Vanquis Bank continues to bring the benefits of a credit card to people who can find themselves rejected by mainstream lenders. Since 2003, we have operated in the non-standard market, helping people on average or below-average incomes to do simple, everyday things that more mainstream customers take for granted, such as supermarket shopping or making online purchases.
We are confident of continuing success in a market which inherently carries the potential for higher levels of default because of our extensive experience and expertise in lending to non-standard customers. Given the nature of the market, we lend cautiously and responsibly and aim to support and inform our customers, whether they are new to credit or wish to repair their financial history.
Our approach is characterised by our ‘low and grow’ strategy towards extending credit. Customers typically start with a credit limit as low as £250. We then monitor performance over time to understand individual customer behaviour before granting responsible increases when it’s right to do so.
Our interest rates reflect the higher levels of default within this market segment. The majority of our customers are taken on at our representative APR of 39.9% and our default charges are in line with those of the mainstream credit card providers. In all other respects, Vanquis Bank customers experience all the features associated with other globally-accepted credit cards.
The high level of contact we enjoy with our customers also distinguishes Vanquis Bank from other lenders. Customers excluded by mainstream card issuers appreciate the option provided by Vanquis Bank and we provide a higher level of help and support than the mainstream lenders from our two contact centres in Chatham and Bradford.
Our bespoke approach
At Vanquis Bank we have developed a bespoke approach to delivering our strategy. This comprises four key strands:
1. Focus on our target market
Vanquis Bank operates exclusively in the non-standard sector of the credit card market with many of its customers having been refused credit by mainstream lenders, either due to a thin or impaired credit history. We provide customers with the opportunity to establish a sound track record of using credit to meet their desire to build or repair their credit history. We estimate that 7 million of the current 10 million people in this non-standard market are the target audience for our credit card product.
As our experience and expertise in serving this target audience has developed we have been able to tailor our products and services to suit the very particular needs of our customers. Not every lender has the capability to serve customers in the non-standard market but we enjoy taking care of our customers and providing them with high levels of service and products which genuinely meet their needs.
Our success in the UK has convinced us that we have a business model which could be successful in overseas territories. Having explored a number of EU territories into which we can passport our UK banking licence, we commenced a pilot credit card operation in Poland during 2012. The pilot is still progressing but the results to date show that our product offering and business model are likely to bring benefits to non-standard customers in overseas markets just like in the UK.
2. High customer contact
The relationships with our customers are much, much closer than those in the mainstream lending market. We genuinely value our customers and continue to develop new propositions to enhance levels of contact.
All of our customers receive a welcome call as part of the acceptance process – this is unique in the UK credit card industry. The call provides the opportunity to gather additional information which is useful to help manage their account at a later date and establish a more personal relationship. It is also an important element of completing our underwriting and we will turn down an application if we cannot engage in a satisfactory dialogue with a potential customer.
Some of our customers are new to credit and so choose to contact us more than would be expected in a standard lending relationship. In 2012, our contact centres received approximately 7 million calls, of which around half were answered by our contact centre staff and the remainder by our Interactive Voice Response system. In addition, our agents called and spoke to customers nearly 12 million times. To aid with account management and to offer alternative payment channels, more than 1 million SMS texts were sent each month. This high level of contact means that we understand our customers and can also provide support to customers when they are struggling to make payments.
We also offer a Gold Service, carrying enhanced levels of customer service, to over 240,000 of our best customers.
High customer contact has helped us to maintain some of the best levels of customer satisfaction in the industry with 9 out of 10 customers saying they would recommend us. It is always our aim to treat customers fairly and resolve quickly any complaints that do arise. This is reflected in the fact that when complaints do get escalated to the Financial Ombudsman Service (FOS), they find in our favour over 95% of the time, which makes us one of the best performers in the industry.
3. Low and grow
Booking the majority of our accounts on a small initial credit line is at the core of our ‘low and grow’ strategy. The initial credit line is typically just £250 and this allows us to observe and understand our customers’ behaviour before granting any further lending in a responsible and sustainable manner. Vanquis Bank has developed an unparalleled expertise in lending to the non-standard market in this way. We continue to invest in people and systems that enhance underwriting capability in both acquiring our customers and subsequently allowing credit line increases. This ‘low and grow’ approach has allowed the average balance of the portfolio to continue to grow to £790 (2011: £650) whilst continuing to improve underlying credit quality.
Collections are an extremely important aspect of the business and we continue to develop new and innovative collections strategies designed to help customers stay on track. Our telephone-based operations use leading-edge technology and techniques to maximise efficiency and cash collected. Our collections teams are highly trained and our ‘promise kept’ rate – the number of payments actually received from a promise given by a customer – is consistently in excess of 70% which we believe is ‘best in class’. Our employees are trained to manage the accounts of customers that are identified as vulnerable and support them accordingly.