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!

Weekly Blog by Philip King, CEO of the ICM - 'Neither borrower nor a lender be?'

I was in Basel earlier this week for the ICTF Conference. It's always a good opportunity to catch up with credit professionals from around Europe and beyond, and great to hear some of the issues being faced and how they're being addressed.

 

Flights and travel gave me the opportunity to read the FCA's recently published consultation: 'Detailed proposals for the FCA regime for consumer credit'. We'll be providing the opportunity for members to submit comments through our November ‘In Brief’, and I won't go into any detail on the 193 pages, nor the 387 pages of the Appendices here. I do though want to make just one comment about the FCA's stated intention to focus on the Payday Loans sector.

 

I've written several blogs over recent months arguing that the OFT should, in its final year, take action over the absence of evidence that affordability tests are being adequately carried out by payday lenders. I've consistently asserted that this is the key failure of the market and should be addressed with vigour. It should, after all, be the determinant in all credit decisions regardless of sector, size or nature.

I've given up hoping that the OFT is going to take any serious action on this in its final days but I was encouraged to read these words in the consultation: "Our proposals.........are based on the principle that money should only be lent to a consumer if the consumer has the ability to repay and in a sustainable way." And in his foreword, FCA Chief Executive Martin Wheatley says: "The OFT affordability guidance is good, but the OFT’s own research shows too few firms implement it. We will put it into our rules and guidance, and enforce this."

 

Martin's last two words are the most important - let's hold the FCA to account and ensure it delivers.

 

 

Guest Blog by Josef Busuttil, Director General of Malta Association of Credit Management - 'A Credit Management View from Malta'

The small market economy of Malta has been strong enough to resist and manage the economic and financial turmoil that hit the World, in particular, Europe. Thanks to the Maltese regulators, the financial services sector has remained significantly strong and the banks are still enjoying growth and increase in their profits. 2011 was also a record year for tourism, a sector on which the Maltese economy greatly depends.

This does not mean that all is rosy and that the sun shines 365 days-a-year over this rock. It also rains in Malta! Malta does not live in a vacuum. It forms part of the European Union and the Euro-zone, and it exports its products and services worldwide like any other developed country. Hence, what happens offshore affect the Maltese economy to a certain or greater extent!

One of the factors that has hit the Maltese business community is surely the rationed credit facilities from the foreign principals/suppliers. However, from a local credit perspective, Malta has made stark improvement during the recent past. Since MACM - Malta Association of Credit Management - was established in 2001, it has worked and lobbied for a better credit environment and Maltese businesses have witnessed improvement in a number of pertinent credit areas. This includes the number of dishonoured cheques that has gone down remarkably, the credit-related legal framework which is now in place, the judicial system which is more efficient, and business organisations are today adopting more the credit management practices, tools and systems provided by MACM in order to protect their cash flow and secure their long-term profit.

Nevertheless, MACM is aware that late payment is still a major concern for the Maltese businesses. It believes that authorities should do more to enforce legislation that would help creditors in their cash flow management. MACM suggests that the enforcement of court judgments should not only be efficient but also effective. Besides, MACM still notes that some local firms may not be deploying the proper credit management practices when granting and managing credit. These are some of the challenges that MACM is currently addressing.

In fact, MACM advocates that in today's business, a credit practitioner should do more than crunching numbers. The role of the credit practitioner should focus on how to gain and sustain competitive advantage in the market, whilst protecting cash flow and securing long-term profit. This requires up-to-date credit information and skilled staff supported by their top management team and assisted by the appropriate tools and systems in their day-to-day duties.

To support its members, MACM provides credit information which is updated on a daily basis. This information assists Maltese businesses to identify the most significant 'warning signs', which include:

*history of dishonoured cheques and overdue accounts;

* history of court judgements and executive warrants;

* history of court orders and court notices;

* customer changing banker/auditor;

* companies' information and accounts;

* changes in payment pattern;

* lack of filing of accounts as required by the Registrar of Companies (in case of companies);

*other databases that help businesses to identify their prospective customers.

MACM has also invested to provide education to the people working in the field of credit management. Thanks to the ICM Accreditation, Maltese credit practitioners have the opportunity to read the ICM Diploma in Credit Management and to sit for the relative examinations in Malta.

Credit Management is a peoples' function and having skilled and educated credit practitioners would result in better cash flow management, enhanced long-term customer relationship and improved business perception in the market, which are all required to gain and sustain competitive advantage and market share - which is the name of the game in such a changing global environment.

Weekly Blog by Philip King, CEO of the ICM - 'Consistency, fairness and madness'

It is always interesting to see what comes out of the EU and compare ourselves with our fellow 'Europeans'. I was particularly intrigued, therefore, by a recent article in The Guardian http://bit.ly/i5tB9H that highlighted how the Irish are undertaking what they call 'bankruptcy tourism' - in short, taking advantage of the bankruptcy process in the UK as a better way out for entrepreneurs crushed by debt from the property boom.

Waiting 12 months to be declared bankrupt and start again is a considerably more attractive proposition than waiting the likely 12 years in Ireland, and so it set me thinking: isn't it about time that the EU looked more actively into bankruptcy and insolvency across Europe and introduced a modicum of consistency and uniformity among Member states? I am sure it would be well received, especially by creditors.

And while we are talking about the EU, I was similarly intrigued and bemused by The European Court of Justice ruling on sex equality in insurance that will mean that insurance companies are not going to be able to price according to the calculated risk of those wishing to be insured.

I share the frustration of parents who have seen their sons penalised by excessive insurance charges because they fall into the high risk young male driver bracket, but the pricing of insurance and premium rates are based on calculated odds. If we stop this, then what next?

If it is unfair to use claims experience to price insurance, then isn't it also unfair to use credit scoring models predicated on calculated experience? What an interesting conundrum that would be.

I may be becoming too old and cynical but the absence of common sense from EU decisions, of which the above are just two recent examples, drives me to despair!