Challenger ready for prime time
In November Secure Trust Bank's Moneyway announced its intention to enter the prime sector in 2015. we caught up with MD John Simpson
Given the way the market has expanded in 2014, it’s no surprise that the industry is seeing change, with new players coming in and more experienced players looking for ways to increase their slice of the growing pie.
For Moneyway, the motor finance arm of challenger bank Secure Trust Bank, one of the ways to achieve this was to look at entering new markets, in this case the prime sector.
Speaking to Motor Finance John Simpson, managing director of Moneyway, said plans to enter the market developed over the previous six months. When he joined, Simpson says his brief was to focus on doubling the size of the business over the next two to three years.
According to Simpson, a number of different strategies were considered in order to achieve that aim, with entering the prime space eventually chosen as a key part of the future strategy that would benefit both Moneyway and its dealer partners.
He says: “As things stand at the moment we position ourselves as third or fourth choice in the lending hierarchy within a dealership, and most of our business tends to come from business that some of the captive lenders have declined.
“What we believe this participation in the prime space will enable us to do is move ourselves further up that hierarchy, and provide a one-stop shop to dealers. The type of dealers we’ll be targeting, and our realistic marketplace, is the small
franchised dealers and the independent dealers.”
According to Simpson, the current plan is for a controlled entry at the start of 2015, with a more extensive role out of the prime proposition towards the middle and back-end of next year.
Speaking about the shape the prime offering will take, Simpson says: “Our prime offering will complement what we do today. We operate on a strict rate for risk basis. That is really layer dependent on the risk association with that particular customer. Our prime lending will operate in a similar sort of fashion across one product, which will be hire purchase.
“We’ve taken that decision because primarily we’re operating in the used car sector and that’s still a very popular product at point of sale, and we intend to specialise in that area, but just expand our rate for risk to incorporate products that compete in the prime space, as well as continuing to support the non-prime markets in the way we have done for six or seven years now.”
At present, Simpson is unwilling to commit to what percentage of the business Moneyway estimates it will write will come from the prime space in two to three years.
However he is willing to say: “We will certainly be looking to continue to grow in the non-prime sector, which is where we have our niche and our strength. But at the same time we would absolutely want to complement that with writing some sort of prime business.
“As our exposure to the prime sector starts to develop, we certainly would see that as becoming a more significant proportion of our business, although we are still very much committed to the sectors we operate in today.”
Alongside the move into prime, Moneyway is looking to increase the amount of money it will lend. Currently, the maximum lend is £15,000. However, according to Simpson that number is set to increase to £20,000 for certain scenarios, and increase even further for those in the prime space.
Similarly, he says: “We’re also looking at a wider eligibility of vehicles as well, in terms of age and in terms of looking at higher-powered and higher insurance group vehicles as well, which we haven’t done in the past.”
One example of this is that Moneyway may start to look at prestige cars in the future, which Simpson says is potentially representative of the new areas where the company will look to lend.
Moneyway’s principal means to market has historically been via brokers and dealers, and Simpson says both will continue, though naturally as the business is looking to lend into the prime space, the opportunity will exist for the lender to establish relationship with new dealers.
Alongside all this, Simpson says Moneyway will have doubled the size of its sales force by the end of the year compared to the levels they were at in May.