Weekly Blog by Philip King, CEO of the ICM - 'Catching the bus'

It's been a busy news week. I was interviewed on Jeff Randall Live on Sky News on Monday evening about the government's proposals to cap the cost of Payday Lending.  A bit like buses though, news stories of interest tend to come in twos and threes, and I had a view on the three main news stories the programme was covering.

Firstly, the Lawrence Tomlinson report containing allegations that RBS had pushed healthy small and medium-sized businesses into administration to strip their assets and then buy them back cheaply to make a profit.  As the MP Mark Garnier said in his interview: "I'm not a lawyer, but these allegations, if true, look a lot like fraud to me." How many credit professionals are looking back at bad debts incurred where they thought their decision to supply had been reasonable based on their assessment of customer risk only to be caught with a bad debt when the customer went in to insolvency and wondering if the allegations might be true?  Apart from the obvious impact on the businesses forced into insolvency, what might the wider impact on their suppliers and the economy be?

Secondly, the government was selling £900m of student loans to a debt management consortium for £160m. The loans had been taken out by students who started courses between 1990 and 1998.  Part of the reaction to the news was that debt collection companies would act irresponsibly and aggressively in recovering debts that have so far not been collected.  The Student Loans company doesn't have the best record in managing its loan book and particularly the older elements of the portfolio.  We're told the terms and conditions of the loans are not going to be changed as a result of the sale and, if engaging third parties increases the recovery of funds to the public purse, then I'm all for it.  Perhaps the debt collection companies will just apply good credit management principles and collect money that is overdue from people who can - and should - be repaying it.

Thirdly, the Chancellor's announcement that government will impose a duty on the FCA to cap the cost of payday lending.  Setting on one side the suggestion that the announcement is one of political expediency, there are bigger questions to be answered. How will the cap level be determined?  The quoting of the Australian model with its cap of 4% per month seems to overlook the 20% arrangement fee that can be charged, and the punitive penalties for late payment that can be applied.  And the last thing we want is for the cap to make short-term lenders flee the market forcing borrowers to use loan sharks instead.

I'm not averse to the principle of restricting overt profiteering that can exploit the most vulnerable but let's not forget that payday lenders aren't the only guilty parties here.  As I said to Jeff Randall, I went online and looked at what £100 payday loan for a month would cost.  I'd have to pay back £137.15. If I took an unauthorised overdraft on my current account with a High Street bank the cost would be £5 per day, capped at £95 in a month.  On another current account I looked at, the cap would be £150, and both of these accounts would also charge transaction fees on top.  On this comparison, charges of £37.15 sound a snip!

Equally big issues with payday lenders are the opportunity for borrowers to take out multiple loans with multiple lenders, the availability of repeated roll-overs, and - as I've said in this blog before - the failure of lenders to carry out adequate affordability checks ahead of granting loans.

Back to my buses analogy, I guess next week will be devoid of any significant news and we'll be back to following the exploits of celebrities and their social lives!

 

Weekly Blog by Philip King, CEO of the ICM - 'Changing the mindset of start-ups'

I've had some interesting meetings this week with BIS officials and Ministers, and other organisations, talking about late payment. No doubt you'll have seen David Cameron's announcement in October that a consultation was going to be launched looking at the issue, and I mentioned it in this blog column a few weeks ago.

One of the meetings was a round table involving a large number of organisations looking for practical steps that might help SMEs to manage their cashflow better. There's no doubt that the required change in culture that I often refer to is needed throughout the supply chain. Big businesses need to take a responsible approach in dealing with their suppliers, and smaller businesses need to apply basic good credit management principles.

Therein though lies the challenge. For many micro businesses, cashflow only becomes important when it runs short, and that's no surprise. If I'm trying to start a business, I'm bound to be more worried about finding customers and delivering my service or product than I am about such things as agreeing payment terms, invoicing accurately and promptly, and chasing unpaid amounts.

But this is what needs to change - we need to make the mindset of start-up businesses one that recognises the importance of cash from day one, that applies the basic principles that credit professionals understand so well. Unless that happens, too many businesses will never grow beyond the micro stage and too many businesses will fail. So what's the answer? I am not sure I know - I wish I did - but I'm glad to be engaged in the debate and to be working with others in looking for solutions.

Weekly Blog by Philip King, CEO of the ICM - 'Harnessing support for exports'

You might have seen that this is Export Week designed to draw attention to exporting and the need for businesses in the UK to do more of it. The government has set some ambitious targets for 2020: achieving exports totalling £1 trillion and having 25% of businesses exporting, the current level is 20%.

By coincidence, the guest speaker at the ICM's Credit Industry Think Tank on Tuesday was Robert Hurley from UK Trade & Investment who shared some interesting information and facts about particular export markets and the work of UKTI, interspersed with some personal anecdotes from his long experience in exporting before joining the government organisation.

UKTI works with UK-based businesses to ensure their success in international markets and provides support in four key areas: business planning, market research, market promotion & publicity, and market visits. Although I've had significant contact with the organisation over recent years, I hadn't realised the depth or breadth of the service and support they offer.

One particular service that caught my attention was the 'Business Opportunity Alerts'. A business can register on the website stating its sector and the markets it is interested in, and it will receive alerts of any relevant opportunities that arise. I don't know how many of the 4.8 million businesses in the UK have registered for the service, and I don't know how many businesses are even aware of the facility, but I'd hazard a guess that for both it's a pretty small proportion, and that's a shame.

Exporting is a really good way to grow our economy, and it's good for business generally, so services like this need a high profile. I've talked in previous blogs and elsewhere about the disappointing lack of awareness among the business community of various government schemes and this is another example.

A huge amount of good work is put into supporting businesses, especially the small and medium ones, and it's a pity when that effort goes to waste. More needs to be done to bring such things to the attention of business owners and government needs to get smarter. In the meantime, if you know a small business that's even thinking about selling into overseas markets then you could do worse than point them to www.ukti.gov.uk

 

Weekly Blog by Philip King, CEO of the ICM - Facing facts'

I've been following the recent furore about Tesco's trial of face-scanning technology in its 450 petrol stations with interest. Apparently, the technology allows the camera to identify the customer's gender and approximate age and then deliver an appropriately targeted advert.

The targeting of adverts on web sites based on previous surfing history is well documented, the monitoring of spending through loyalty cards allowing targeted promotions has been around for several years, and the offering of free Wi-FI to facilitate the capture of data and routes to market is becoming ubiquitous. For a long time we've been told that the average person is viewed on CCTV an estimated 70 times each day even if the awareness falls into our subconscious.

This somehow seems to be a step further but is surely no surprise in an age of ever increasing technological sophistication and complexity. Just this week, I realised I'd left home without putting my pen in my suit pocket. Did I panic? No, I realised that almost all my note-taking, planning and writing is on my iPad and I rarely use a pen these days. I'd never have believed that would be the case even a couple of years ago but I genuinely couldn't imagine anything different now.

And so it is with credit management. I was at the ICTF conference recently which brings together credit professionals from across Europe. One of the sessions there was a workshop looking at the use of technology and how to identify and source the best solutions. As I travel around talking to credit people I'm made aware of the advances in the software and tools being used and, equally importantly, of its integration into legacy systems, processes and procedures. In most cases, it's about more than being increasingly efficient or saving cost, it's about being more effective and adding more value to the business.

Whether we like it or not, the evolution will continue and - to some extent at least - we have to embrace it if we want to maintain our position as individuals and organisations. Do I care if Tesco is working out my age and gender so that it can show me an advert I'm more likely to be interested in? When I think about it rationally, not really!