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Interview With Nostrum Group CEO, Richard Carter

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Between the risk involved with lending and the number of resources needed, it can be costly for banks. Nostrum Group is helping banks on both fronts with a set of tools that reduce friction in the lending process.

At FinovateEurope 2014, Nostrum Group showed off Virtual Collector, a system that automates loan delinquency management. This year it applied for FinovateEurope and was selected to debut a new iteration of its core system that aims to make lending cheaper, faster, and safer.


Richard Carter, CEO, has an extensive background in the credit and lending space. We interviewed him recently about Nostrum’s loan platform:

Finovate: In addition to its Virtual Collector, Nostrum offers loan application technology. What role does big data have here? What role do you see big data taking on in the lending industry in the future?

That’s right, in fact at FinovateEurope 2015 we launched our new Virtual Finance platform, which is our fully digital loan management platform. This platform enables lenders to completely automate the loan application and servicing process, including delinquency management, which is where Virtual Collector fits in. 

The focus of our efforts when developing the Virtual Finance platform was on automating a truly personal and bespoke customer experience. Big data plays a vital role in the way lenders can optimize their lending decisions, as it offers such a rich source of insight to inform their scorecards.
The driver of all of this of course is that smartphone adoption is nearing saturation. A person’s Facebook activity can probably tell you much more about their loan affordability than bank statements from six months ago for example and therefore lenders can expect to make better lending decisions and improve the performance of their loan book.
On a more simplistic level, the interaction of the applicant with the site can be used to supplement the lending decision. If a customer applies for the largest loan amount available with the shortest term in milliseconds and skims through the T&C’s are they entering into a loan agreement with strong intent to pay?
Finovate: What can you tell us in the way of metrics?
Perhaps the most telling metric is the fact that Nostrum’s lending platform processes a loan application every 10 seconds on behalf of our clients. When you consider that we only employ around 80 staff, the efficiencies of automation are clear.
Historically (and even now), some paper based lenders would take several weeks to confirm their decision on a loan application. Using our systems this can be done within seconds, but not only that, we can have the funds in the applicant’s bank account within minutes. We’ve not quantified the financial or operational benefits to lenders because, quite frankly, the case in favour of automation is an overwhelmingly compelling one. However, you’d call out the ability to process applications and service queries without the requirement for agents as a major overhead reduction. The flip side is that we know customers want to engage in this manner, so that will drive acquisition. 
The strong demand for our product shows how the lending industry is transforming. Over the last two financial years our turnover has increased by 137% and based on our current line of sight of our order book, this digital trend is set to continue for some time to come. You only have to see how many banks have created senior digital leaders to understand that this isn’t a short-term play.

Finovate: Do you view alternative lending sites, such as Lending Club, as competition or complementary to traditional bank lending?
We see alternative lenders as complimentary because in most instances they are fulfilling demand for loans in areas of the market where banks don’t want to lend. The alternative lending sector has grown quickly though and combines the latest technology with highly efficient operating models, so the threat to the banks is an increasingly real one. On a slightly controversial note, we would highlight payday lenders as having driven technology adoption. They pushed high levels of automation through their lending operations – they had limited appetite to staff up contact centers, so the whole application process was automated including electronic signatures on agreements and immediate disbursements. That legacy is now continuing through mainstream lending as customers demand immediacy of service with mainstream banks and other product providers.
The challenge the alternative lenders face is whether they can scale up their operations to compete not just on rate, but in terms of the volumes of business they can write. The question that needs to be asked is whether these alternative lenders are trying to supply a product that customers want, or do they just represent a great idea looking for a home? Looking back at previous examples, prepaid cards were in a similar stage of maturity, and a great product, but lack of demand stifled growth.
Digital banks now face a similar journey, and our view is that the most successful alternative lenders and digital banks will find themselves being acquired by the major banks, who will inevitably retain the vast majority of the customers. At the end of the day, the banks or lenders who have the customers are the ones who will be the winners. That’s generally the case in most industries. 
In the UK, for example, we are already seeing collaboration between major banks and peer-to-peer lenders, to pool resources and drive progress to critical mass.
Finovate: Tell us an original fact about Nostrum Group that you’ve never before shared.
The fact I would really like to tell you is the list of high street retailers and well-known global consumer brands who use our systems to provide finance facilities to their customers. We’ve never shared this before because we’re not allowed to name most of our clients. 
So, although I’d like to tell you, I’m not allowed! However, what I can say is that if you search for a list of the top 20 UK retail brands you’ll find at least six of our current
clients, and nearly the same number again who we are actively in talks with. 
Finovate: As CEO, what past experiences do you have that help you provide lenders with a better way to serve borrowers?

My entire career has been spent working in technology in financial services, specifically in the lending industry. So I’m a subject matter expert and I’ve got experience and relationships that span three decades. I’ve been at the heart of the industry through boom and bust periods, and some of the most pivotal innovations the market has experienced including telephone banking, internet banking, and most recently the dawn of the cloud, social media, smartphones and tablets. 

I think what really helps me to add value to our clients though is the simple fact that I’m a consumer myself, and one who is fascinated by technology and gadgets, and obsessive about customer service. I follow innovations and success stories across consumer industries with great interest and these have been the source of many sparks of inspiration for our own technology. 

I can sit down with our clients and talk to them from combined perspectives of a technology provider, a lending industry expert, and an active and passionate consumer. I think it’s a combination they value.

Nostrum Group is self-funded and is based in the UK. Check out the debut of Virtual Collector at FinovateEurope 2014. Its FinovateEurope 2015 video will be available on the demo video archive pages later this week.