John Simpson tells Motor Finance that, six months since its launch, Moneyway’s prime motor finance product pilot has progressed well, and that he expects the lender’s results to show the company has grown above the industry average.
Speaking about Moneyway’s recent prime motor finance product pilot, John Simpson, managing director of Moneyway (the motor finance division at Secure Trust Bank), said: "We started off with six introducers supporting the pilot, but as it’s gone on we’ve added more. So we’ve now got upwards of a dozen people who are contributing to the pilot. We’re starting to see some reasonably significant volumes coming in now."
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The plan for Moneyway is to run the pilot until the end of the year. "By that point, I think we’ll have completed our pilot, and we’ll have enough information to analyse how the portfolio is performing, and get customer feedback about how the product fits in the market with a view to a general launch in 2016", Simpson says.
The 2016 launch is obviously dependent on analysis of the data and feedback from Moneyway customers and partners, he adds.
So far, though, Moneyway says it has received positive feedback for the product, and has only had to make one or two minor changes on the back of initial feedback from introducers.
"We now feel we’ve got a product which fits our customer requirements, fits around what prime customers expect to see, but also at the same time we’re able to offer a full range of products meaning we’ve got a product for virtually every customer on the risk curve," Simpson adds.
In terms of expectations for the product, Simpson says he has no aspirations for it to compete with some of the major players in the sector, such as Black Horse, Santander and MotoNovo.
Instead he says: "What we want to try to achieve for our customers is to put them in a position where they recognise Moneyway as a company that operates across the entire risk curve. Previously we’ve been associated with near- and non-prime lending. With a prime product, that’s enabling us to have fairly significant reach across the risk curve, which is something only a few other lenders in the market actually do."
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By GlobalDataAn example of this is the fact that, at this stage, Moneyway isn’t considering introducing a PCP product, despite the fact that PCP is becoming increasingly popular in the used car space.
Simpson says: "Our view is we see the HP market growing; we see the PCP market growing. But at this point in time our customers require simple straightforward products, and hire purchase over periods from
24 to 64 months provides them with simplicity. We feel that’s a very appropriate product for us."
When asked about the differences between prime and subprime customers, Simpson says the two sets are generally fairly similar. Both groups want very clear and transparent products, and they want the flexibility to borrow over varying periods of time, depending on budgets and affordability. Similarly, the expectations are similar between the two. "So the dynamics of the customer are fairly similar," concludes Simpson.
The only major difference between the two groups he concedes is the risks associated with them, which explains the differences in rate.
And this is an area Moneyway has looked at: "One of the very things we’re very conscious of is the rating structure we put in; it is very competitive," says Simpson. "Our maximum APRs are approaching the 39.9% for the highest risk, down to significantly lower for prime customers, reflecting the credit ratings of those individuals."
Industry trends
The lender is not alone in looking to new areas for growth. Simpson notes that he has seen a number of companies which were
traditionally higher on the risk curve starting to compete for customers with lower credit ratings.
Simpson says: "Certainly many of the people who traditionally operated higher up the risk curve then we do, are operating in our space, and a number of new entrants have come in and around our area as well."
Interestingly, Simpson observes that nearly all of the new competition is coming from either lenders coming down the risk curve, or new entrants coming into the market in the same space in which Moneyway operates. Very few lenders have started to lend further up the credit curve, he says.
Regardless, the result has been a highly competitive landscape.
At the moment this isn’t a problem: the market is positive for lenders, with a growing car market, increasing finance penetration and relatively cheap credit.
The problem may come when this growth all starts to slow down.
Simpson says Moneyway should be able to weather any tough times for a number of reasons. One is that the company has now existed for some time, and its partners know they can rely on it.
Simpson also believes a new prime product will help in this situation: "It will support us. You can’t stand still. What we want to do is improve our offer. We want to be able to provide more products to our customers, and there’s no question about it, the market is demonstrating change at the moment."
In terms of general product developments, another change Moneyway has made recently was a move to a fixed rate, fixed commission payment structure. Previously, Moneyway mostly used fixed-rate products, however the lender has now spread this across the range.
This is likely to please the Financial Conduct Authority, which has begun looking at remuneration. Simpson says: "Our compliance around FCA guidelines is always front and centre of everything we do. Our products, quite frankly, have always been geared around what the FCA guidelines want, because we were primarily fixed commissions and fixed rate, anyway. So we didn’t have to make many changes to comply with guidelines which the FCA brought in."
Looking ahead, Simpson concludes: "From a product perspective, the conclusion of the prime product is our primary goal."
