Chris Lemmon, editor of Motor Finance, catches up with Alphera director Preston Rogers to discuss how the businesses navigated the recent challenges and to discuss the firm’s plans for the months ahead.
In the face of challenges caused by Covid-19, Brexit and regulation changes, Alphera Finance Services UK posted its record annual performance in 2020, signing a total of 104,504 finance agreements throughout the year.
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How was Alphera able to enjoy its record annual performance during such a challenging time?
There are a few reasons for that. Firstly, we have a diverse partner network which really helped us to be active across multiple dealer and broker channels. We could almost play in all the spaces, reacting to when various types of businesses were doing better than others.
We had good momentum pre-pandemic but was obviously stopped in our tracks in April with the first lockdown. By the end of May, I was surprised by how much business we were really doing.
After the first lockdown, I think the summer boom in used cars, driven by manufacturer closures and new car stock shortages, really played into our strengths as we’re predominantly a used car player.
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By GlobalDataWe were also open for business and were able to support our customers. Some of competitors, maybe bank-based, deliberately pulled back from a lot of lending to be risk-averse. Other businesses had funding challenges, while we were still very much open for business.
In terms of how we moved as a business, we had actually done a lot of work around disaster recovery planning. You always hope that you don’t have to use those, but when we needed to, that planning clicked in within two or three days.
The whole company was pretty much remote and working with no issues. Our phonelines also remained open, which meant that there was virtually no business disruption.
What trends have you seen across the industry over the last 12 months?
Although we saw different pockets of business come on stream stronger at different times, the business we conducted was not dramatically different from pre-pandemic dealings. When you look at the whole year, it really did not change too much – our new and used flip did not change too dramatically.
More noticeable was the way in which our partners and customers interacted with us – that has definitely changed. We had a lot of projects in flight already to try and make things easier for dealers, brokers, and customers. Those things have had to be accelerated in the last year.
Our MyAlphera finance portable saw double the number of customers registered at the end of 2020 than we had at the end of 2019. In the first quarter of this year, almost 50% of our interactions with customers were conducted on our platform, through the self-service channel. That’s been quite different for our business when compared to where we were five years ago.
Another interesting thing we have seen is that evermore customers are using their phones [to access our channels], rather than a desktop or a tablet. Half of the activity we’re seeing from customers is being done on their phones.
While we have all been doing this with online banking for years, buying something like a car has always involved phone calls and interacting in person – so that has also been quite different for us.
Virtually half of our customers are now signing up remotely to our platforms, with some completing the transaction remotely. I think Click and Collect can be quite nuanced in terms of whether the whole transaction is actually remote – but during lockdown that was certainly the case.
When customers return to dealerships, will that start a change? Over the last few weeks, we have seen a slight plateauing, but it doesn’t look like it is going to reverse. Some of the wins for the customer, in terms of flexibility and offering, are probably here to stay.
I think customers are landing at the dealership now, full of information. They are as informed as they have ever been. This obviously puts the dealerships and the staff under a bit more pressure, but in terms of whether they still want to go and see what they’re buying, and touch and feel it, I think they do.
What has the uptake been like for the Alphera Zero platform?
I would say that the uptake has not been what we hoped for. While it was not necessarily about uptake, we found that we may have launched at an unfortunate time – but it’s really been about testing the waters.
We have had some really good discussions with a couple of prominent dealership groups over the last few weeks that are really keen to start offering it. People are really interested in the space and they are looking for something to offer in the sector.
Will customers respond to the platform in the way that we want them to? We’ll have to wait and see.
The one thing that we are seeing in the electric vehicle (EV) space is that customers are really price sensitive. There is already a premium to pay with a lot of new information coming at them in the transaction – so we need to make sure that it is not too much of an information overload for them.
We are working with our partners to help weave Zero into the customer journey. We will be in a better position when we have caught up with a few more partners and that should be in the next few months.
What is consumer appetite like for EVs?
Consumers are focused on the topic and you can see that. I saw the latest figures on the used car market and how disappointingly low the alternatively-fuelled vehicle sales figures are.
We have had this discussion internally, but the reality is that there aren’t really any EVs in the used car market. If a used car customer goes to buy today, it is quite difficult for them to even find an electric car. The ones on the used car market may also be a little disappointing when compared to some of the technologies you see in a new EV. The used car market is probably still a year or two away from really coming through.
There is also quite a gap in customer education on the topic. We’re trying to look at the space and think how we can make that experience better for the customer, while also helping the dealer get the right information.
Things like public charging sounds easy with more places opening, but the cost can be astronomical if you go to the wrong charging point. It’s not like fuel where it can be a few pence difference; it could be triple or four times the price, with connection fees and the rest.
It’s a bit of a minefield for the customer because everybody knows how to put fuel in a car. When you first get an electric car it’s quite daunting to start all over again.
What are Alphera’s priorities for the year ahead and beyond?
The business is in good shape, so we don’t want to make any radical changes that we don’t need to make. We’re at the heart of competitive market and will look to grow. Even if the market goes backwards, we will look to beat that.
One really good initiative coming up is the new e-Sign and ERD platform that is launching in a couple of months from now. It’ll be a much better way to identify customers remotely, which at the moment is a huge burden for the whole industry.
The process for our dealerships to get their pay-outs from us is also going to be much quicker. It’ll be good news for both the customer and our partners too so it will be a nice step forward, due for launch at the start of Q3.
Concerning the recent FCA changes, we are looking at the different commission models out there, such as credit-score based pricing. We are currently out there with one rate and one commission, so we’re looking at whether to go into other spaces; we’ll make that decision shortly.
We are also 15 years old in 2021, so we’re keen to get out there and do something with our partners – to look forward with them and ask what they want from a finance company in the next 5-10 years. It will be quite interesting to get everyone together and hear the different perspectives post-pandemic.
Finally, when you start to look at the ICE ban of 2030, there are obviously quite a few things that we’ve really got to get our heads around – not just Alphera, but the industry as a whole.
