RCS enters secured lending business
BNP Paribas-owned consumer finance company introduces peer-to-peer vehicle and home improvement loans
Unsecured lender RCS has quietly entered the secured lending space.
The consumer finance company, owned by the Paris-listed BNP Paribas, has been offering vehicle finance for four months and is also getting into financing home improvements.
The decision is part of the strategy RCS embarked on at the end of 2016 to try and gain market share by adding more products. The lender had predominantly offered store cards enabling consumers to buy goods on credit, and personal loans.
RCS CEO Regan Adams said the lender realised how difficult it could be to compete with the big banks in asset financing, which is why RCS is carving a niche to finance private peer-to-peer vehicle transactions.
“We know the auto finance market is quite competitive. We spent a lot of time thinking carefully where we want to position ourselves. That’s why we chose to focus on the peer-to-peer space. We know the dealer market is very competitive and the likes of Wesbank and MFC have that market. It wouldn’t make sense to try and compete there,” said Adams.
Private vehicle sales remain a difficult market for ordinary individuals to navigate given the limited recourse that consumers have. Adams said RCS’s strategy is to introduce some level of comfort and protection by sending the vehicles they are going to finance to a network of assessors. The lender also helps buyers verify legitimacy of the seller and their right to sell the vehicle, while buyers are spared concerns about whether funds are legitimate.
For home improvement loans, RCS is also eyeing the niche market of financing additions like solar panels.
Adams said the company’s ambition in the unsecured lending space was to start growing its credit card offering. The company will target its store card customers with both the personal loan and credit card offerings.
Adams said both the lender and its parent company BNP Paribas were happy with the progress made in terms of earnings growth and new products on the pipeline.
Although RCS’s profit for the 2018 financial year was flat — largely due to changes in provision for impairments — operational results showed that the strategic shift was bearing fruit. The lender grew its gross active debtors’ book by 19% to R9.83bn and maintained good health of its book as 86% of customers were up to date with their payments.
Despite being around for 20 years, RCS’s market share in terms of the value of loans it advances is low and Adams admitted it could do more.
“But we want our growth to come from the right customer profile,” he said, adding that RCS’s growth may have been limited by its prudent risk management policy.
“Instead of growing our book aggressively when it’s good times and close it in bad times, we’d rather have a consistent risk policy and a particular risk profile that we are comfortable with. In good times, yes, we are probably losing some business but in bad times I think we are in a better position.”