With dealers facing an increased regulatory burden, it makes more sense than ever for them to decrease their lender relationships and look to full-service alternatives. Jonathan Minter speaks to Blue Motor Finance’s Christopher Jones about the company’s stellar rise and growth
Traditionally, most motor finance lenders have targeted specific segments of the market.
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Prime lenders will generally look to lend at a lower-end APR to customers with high credit scores, while further down the credit scale subprime lenders will look to provide customers with more chequered credit histories the ability to purchase a car at a higher rate.
The coming of the Financial Conduct Authority (FCA) has caused things slowly to start changing in some instances, however.
With dealers facing an increased regulatory burden for offering finance, there is the argument to be made that it makes more sense than ever for dealers to decrease the number of lender relationships they have, in at least some cases.
This has both provided brokers with an opportunity, and also seen the rise of lenders that are looking to cover more of the market. One example of this is Moneyway, which has launched a prime product to sit alongside its traditional offering.
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By GlobalDataBlue Motor Finance is another company to establish itself as a so-called ‘one-stop shop’.
“Our one-stop shop is really important for us. And I think this is going to get more and more traction from dealers who don’t want the hassle of managing multiple lender relationships,” says Christopher Jones, COO at Blue Motor Finance.
Dealers that do continue to manage multiple relationships will open themselves up to regulatory risk because they will need to justify why they have given a deal to a particular lender, and this situation is not going to change, he adds.
When asked if he thought this means more lenders will look to provide a full-service solution, Jones thinks they will have to.
In order to react to this development, lenders are either going to have to adjust to better work on a panel, or be able to provide a full-service solution that can cover all a dealer’s needs, Jones says, adding: “If you provide a full-service solution, it de-risks it for the dealer because they then haven’t got to make a decision.”
Although the majority of the industry has now gone through the regulatory process, Jones warns that the FCA is currently still learning about the market, and that those operating under it should continue to keep an eye on developments.
“The FCA has not sat there on its hands. It’s individually approving companies as it goes through. But I don’t think that once all the finance companies and dealers are approved that will be the end of it.
“There’ll be action against things which are clearly wrong now, but once it has gone through everyone’s applications it is going to regroup and look at the market as a whole. It wouldn’t be fair to look at finance companies one by one and say ‘you need to do this and this’, and then six months later say ‘now it’s your turn’.”
Because of this, it’s possible that the regulatory pressure on dealers, encouraging them to limit the number of lenders they have relationships with, could continue even once the authorisation process is over.
Creating this one-stop shop is certainly not without its challenges; however Jones says new technologies are making this more possible. One example of this he gives is around affordability.
“Normally when you get to non-prime, affordability becomes more important. So on the non-prime side we integrate bank account-checking software so we can look at the turnover of their bank account.
“So rather than ask for a payslip, we can actually just look at the turnover of their bank account and debt, to get an idea how much money they earn to verify it.
“It makes it easier for the dealer, and actually gives us more accurate information as well.”
For Jones, technology is a core part of Blue’s finance offering, as it is this that is key to offering the seamless end-to-end service it has set out to deliver.
This has included things like integrating e-signatures sensibly, and making sure the customer journey is as easy as possible.
Another area Blue launched with a strong view on was around commission disclosure, a topic surrounded by much speculation.
Blue’s position from its launch has been to make it clear to customers in various parts of their documents that they can request commission details if they want to, and Jones says some customers do indeed request this information.
There has been a lot of speculation as to whether the FCA is going to make commission disclosure compulsory, or regulate on the topic; however Jones does not see this as potentially too disruptive.
He notes: “People are just wary of it because it’s new, but we don’t think it’s that much of a problem.
“Someone has got to agree a standard approach to it, maybe coordinated by the FLA. It would be quite useful just to get some hard and fast regulation, just to say ‘you need to do this’, and everyone will then fall into line.
“Our view is we’ve always been upfront about the amount of commission being paid, and everyone else should follow suit.”
Successes
So far these tactics appear to have worked. Since launch, Blue has been growing 10% month-on-month, and has continued to grow at this rate, despite this now being from a larger base.
According to Jones, Blue is now doing approximately 40,000 proposals a month, and 1,500 on a reasonable day.
The team has continued to grow in line with these successes, and now stands at over 100 people. Recruitments include relatively senior captures, such as a head of analytics at Shawbrook, a sales director from Barclays and also a director from Hitachi.
“These recruits are important, and they understand what we’re doing, and what we’ve been able to achieve, and they can see the opportunity for themselves going forward, because they’ve taken a big leap to join a much smaller company,” Jones concludes.
In order to accommodate this expansion, Blue has also had to move to a new office in Sevenoaks, Kent, giving it the capacity for another 200 people, something described as giving a flavour for the company’s ambitions.
