionality to identify repeat applicants

• Ability to receive materially leads from more brokers and be placed in more Ping trees

Additional opportunities include:

• Dialler campaigns to target customer declined leads

• Self-employed market remains materially undeveloped

• Packaging – brokers sending screened and ‘warmed up’ leads

• Expand direct-to-brand advertising – radio, digital video and social media

8.1 Strategy for growth – increase the number of high quality leads


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Investing in our existing talent

We have internally promoted:

•2 Divisional Managers

•7 Area Managers

•13 Branch Managers

•7 functional team leaders

Respecting our experience

Long Service awards:

68 x 5 year awards presented

58 x 10 year awards presented

Nurturing our talentCompany wide focus on training and networking:

• Dedicated technical and soft skills trainers

• A senior Branch Manager seconded to training

• Extensive use of on-line training and testing

software

• 8,398 classroom training hours YTD

• Countless social events

8.2 Strategy for growth – invest in our people


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8.2 Strategy for growth – invest in our people


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Branches open around core hours of Monday – Friday 10-6, with Saturday mornings as required

Lead data analysis tells us that peak loan enquiry times are Monday – Friday 8 am and 7 pm, Saturday 10-12 noon

We will look at moving to a full shift hours model

• Monday-Friday 8am-7pm, Saturday 8am – 1pm

• New standard 60 hour week, a 50% capacity increase

Implications and next steps

• This has pros and cons for staff

• An 11 hour day requires shifts to cover the whole day, 7 and 4 hours

• Need to review shift allowances and compensation structure

• Not enough desks to have both shifts on at same time

• Will need a scheduling and time booking tool

Will start work in Q1 2019 to understand requirements and develop a roll-out schedule

Likely to be a driver of growth in 2020

8.2 Strategy for growth – could we add more staff to existing branches?


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8.3 Strategy for growth – expand our footprint with more branches

50

100

150

200

250

300

350

0

10

20

30

40

50

60

70

Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18

Branch count and FTE

Branch Count FTE


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• Opened 5 branches in 2016, 12 in 2017, 12 in 2018

• Streamlined opening process, enhanced staff selection

methodology, constantly evolving induction programme

• 12 further locations identified for 2019; 9 future branch

managers nominated and already in-training

• Planning to open 5-10 branches in 2019, similar rate

thereafter

• Now believe 100-120 branches are possible

Reminder of branch economics

• Pre-opening P&L costs up to £75k

• 0-12 months EBIT £(105)k

• 12-24 months EBIT £165k

• 24-36 months EBIT £300k

8.3 Strategy for growth – expand our footprint with more branches


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Analysis & Operations

Propose & Search

Locations

Lease Property

Training & Recruitment

Setup Location

Branch Opening

8.3 Strategy for growth – branch opening process


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Key selection criteria:

1. Where do people live?

Population demographics by postcode

2. Does this include our customer profile?

Credit scoring by postcode

3. What is the current local demand?

Analysis of current and potential broker leads

4. How does this relate to our current capability?

Proximity to existing branches and management capability



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2006-2007

• Birmingham

• Coventry

• Nottingham

• Wolverhampton

• Leicester

2016-2018

• Wallsall

• Tamworth

• Mansfield

• Dudley

• Derby

• Coventry 2nd

2019-2020

• Leicester

• Erdington



#53


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May-16 Nov-18 2019 Proposed



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Reaching Capacity

• Across 2016 Glasgow were growing at an average rate of £64k a month. This slowed down to £43k in 2017

New Branch

Opening

• The branch was split when Hamilton Branch opened in August 2017

Increased Productivity

• Glasgow returned to growing at £63k a month as well as Hamilton growing at £61k a month

Paisley Branch

Opened

• The three Branches now have a combined growth of £167k

8.3 Strategy for growth – case study 1: Glasgow


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Hamilton opened

8.3 Strategy for growth – case study 1: Glasgow


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8.3 Strategy for growth – case study 2: Reading


#57


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Reading• ATB reduced from 37% above branch average

to average levels, increasing efficiency

• Allowed to focus on closer apps, and convert them

better

Slough• Take on ATBs from Reading, Harrow, and Hounslow• Average travel time reduced from 76 to 17 minutes

• Projected total new cash uplift of 25%+

8.3 Strategy for growth – case study 2: Reading


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• Additional growth strategy created to

develop branches with large potential

• Branch with high potential and no large

nearby towns

• Single branch expands to two in a single

location

• Postcodes are split between two branches

(e.g. North/South or East/West)

• Branches are then able to achieve local

potential

• Coventry highlighted as great location for

expansion

8.3 Strategy for growth – case study 3: Coventry


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We look at every step of the customer journey to identify potential process enhancements.

Our first three projects are already underway;

Letter fulfilment

Currently all printed, enveloped and posted locally

Route standard letters to a central printer; estimated time saving 3%

Marketing and Collections reminders

A wholly manual process at whim of individual branches

Automated multi day messaging to engage new customers

Pre-scheduled notification of upcoming and overdue payments

Collections processing

In branch or by phone to branch staff

IVR ‘push button’ payments by phone

Text message and emails containing individual links to personal payment pages

8.4 Strategy for growth – process efficiency


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A collections driven lending app• Use the app to make payments on-line

• Receive marketing offers or request top-up loans

A content rich Customer Portal website• Relevant financial education and signposting

Automated Know Your Customer processing

Utilize Open Banking to improve and enhance underwriting

Experiment with brands, AI data analysis and Pay Per Click journeys

Enable a face-to-face experience without being physically co-located• Use of chat functionality and WhatsApp for initial contact

• Facetime and video calling for first meeting and appointment booking

• Virtual closing booths with on screen documents

• This could transform the Central branch as well as ‘out of hours’ support

8.4 Strategy for growth – technology enabled efficiency


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• We are still only reaching a small section of our potential market

• The company has a long track record of delivering change, on time and on budget

• Four high potential growth levers

• Leads – PDI project, new brokers, smarter marketing

• People – upskilling our staff, adding more heads, extending our opening hours

• Branches – a proven model, already working on 2019 openings, at least 5 years pipeline

• Process efficiency – we are only just starting...with automated marketing and collections

• We have a clear roadmap to stable, predictable long term growth

8.4 Strategy for growth – summary


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• Large and growing market

• No material regulatory issues

• Attractive competitive landscape with high barriers to entry

• Unique market positioning and customer offer

• Clear strategy to maintain growth trajectory

• Additional upside potential via further expansion and productivity improvements

• Proven underwriting and stable credit quality

• Attractive loan book ROAs

• Highly experienced and driven senior management team

• Winning business culture

9. Summary

1. introduction ell investor day 2. customer journey/media/files/n/non-standard-financ… · uk’s...

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