Retailers and financial services - Cenfri Payments/2015/Financial services... · Retailers and...

Making financial markets work for the poor

Retailers and financial services

September 2014

#WhyRetailers

Agenda

Introduction

User case

Business case

Summary and Conclusions

The research aims to understand more fully customers’ reasons for taking up financial services offered by retailers, and why retailers choose to offer these services in the first place

To map the landscape of financial products and services offered by retailers in South Africa

Build an understanding of the business case for retailers to provide financial services

Unpack the evolution of the product offering and its relative position within the wider area of value added services provided by these retailers

OBJECTIVES OF THE RESEARCH

Note*: For the purposes of this analysis credit retailers are those where credit sales account for 40% or more of total merchandise sales

BUSINESS CASE FOR OFFERING FINANCIAL SERVICES

USER CASE FOR TAKING UP FINANCIAL SERVICES OFFERED BY RETAILERS

Understand why and how people use financial services at retailers

Identify the primary factors that influence take up of financial services at retailers

STORE











Desk based research Interviews with retailers

STORE

Four retailer types were identified

Four retailer types were identified based on two dimensions:

Industry

Tender type (cash versus credit*)

FMCG retailers

Cash-based clothing retailers

Credit-based clothing retailers

Furniture retailers

As a first step, the project team mapped financial products disseminated by large retailers in South Africa. FMCG retailers with more than 500 000 customers in LSM 1-7 were included in the market map

10%

20%

30%

40%

50%

60%

20% 40% 60% 80% 100%

SHOPRITE (20.1 m)

PICK N PAY (13.5 m)

SPAR (13.2 m)

SPAZA (12.1 m)

CHECKERS (6.3 m)

TOWNSHIP SUPERMARKET (4.1 m)

BOXER STORES (3.5 m)

CLICKS (2.8 m)

WOOLWORTHS (1.1 m)

U SAVE (810 000)

DISCHEM (710 000)

MAKRO (454 000)

7 ELEVEN (268 000)

POP IN (206 000)

Source: AMPS 2012A. Note: Total Pick n Pay Group customers (Pick n Pay and Boxer): 16.4 million. Total Shoprite Holdings customers (Shoprite, Checkers, OK and Usave): 24.7 million Note*: “From which store or stores do you usually do your food and grocery shopping?”

% LSM 1-7

Included in market map

Not included in market map

Size of bubble: number of customers

TOP FMCG RETAILERS*

TOP CLOTHING AND SHOE RETAILERS*

Clothing retailers with more than 200 000 customers in LSM 1-7 were included in the market map

0%

10%

20%

30%

40%

50%

60%

0% 20% 40% 60% 80% 100%

JET/ JET MART (5.6 m)

DUNNS (248 000)

PEP STORES (2.9 m)

ACKERMANS (3.1 m)

MR PRICE (4.6 m)

WOOLWORTHS (2.7 m)

TRUWORTHS (2.0 m)

FOSCHINI (887 000)

TOTALSPORTS (846 000)

IDENTITY (692 000)

SPORTSCENE (552 000)

MR PRICE SPORT (409 000)

MILADY’S (384 000)

FASHION EXPRESS! (291 000)

SPITZ (310 000)

STUDIO 88 (248 000)

EDGARS (4.2 m)

LEGIT (710 000)

Source: AMPS 2012A. Note: Total Edcon customers (Edgars, Jet and Legit): 8.9 million. Total Foschini Group customers (Foschini, Exact!, Fashion Express, Markham, Sportscene, Totalsports and Due South): 3.1 million. Total Truworths Group customers (Truworths and Identity): 2.5 million Note*: Bought clothing or shoes from this store in the past 3 months

% LSM 1-7




EXACT! (340 000)

MARKHAM (1.1 m)

Furniture retailers with more than 100 000 customers in LSM 1-7 were included in the market map

0%

10%

20%

30%

40%

50%

60%

0% 20% 40% 60% 80% 100%

GAME (2.2 m)

LEWIS (752 000)

BARNETTS (212 000)

JOSHUA DOORE (309 000)

ELLERINES (282 000)

RUSSELS (250 000)

OK FURNITURE (516 000)

MORKELS (202 000)

MAKRO (359 000)

HIFI CORP (291 000)

FURNITURE CITY (175 000)

HOUSE AND HOME (265 000)

BEARES (145 000)

GEEN AND RICHARDS (153 000)

PRICE ‘N PRIDE (132 000)

FURN CITY (120 000)

TOP FURNITURE RETAILERS*

Source: AMPS 2012A Note: Total JD Group furniture retail customers (Russells, Barnetts, Joshua Doore, Morkels, Price n Pride, Electric Express and Bradlows): 1.3 million. Note*: Bought furniture or appliances or household accessories from this store in the past 12 months




% LSM 1-7

There is a clear clustering around dominant payment mechanism (cash versus credit) and purchase frequency

FREQUENCY OF CLIENT

INTERACTION

PAYMENT TENDER

CREDIT

CASH

CALENDAR

DAILY/MONTHLY SEASONALLY CALENDAR

(BI) ANNUALLY

Boxer Checkers Clicks Shoprite Pick n Pay Spar Pep

Dunns Ackermans Mr Price (19%)

Woolworths (clothing)

Edcon (47%)

Identity (55%)

Foschini (58%)

Truworths (71%)

Lewis (72%)

JD Group (63%) Ellerines (61%)

OK furniture (31%)

Game

Payments switches Retail servicing

activities (such as scanning barcodes)

FOCUS ON TRANSACTIONAL

FOCUS ON CREDIT AND INSURANCE

Strong customer relationships

Rich internal customer databases

Monthly instalment collections platforms

Note: Percentage of credit sales: Edcon (31.03.2014); Ellerines (30.09.2013); Foschini Group (31.03.2014); JD Group (30.06.2014); Lewis (31.03.2014); Mr Price (31.03.2014); Truworths (29.06.2014)

Five retailers were selected for more detailed case studies. This formed the basis of the business case research

FMCG RETAILERS CASH-BASED CLOTHING RETAILER

CREDIT-BASED CLOTHING RETAILER

FURNITURE RETAILER

Cash withdrawal Bill payments SASSA grant pay-

outs

Retail Savings Bonds

Go Banking credit card

Cash withdrawal Bill payments SASSA grant pay-

outs Money transfer

Savings book

Funeral insurance Accident insurance

Checkers Business Card (niche product)

Cash withdrawal Bill payments Money transfer Cross-border money

transfer

Lay-bye

Funeral insurance (off the shelf)

Free funeral cover with Pep Club

Personal loan

Funeral, Travel, Accident, Home owners, Household contents, Vehicle, Hospital cash plans, Credit life, Legal, Dental accident

Store credit Secured fixed term credit

Unsecured personal loans

Lay-bye

Credit life Asset insurance Funeral

insurance

Mobile Money Bank Account











STORE

Focus group research Survey

Five focus groups and approx. 1000 surveys conducted. This formed the basis of the user case research

FOCUS GROUPS SURVEY

Five focus groups were conducted to probe the decision process and purchase criteria for credit and insurance

Focus groups were held in Johannesburg, Cape Town and Empangeni (KZN)

To better understand why customers choose to use a retailer to send and receive money a survey was administered to people while in a queue waiting to conduct a money transfer

The majority of the surveys were conducted in Gauteng, though some surveys were done in East London, Umtata and Pietermaritzburg


User case Motivation for consumers to access financial services through

retailers

September 2014

#WhyRetailers

Agenda

Why we do the things we do

Credit and savings

Insurance

Money transfer

Classical economic theory predicts that consumers consider all alternatives available to them and make rational choices to select products that best meet their needs. In contrast behavioural economics highlights that decision-making is often fraught with irrationality

NONSTANDARD PREFERENCES

IMPERFECT OPTIMIZATION

BOUNDED SELF-CONTROL

THREE BROAD CATEGORIES OF PSYCHOLOGICAL BIASES

Consumers have limited attention and cannot focus on all of the information relevant for all of the decisions they are called upon to make

Consumers have limited computational capacity, which leads them to apply simplifying heuristics to complicated choice problems

Consumers’ reasoning is often biased

Discrepancy between the intentions consumers have and their actual behaviour

Consumers often plan to behave in a certain way but end up doing otherwise

They procrastinate, their choices may vary depending on their emotional state, and small barriers may in fact constitute significant deterrents to action

Consumer preferences are often context dependent

Individuals exhibit a bias toward the status quo. Their choices are sensitive to how decisions are framed.

They evaluate outcomes not in terms of absolutes but relative to (endogenous) reference points.

Classical economic theory predicts that consumers consider all alternatives available to them and make rational choices to select products that best meet their needs. In contrast behavioural economics highlights that decision-making is often fraught with irrationality

NONSTANDARD PREFERENCES

IMPERFECT OPTIMIZATION

BOUNDED SELF-CONTROL

THREE BROAD CATEGORIES OF PSYCHOLOGICAL BIASES

Consumers have limited attention and cannot focus on all of the information relevant for all of the decisions they are called upon to make

Consumers have limited computational capacity, which leads them to apply simplifying heuristics to complicated choice problems

Consumers’ reasoning is often biased

Discrepancy between the intentions consumers have and their actual behaviour

Consumers often plan to behave in a certain way but end up doing otherwise

They procrastinate, their choices may vary depending on their emotional state, and small barriers may in fact constitute significant deterrents to action

Consumer preferences are often context dependent

Individuals exhibit a bias toward the status quo. Their choices are sensitive to how decisions are framed.

They evaluate outcomes not in terms of absolutes but relative to (endogenous) reference points.

Hyperbolic discounting

A tendency to apply a higher discount rate to time periods

further in the future

Self-control bias

A tendency for people to focus on short-term and fail to focus

on long-term goals

Status quo bias

A tendency for people to stick with what they know even when

better options are available

Decision fatigue Sets in when an individual is

faced with complex decisions. This can lead to fast and

careless decision making or decision avoidance

Earmarking

Labelling money or credit for a specific purpose to aid with

money management

Anchoring

The tendency to rely heavily on the first piece of information offered

(the anchor), and use this to make all subsequent judgements

A guiding framework is based on the supplier’s proposition. How is this perceived and experienced by the customer? How does the customer assess the relative advantages of the offering compared to alternatives?

What are the primary characteristics of the product?

How is the product priced?

How is the product structured?

How does the product structure align with the customer motivation / need / purchase trigger?

Provider brand (who is the provider?)

How is the brand perceived?

How is the product marketed?

What are the primary messages?

Who qualifies for the product?

What distribution network exists?

Who sells the product / provides information / advice?

Where does this take place?

What mechanisms are used to promote the product in store?

How and where is the product serviced?

How are instalments / premiums collected?

How are claims lodged?

How are claims processed?

How is persistency encouraged?

What grace periods are offered?

What are the consequences of default?

How is default managed?

SAMPLE ISSUES

What is the underlying need?

WHY? WHAT? HOW?

Trigger Product features

Distribution, sales &

promotion Servicing

Branding & marketing

Persistency & Default

Agenda


Credit and savings

Insurance

Money transfer

We conducted four focus groups on credit; two on clothing and two on furniture

CLOTHING STORES FURNITURE STORES

Two focus groups were conducted with people who have a clothing store account in JHB

Age: 25 – 49 Black Personal income R2 000 – R6 000 Urban

One group included people with funeral insurance linked to their store account

The focus group discussions explored experiences of opening and using a store account. The discussions also explored why customers use store accounts instead of credit cards, other credit products or savings product

Two focus groups were conducted with people who had purchased furniture / appliances in the past 2 years

One group was held in Cape Town (personal income R2 000 – R6 000) and another in Empangeni which included people from more rural areas

The discussions explored how people purchased furniture and why they financed the purchase

General perceptions of purchasing through a furniture store were also investigated

Why do customers behave the way they do? Is there a choice hierarchy?

WHY? WHAT? HOW?



promotion Servicing



20

Why do customers behave the way they do?

WHY? WHAT? HOW?



promotion Servicing



21

The degree to which the underlying purchase is planned/ emergency or impulse impacts on the financing mechanism

Is credit a last resort or a preference?


WHY? WHAT? HOW?



promotion Servicing



22

The degree to which the underlying purchase is planned/ emergency/ Impulse impacts on the financing mechanism


Some customers need to create a credit history (see point on retailer risk tolerance)

Easier to access - retailers have higher risk tolerance


WHY? WHAT? HOW?



promotion Servicing



23


Costs of deferral / benefit of immediate ownership may be commensurate with the cost of credit





WHY? WHAT? HOW?



promotion Servicing



24



Costs of deferral / benefit of immediate ownership may commensurate with the cost of credit


Facilitates control (self and others)

Revolving vs term structure aligned with underlying seasonal purchase cycle for clothing

People are mostly aware of their lack of self-control and so try to select products that facilitate self-control or pre-commitment

“When you have taken furniture, you see what you have bought, when you have taken a loan

for money, you have it in your hand and end up wasting it on unnecessary things “

Empangeni, Furniture

FEATURES

Facilitator: How come? What’s with the credit card that you don’t like? Let me just try to understand this I will come to you guys but you are saying the word credit scared you? But a store card is credit?

R3: With the credit card yes I can buy clothes but now I can even stop at the shop and just buy ice cream with

the credit card

Johannesburg, Clothing store account

R8: Yah because you know with a credit card

the same as with a store card, you get

people who will exhaust their store card like

you know what! So imagine if you can’t

manage your cash flow and you have a

credit card. It’s not limited that you can buy

only at 1 store. You can go to the garage you

can go wherever so you see that’s the

difference. There is a limited side [with the

store card] and there is an unlimited side

with the credit card.


Johannesburg, Clothing store account respondents: R3 - Female, Married, One child; R8 - Male, single, One child Empangeni, Furniture respondents: R5: Female, Single, Four children, Works at a Salon

Control of spending within the households is also important

“It is a general thing. Women, what they see they want. Sometimes like babies. You have to put that control over

everything sometimes”

Cape Town, Furniture, male, married (Post Office teller)

FEATURES

R7 - Male, Married, Two children, Post Office teller


WHY? WHAT? HOW?



promotion Servicing



27






Revolving vs term structure aligned with underlying purchase cycle

Decision fatigue – effort to compare across competing credit product

Status quo bias


WHY? WHAT? HOW?



promotion Servicing



28



Active messaging and marketing of credit facilities

Status quo bias






Status quo bias


WHY? WHAT? HOW?



promotion Servicing



29



Active messaging Status quo bias






Status quo bias

Active messaging


WHY? WHAT? HOW?



promotion Servicing



30









Status quo bias

Active messaging

Limited active promotion of savings in store


WHY? WHAT? HOW?



promotion Servicing



31









Status quo bias


No active promotion of savings

Easier to access - retailers have higher risk tolerance

Incentivised sales people (furniture) Wide, accessible network of stores In-store promotions/ inducements Up-sell / cross sell opportunities

facilitated by continuous contact

There was a perception in the groups that it is easier to get credit from a retailer than a bank

You can go to a bank – the bank tells you that you

are in so many debt – so much debt – we can’t give you money, because they

check your data basis. You owe this one and you

owe that one

Facilitator: You talk about the credit act?

Yes. If you go to this furniture – they say no

problem man.

Cape Town, Furniture

SALES / PROMOTIONS

Facilitator: Why did you apply for store cards I get the feeling

that you want credit cards only?

R6: Before you just started working and you apply for a credit card, you don’t know. The credit

card was something big

R2: … Sometimes it is the fact that not everyone qualifies for a credit card but almost everyone

qualifies for a store card

Johannesburg, Clothing store account with linked insurance

R8: I think at the bank too they are not willing to take a risk like your account stores will

take, you know? Because they wouldn’t give you anything,

am I right?


Johannesburg, Clothing account with linked insurance: R2 - Male, Single, One child, Self employed; R6 - Female, Single, Two children, Self employed Johannesburg Clothing store account : R8 - Male, single, One child, Employed Cape Town furniture: R7 - Male, Married, Two children, Post Office teller

Consumers can choose across a range of alternative products, offered by various providers. Why do they choose the products they use?

10%

12%

15%

15%

16%

30%

32%

34%

Asset finance

Mortgage

Retail general

Retail furniture

Personal loans

Micro loan

Credit card

No other products

HAVE A RETAIL APPAREL ACCOUNT (10.8m)

5%

5%

11%

16%

18%

29%

34%

51%

Mortgage

Asset finance

Retail general

Personal loans

Credit card

Micro loan

No other products

Retail apparel

HAVE A FURNITURE ACCOUNT (3.2m)

Source: XDS data

OVERLAPS

10%

13%

17%

23%

24%

29%

34%

62%

Retail furniture

No other products

Retail general

Asset finance

Personal loans

Mortgage

Micro loan

Retail apparel

HAVE A CREDIT CARD (5.5m)

10%

11%

14%

17%

22%

37%

60%

Asset finance

Mortgage

Retail general

Retail furniture

No other product

Credit card

Retail apparel

HAVE A PERSONAL OR MICRO LOAN (6.9m)

53% 37% 10%

? (UNKNOWN)

47% 37% 16%

? (UNKNOWN)

43% 54% 3%

? (UNKNOWN)

37% 46% 18%

? (UNKNOWN)

SALES / PROMOTIONS

Penetration of clothing retail credit is particularly high in the middle market

34

RETAIL APPAREL

48%

(2.21)

38%

(2.37)

60%

(2.21)

30%

(1.63)

43%

(1.32)

PERSONAL INCOME

R30 000+

R15 000-R30 000

R10 000-R15 000

R3 500-R10 000

R1-R3 500

ADULTS 18+ (000’s)

383

1 512

1 851

6 393

13 283

2013

Source: Amps 2012B, Eighty20 analysis to determine imputed income where data is missing, XDS (July 2013)

Note: Adults with no personal income: 8 980 000

Note: An open account is one that has not been closed or has been written off, handed over, lapsed, revoked, repossessed, surrendered,

disputed in the last two years.

(Ave number of retail apparel accounts per

borrower)

SALES / PROMOTIONS

Fifty five per cent of those with furniture accounts earn less than R3 500

35

RETAIL FURNITURE

4%

(1.24)

7%

(1.40)

7%

(1.45)

15%

(1.46)

11%

(1.26)

2013

Source: Amps 2012B, Eighty20 analysis to determine imputed income where data is missing, XDS (July 2013)

Note: Adults with no personal income: 8 980 000

Note: An open account is one that has not been closed or has been written off, handed over, lapsed, revoked, repossessed, surrendered,

disputed in the last two years.

(Ave number of retail furniture accounts per

borrower)

PERSONAL INCOME

R30 000+

R15 000-R30 000

R10 000-R15 000

R3 500-R10 000

R1-R3 500

ADULTS 18+ (000’s)

383

1 512

1 851

6 393

13 283

SALES / PROMOTIONS

R2: They can persuade us very easily, I think they are trained to do that

R5: Sometimes they follow you out the store and ask you a lot of questions regarding what you saw and what you liked and they give you all the

options available to you

Facilitator: Why don’t you say no thanks and walk away?

R5: That is how they get paid, so they will try their best to persuade you because they earn by commission

R6: Sometimes when you say no they take your number and convince you over the phone, next thing you are buying something you don’t need

Empangeni, Furniture

In furniture stores sales people are good at pushing products

SALES / PROMOTIONS

Empangeni, Furniture: R2 - Female, One child, Accounting clerk; R5 - Female, Single, Four children, Works at a Salon; R6 - Male, Single, Four children, Not working


WHY? WHAT? HOW?



promotion Servicing



37









Status quo bias



Easier to access Incentivised sales

people (furniture) Wide store networks In-store promotions Up-sell / cross sell

opportunities

In-store payment preferred in many cases to debit orders – facilitates control

Retailers allow instalments to be paid in store as well as by debit order. Participants like being able to pay in store because they do not trust debit orders and it allows them some flexibility with the amount paid

Facilitator: Why not? Why did you not want anything to do

with a debit order?

Because I heard many stories that the shops is not two times. Then when you go to the shop they tell you many stories. It is

the bank, it is not us. I am going to pay it cash and I get a receipt. I know after 6 months I will say

these are the receipts

Facilitator: So it is about control?

Yes

Cape Town Furniture

SERVICING

R3: Before I used debit order, but now the thing is I saw accounts, that I don’t know, which are taking my money. Like you see every month R100 coming off. So I just decided I will

go and pay cash so I can see who is taking my money

Facilitator: How does it benefit you to go to the mall to pay your funeral premiums monthly?

R7: Just for going out, that’s the benefit. Going out, going to the mall

R4: Sometimes they want you to pay R400 and you only have R200 so you pay the R200 and you come see them again next

month. If you do a debit order, if its R400 then its R400

R: That is true the banks do that

Johannesburg, Clothing store account with linked insurance

Johannesburg, Clothing account with linked insurance: R3 - Male, Married, Two children, Employed; R4 - Female, 25, Single, One child, Works at MR Price R7 - Female, Single, Two children, Self employed Cape Town, Furniture: Male, Married, One child, Employed


WHY? WHAT? HOW?



promotion Servicing



39









Status quo bias



In-store payment preferred in many cases to debit orders – control

Clothing retailers perceived as less aggressive with late payments

Naivety wrt to delinquency

Fear of repossession (loss aversion)



opportunities

Credit bureau data indicates the number of borrowers who are at least 90 days in arrears on their worst performing account across various product types

CREDIT CONSUMERS (July 2013, Millions)

4.3 2.5

1.0 0.7 1.4 0.6 0.1 0.1

6.4

3.0 4.5

2.5 1.8 1.9 2.3 1.6

Retailapparel

Micro loan Credit card Other * Retailfurniture

Personalloan

Mortgage Assetfinance

IN ARREARS NOT IN ARREARS

Source: XDS data

* Other includes “Retail General” or “Financial Other”

% In arrears (90+ days) 40% 45% 19% 22% 44% 23% 6% 5%

5.5 5.5

3.2 3.2 2.5 2.4

1.7

10.8

DELINQUENCY

In the clothing account focus groups, banks are perceived as being far more aggressive with late payments. One respondent likened bank to mashonisas and retailers to an aunt they owe money to

DELINQUENCY

R4: Banks they don’t play. If they want their money they want their money. If you’re not paying and you’re working then a

garnishee. If you’re not working then they repossess whatever that you have, whether you’ve got a fridge or

whatever the sheriff will take it

Facilitator: How is the bank different from retail stores?

R4: The retailers are easy

Facilitator: I hear you say banks are like mashonisa, so who would retail stores be like then?

R7: It is like my mum.

R4: My aunt, I know I have to pay my aunt, I’ll pay her when I’ve got money

Johannesburg, Clothing account with linked insurance

Johannesburg, Clothing account with linked insurance: R4 - Female, 25, Single, One child, Works at Mr Price; R7 - Female, Single, Two children, Self employed

Some participants did not seem to understand the implications of missing a payment and so perceived the furniture stores as being unreasonable

Yes. What was irritating about that – every end of the month they call you or SMS you? They send you letters. Like now you are forgotten. You

know you have a credit. You owe someone money. You don’t have that money. That is why you can’t pay but they keep on calling

Facilitator: What do you say to them when they call you?

I go there and tell them I wasn’t paid – every 30th I was supposed to make payment. From the 15th I know I don’t have money. I call on the 25th and

talk to the store manager. This month I won’t be able to pay

Facilitator: You physically went into the store at Ellerines?

Yes

Facilitator: How did they treat you?

R4: They say okay it is fine. When can we expect money? I say next month. Fine, but next month you find it went up. They didn’t even stop it because you came and explained to them that you don’t have money or

you won’t have money


DELINQUENCY

Cape Town, Furniture: R4 - Male, Single, No children


WHY? WHAT? HOW?



promotion Servicing



43









Status quo bias




Clothing retailers perceived as less aggressive with late payments

Naivety wrt to delinquency

Fear of repossession (loss aversion)

TRUST



opportunities

Agenda


Credit and savings

Insurance

Money transfer

Insurance can be linked to a store account or sold as a stand alone product

INSURANCE FOCUS GROUPS

CREDIT-LINKED INSURANCE OFF-THE-SHELF INSURANCE

Questions on insurance were asked in all credit retailer focus groups

One group on individuals with funeral insurance linked to their clothing account: Age: 25 – 49 Black Personal income: R2 000 – R6 000 Urban

A focus group with people who have purchased funeral cover from Pep was held in Empangeni, KZN

In the case of linked insurance, the timing of the purchase has a significant effect on the user case

CREDIT-LINKED INSURANCE

ACCOUNT

APPLICATION

DELIVERY OF

PRODUCT

ONGOING

SERVICING

INSURANCE INSURANCE

When insurance is sold as the customer is applying for an account, the customer’s primary focus is to qualify for the account. The perception was that signing up for linked insurance would improve the probability of qualification

R7: Sometimes there is a feeling – when you go to these people – I think in your mind comes something – these people want to

decline you first of all. That is what goes into your mind. I might just go there. People are going to decline me. Now you come and you sit in front of this friendly guy. He tells you – he cracks jokes with you and everything … bla-bla-bla… you are

still thinking oh man – I just want to get this thing. All of a sudden they come to you and say – it is fine. We are going to

give you the bed. Huh? Okay. Now whatever this guy is saying to you is okay. This guy is doing me a big favour.


Cape Town, Furniture: R7 - Male, Married, Two children, Post Office teller

Customers are so focussed on applying and qualifying for a store account that at the time of application decision fatigue may play a role in the user case for linked insurance

R2: Because a lot of times you just want the account to be approved, you just put everything and sign

…

R4: Same with me because I just wanted the account, so they say funeral I said yes, they say if you die that account will be paid out by the insurance, it wasn’t necessarily something

that I sat and thought about, it was just a then there decision, please approve me and give me what I want


Johannesburg, Clothing account with linked insurance: R2 - Male, Single, One child, Self employed; R4 - Female, 25, Single, One child, Works at MR Price

In contrast, various factors influence the decision to purchase insurance when it is sold as a stand alone product

WHAT? HOW?

Product features


promotion Servicing



Purchase of insurance is no longer a secondary decision when it is purchased once the customer already has a store account or when it is purchased off the shelf

Very affordable premiums

Principally used as top up cover to match rising costs

WHAT? HOW?

Product features


promotion Servicing



Edgars Premiums Personal funeral plan: R22.50 pm

for R10 000 cover Family funeral plan: R37.50 pm

for R10 000 cover

Pep Premiums Family funeral plan: R49.99 pm

for R9 000 cover (Covers you, your partner and up

to 5 children)

The data does show that funeral cover from a shop is very rarely used as standalone cover

EVER HAD FUNERAL COVER FROM A SHOP

(1.6 mill)

EVER BEEN A MEMBER OF A BURIAL SOCIETY

(9.5 mill)

EVER HAD FUNERAL COVER BUT NOT FROM A SHOP (17.1 mill)

FUNERAL COVER OVERLAPS

16% 42%

35% 6%

11.3 mill

4.2 mill 4.6 mill

Source: FinScope 2013

Note: Bubbles are not to scale

Only 16% of those that have

ever had funeral cover from a

shop have only ever had

funeral cover from a retailer




WHAT? HOW?

Product features


promotion Servicing



Typically sold via outbound telephone campaigns. Sign up is immediate and no additional data is required

Purchasing insurance from a credit retailer is easy. The retailer calls the customer and if the customer agrees there is no additional work to activate the policy as it is linked to the store account

SALES / PROMOTIONS

Facilitator: Okay, which one was the easiest to open in funeral covers looking at what you’ve got, which one was the

easier one to open [the funeral cover from an insurance company or a retailer]?

R (multiple): Store one

(Most agree)

Facilitator: How come it was the easiest, you guys say Clientele pays the most but not the easiest to open, what

makes it easier?

R5: You are there in their database, if you are a loyal customer they call…

R4: Unlike the other ones you go to them


Johannesburg, Clothing account with linked insurance: R4 - Female, 25, Single, One child, Works at MR Price; R5 - Female, Single, Children, Works as a teacher




WHAT? HOW?

Product features


promotion Servicing




Starter pack is simple to purchase. Follow up call to gather data




WHAT? HOW?

Product features


promotion Servicing





Premiums added to outstanding balance





WHAT? HOW?

Product features


promotion Servicing







Cash payment preferred to debit order - control

Can pay up to 12 months of premiums in advance

Being able to pay in cash in store and, in the case of Pep, being able to pay premiums in advance are viewed as key advantages

R5: … I like that I can go to the store and pay the policy in cash

R: Yes I also like that I pay in cash

Empangeni, Pep funeral cover

R8: I signed up with the PEP policy because I was at home, not working anymore, so I knew that I could afford the PEP policy because it was only R60 so I have no problem with paying that. If I

have surplus money then I pay 3 or 4 months in advance for the policy

Empangeni, Pep funeral cover

SERVICING

Empangeni, Pep funeral cover: R5 - Female, Single, No children, Not working; R8 - Male, Divorced, Pensioner




WHAT? HOW?

Product features


promotion Servicing









Perceived to be more flexible than insurance companies (if account is in arrears cover is still in place)

Customers perceived retailers to be more flexible than insurance companies and felt that retailers gave them significant leeway before the policy would lapse

DEFAULT

R1: I heard that from people, information that you get sometimes, from the store that even if you miss an

instalment they will give you space

M: Is it the same for all of you guys?

R4: The Clientele or the private ones, if you miss more than one instalment they don’t pay, the Jet, if you don’t

pay your account for 3 months it stays there until you come and pay, they will deduct your instalments

money, but it doesn’t lapse, the other does, as long as you still have your account

Johannesburg with linked insurance

Johannesburg, Clothing account with linked insurance: R1 - Male, Married, Children, Works at Mr Price; R4 - Female, 25, Single, One child, Works at MR Price




WHAT? HOW?

Product features


promotion Servicing









Perceived to be more flexible than insurance companies (if account is in arrears cover is still in place)

Agenda


Credit and savings

Insurance

Money transfer

The money transfer landscape

BANK ACCOUNT

FNB e-wallet

ABSA CashSend

Nedbank Send iMali

Standard Bank Instant Money

Mpesa

CELLPHONE BASED

Shoprite/ Checkers/ Usave

Pick n Pay/ Boxer

SPAR

Pep

RETAILER

Send money with a relative or friend

Taxi driver

INFORMALLY

Post office

Western Union

Money Gram

OTHER FORMAL

MONEY TRANSFER

A number of retailers offer a money transfer service. Shoprite was the first retailer to offer money transfers in 2006 and they are thought to be the dominant provider

RETAILER TRANSFER

SERVICE BANK

MOBILE MONEY

MONEY TRANSFER

INSTANT MONEY

MONEY TRANSFER

TYME (Bank of Athens)

CAPITEC BANK

STANDARD BANK

ABSA

Sender*: MTN customer: R4

non MTN customer: R5 Receiver: R4.00

Both sender and receiver must have a mobile money account

Sender: R9.99

Sender: R9.95

Sender: R9.99 Sender must be a

member of the Pep Club

COST

Note*: Assumes that the sender needs to deposit money in at the till at a cost of R4.00 to the sender

& BOXER

USAVE & CHECKERS

Eighty20 conducted a survey with people standing in the Shoprite Money Market queue

985 TOTAL SURVEYS

COMPLETED

SURVEY LOCATIONS

13

32

36

37

44

44

47

48

53

68

69

89

97

151

157

Katlehong, JHB

Umtata

Doornfontein, JHB

Randburg, JHB

Alexandra, JHB

Amalinda, East London

Sancardia centre, Pretoria

Hillbrow, JHB

Cosmo City, JHB

Church St, PMB

Germiston, JHB

Soweto, JHB

Dobsonville, JHB

Eloff street, JHB

Springs, JHB

51% 49%

24%

28%

25%

12%

11%

<25

25 - 29

30 - 39

40 - 49

50 - 59

BLACK

COLOURED

OTHER

93%

6%

1%

0%

7%

10%

25%

8%

12%

37%

The dominant source of income for those who send is salaries paid by a company. Those who send are more likely to be male

SEND ONLY RECEIVE ONLY SEND AND RECEIVE

1%

5%

8%

10%

10%

13%

52%

2%

16%

8%

33%

11%

7%

23% Salary paid by a company

Profits from own business

Piece jobs Money from friends/ family

Salary paid by a person Government pension/ grant

Other

92% 85% 88% Have a bank account

42% 58% 57% 43% 52% 48%

81% of those that receive a salary or grant, receive it into a bank account Source: Eighty20 Money Transfer Survey

33% 37% 30%

These photos were taken on the 19th and 21st of March at the Shoprite in Germiston Mall, Johannesburg

WEDNESDAY MARCH 19 11:12

WEDNESDAY MARCH 19 14:24

FRIDAY MARCH 21 (HUMAN RIGHTS DAY) 10:46

66

Source: Eighty20 Money Transfers Survey

Queuing times for money transfer services can be long

3%

9%

21%

28%

14% 15%

9%

HOW LONG DO YOU WAIT IN THE QUEUE ON AVERAGE?

49% of those surveyed said they had left the store without conducting a money transfer because the queue

was too long

<10 mins 10 – 19 mins

20 – 29 mins

30 – 44 mins

45 – 59 mins

60 – 89 mins

90 mins+

Source: Eighty20 Money Transfer Survey

Senders with a bank account choose to use the Shoprite money transfer service primarily because the receiver does not have a bank account

WHY DON’T YOU SEND THE MONEY BY YOUR BANK ACCOUNT? (Use service to send money, have a bank account)

38%

RECEIVER DOES NOT HAVE A BANK ACCOUNT

In many cases both parties to the transaction are banked

44%

39%

16%

69% 9%

22% Yes Yes

No

Don’t know Don’t know

No

DOES THE PERSON YOU ARE SENDING TO HAVE A BANK ACCOUNT?

DOES THE PERSON YOU ARE RECEIVING FROM HAVE A BANK ACCOUNT?

Both parties banked: 41%

Both parties banked: 59%

69

Source: Eighty20 Money Transfer Survey

SENDERS RECEIVERS

Senders with a bank account choose to use the Shoprite money transfer service primarily because the receiver does not have a bank account and they perceive bank transfers as being more expensive


38% 36%

BANKS ARE TOO EXPENSIVE


Depending on the account and the method used, the cost of sending and receiving a transfer through a bank account varies widely

CAPITEC ACCOUNT

ABSA MZANSI ACCOUNT

Deposit money

Branch R1.15 / R100 R13.00

Cash accepting ATM 55c / R100 R5.20

Transfer

Branch R3.20 R33.00

Telephone - R7.00

Access cash

Branch - R13.00

ATM R4.60 R5.20

POS R1.05 R3.95

71

CAPITEC ACCOUNT

ABSA MZANSI ACCOUNT

Deposit money

Branch R1.15 / R100 R13.00

Cash accepting ATM 55c / R100 R5.20

Transfer

Branch R3.20 R33.00

Telephone - R7.00

Access cash

Branch - R13.00

ATM R4.60 R5.20

POS R1.05 R3.95

Depending on the account and the method used, the cost of sending and receiving a transfer through a bank account varies widely

To transfer R500 Capitec Sender: R3.20 – R8.95 Receiver: R1.05 – R3.20 ABSA Mzansi Account: Sender: R7 – R59 Receiver: R3.95 – R13

72

Senders with a bank account choose to use the Shoprite money transfer service primarily because the receiver does not have a bank account and they perceive bank transfers as being more expensive


38% 36% 18%

MONEY CAN BE ACCESSED IMMEDIATELY

BANKS ARE TOO EXPENSIVE


EASIER TO USE SHOPRITE TRANSFER SERVICE

BANKS ARE FAR AWAY

BANKS CLOSE EARLY

DON’T KNOW HOW SEND MONEY VIA BANK ACCOUNT

16% 12% 9%

3%

Almost one in five respondents did not know of any alternative options for transferring money

24%

18%

17%

11%

10%

10%

5%

4%

3%

2%

2%

1%

1%

19%

Pick n Pay

SPAR

FNB e-wallet

Pep

Checkers

Absa Cash Send

Standard Bank Instant Money

Mzansi money transfers (Post office)

Send the money with someone you know

M-pesa

Other

Boxer store

Send the money with a taxi driver

Don't know any

DO YOU KNOW OF ANY OTHER WAYS YOU COULD SEND OR RECEIVE MONEY?

Retailers

Cellphone based services

Other services

Informal methods

74


Business Case Why do retailers offer financial services?

September 2014

#WhyRetailers

Agenda

Primary motivations for offering financial services

A closer look at furniture retailers

Aside from the direct financial gain from financial services, there are three primary drivers for retailers to offer financial services

$ $ $

INCREASING FOOTFALL DRIVING MORE PROFITABLE BEHAVIOUR

LEVERAGING EXISTING INVESTMENT

Attracting new customers into the store

Increasing the number of interactions with existing customers

Encouraging customers to increase basket size

Incorporating higher margin products into baskets

Retailers can leverage their physical store networks, payments infrastructure, brand name and client data to sell financial services

PRIMARY MOTIVES FOR OFFERING FINANCIAL SERVICES

Primary motives for offering financial services: Increasing footfall

$ $ $









Retailers can increase footfall by increasing client acquisition or by increasing the number of interactions with customers

INCREASE FOOTFALL

1. Increase client acquisition

2. Increase the number of interactions with clients

Retailers offer financial services that are in demand within their target markets in order to draw more customers into the retail environment more frequently

STORE

STORE

Retailers offer financial services that require customers to come into store monthly to pay premiums and instalments

Transactional services offered by FMCG retailers and Pep

Credit and insurance products that require customers to go in-store monthly to pay premiums

“Money Market forms part of the Group’s non-core value-added

strategy aimed at increasing consumer traffic in its stores.

The main focus of the services offered is adding value to consumers’ shopping experience by providing convenience and

saving the consumer time, so turning outlets into destination stores”

- Shoprite Annual Report (2007)

Shoprite Money Market counters

According to Eighty20’s Money Transfer survey 18% of respondents said that they always buy something in store when conducting a money transfer. Those who receive are most likely to say they always purchase

24%

15%

15%

64%

72%

70%

13%

13%

16%

Receive only

Both send andreceive

Send only

Always Sometimes Never

DO YOU BUY SOMETHING IN STORE WHEN YOU COME TO SEND OR RECEIVE MONEY?

13% of those surveyed had not visited the store before they

offered money transfers

Shoprite estimates that 50% of their shoppers make use of the

Money Market counter

In-store servicing models for convenience-based services differ. There is a clear trade-off between delivering high convenience to the financial services client by offering services at till point, and negatively impacting the shopping experience of the ‘next in line’ customer

Negatively impact on the shopping

experience of other customers

Offering high convenience for

financial services

CONVENIENCE AND IN-STORE SERVICING MODELS

Retailers offer services at the till point (Pick n Pay and Pep, or at a separate financial services counter (Shoprite)

Facilitating SASSA grant pay-outs ensures feet in-store; Pick n Pay capitalises on this by offering direct incentives for grant recipients to spend in store

Increasing footfall: When being a destination store backfires

Primary motives for offering financial services: Driving more profitable behaviour

$ $ $









Retailers have adopted various approaches to drive behaviour using financial services

DRIVE MORE PROFITABLE BEHAVIOUR

1. Increase basket size

2. Sale of higher margin products

Retailers incorporate thresholds that customers must meet before they can use financial services

Access to financial services is conditional on purchase of a specific good

Pep customers must spend R50 in-store to withdraw cash from the till

Pep Club’s free funeral cover is dependent on air time usage

The provision of credit allows customers to purchase goods and pay back over time

Furniture and credit-based clothing retailers facilitate sales through credit

CLUB

Example: Pep Club

Pep Club’s free funeral cover is specifically linked to the

customer’s purchase of airtime and the length of time that the

sim card has been active

To encourage take up of the club only club

members are able to make use of the money

transfer services

To join the Pep Club customers must

purchase a sim card at Pep

Example: Pep Club

Pep Club’s free funeral cover is specifically linked to the

customer’s purchase of airtime and the length of time that the

sim card has been active

To encourage take up of the club only club

members are able to make use of the money

transfer services

Average airtime usage

Months sim activated

R0-R50 R50-R75 R75-R150 R150-R500 R500+

0-6 months Accident cover of R500 only

Accident cover of R500 only




7-12 months R0 R750 R1 000 R1 250 R1 500

13-24 months R0 R1 500 R2 000 R2 500 R3 000

25-36 months R0 R2 500 R3 00 R3 500 R4 000

37 months + R0 R3 500 R4 500 R5 500 R6 500

Drives persistency and higher spend

$ $ $









Primary motives for offering financial services: Leveraging existing investment

Retailers can generate revenues at low marginal cost by leveraging existing infrastructure

Physical store networks

LEVERAGE EXISTING INVESTMENT

Trusted brand Existing payments

infrastructure Client data

Communication platform

The physical footprint of a retail chain enables delivery of financial services such as money transfers

Retail chains that have been operating for many years have trusted brands that they can leverage when selling financial services

Client data collected through application for credit or loyalty programmes facilitates the on-selling of additional credit and insurance products

Payment and collection platforms used in the core retail business can leveraged to offer financial services to clients

Retailers often have existing lines of communication to their customers through club newsletters and magazines

Retailers can generate revenues at low marginal cost by leveraging existing infrastructure

LEVERAGE EXISTING INVESTMENT

Client data

Client data collected through application for credit or loyalty programmes facilitates the on-selling of additional credit and insurance products

Client Data

Client Data

Informs

Generates Informs

Generates

Merchandise

Financial services

Examples:

PICK N PAY PEP

Pep uses its extensive physical footprint to facilitate its money transfer service A large number of Pep stores are located in rural areas with limited access to banking infrastructure

Pick n Pay was the first retailer in South Africa to introduce secure, PIN-based Electronic Funds Transfer at Point-of-Sale (POS) in 1989

This enabled customers to use their debit cards to purchase groceries

This technology has been leveraged to offer cash withdrawals at POS and SASSA withdrawals

Edcon has utilised client data and credit infrastructure to offer a wide range of insurance products. The Edgars and Jet Club magazines are the perfect communications platforms to advertise these insurance products

In 2012, Edcon had 3.8 million credit accounts…

… as well as payment and collections platforms required for credit

Client data

Existing payments infrastructure

The Edgars and Jet Club magazines have a combined readership of 5.4 million*

10 insurance products

5.6 million active policies (2012)

R739 million in profits (March 2014)

Communication platform

EDCON

Source*: AMPS 2012

Agenda

Primary motivations for offering financial services

A closer look at furniture retailers

Furniture sales have declined in real terms

R 3 546 R 3 590

R 4 230 R 4 536 R 4 640

R 4 055

R 0

R 500

R 1 000

R 1 500

R 2 000

R 2 500

R 3 000

R 3 500

R 4 000

R 4 500

R 5 000

01

20

08

04

20

08

07

20

08

10 2

00

8

01

20

09

04

20

09

07

20

09

10 2

00

9

01

20

10

04

20

10

07

20

10

10 2

010

01

20

11

04

20

11

07

20

11

10 2

011

01

20

12

04

20

12

07

20

12

10 2

012

01

20

13

04

20

13

07

20

13

10 2

013

01

20

14

04

20

14

Retailers in household furniture, appliances and equipment trade sales (R Million, Constant prices)

R M

illio

n

Source: Stats SA retail trade sales

Consumer credit markets have performed poorly with most recent data highlighting noticeable deterioration in performance, particularly in the unsecured category

Source: NCR Note: Non-performing credit is classified as being more than 90 days in arrears

16%

20%

8% 8%

0%

5%

10%

15%

20%

25%

20

08

-Q1

20

08

-Q3

20

09

-Q1

20

09

-Q3

20

10-Q

1

20

10-Q

3

20

11-Q

1

20

11-Q

3

20

12-Q

1

20

12-Q

3

20

13-Q

1

20

13-Q

3

20

14-Q

1

Per

cen

tag

e o

f g

ross

deb

tors

’ bo

ok

Non-performing unsecured credit

Non-performing credit facilities

Percentage non-performing* book by value (Unsecured credit and credit facilities, 2008 Q1 – 2014 Q1)

Percentage non-performing* book by volume (Unsecured credit and credit facilities, 2008 Q1 – 2014 Q1)

19%

29%

6%

12%

0%

5%

10%

15%

20%

25%

30%

35%

20

08

-Q1

20

08

-Q3

20

09

-Q1

20

09

-Q3

20

10-Q

1

20

10-Q

3

20

11-Q

1

20

11-Q

3

20

12-Q

1

20

12-Q

3

20

13-Q

1

20

13-Q

3

20

14-Q

1

Per

cen

tag

e o

f g

ross

deb

tor’

s b

oo

k

Non-performing unsecured credit

Non-performing credit facilities

Many see the deal with Ellerines as having played a significant role in Abil’s decline. The strategic rationale for that deal was primarily around access to channel for the bank

0

500

1000

1500

2000

2500

3000

3500

4000

4500

03-Jan-05 03-Jan-06 03-Jan-07 03-Jan-08 03-Jan-09 03-Jan-10 03-Jan-11 03-Jan-12 03-Jan-13 03-Jan-14

ABIL makes an offer

to acquire the entire

issued ordinary share

capital of Ellerines

ABIL acquires

Ellerines for R9.2

billion

Moody’s

downgrades

African

Bank’s

global and

local credit

ratings

Ellerine Furnishers Proprietary

Limited commences voluntary

business rescue

Trading update

released: Ellerines

NPL’s were 37.7% of

gross advances at 31

December 2008

ABIL enters into

negotiations regarding

the possible disposal of

Ellerine Holdings

Limited

Moody’s downgrades

African Bank’s global

and local credit

ratings

ABIL placed under curatorship ABIL SHARE PRICE

ABIL

announces it

has entered

into

negotiations

regarding the

possible

disposal of

Ellerine

African Bank wanted more borrowers and Ellerines was after sales, which would be boosted by a new range of

credit products. The huddle between retailing and banking was hailed as revolutionary

- Financial Mail

Shares in African Bank Investments Limited (Abil) soared on Monday as investors bought into the

hope that Abil would be able to get rid of Ellerines, its troubled retail furniture unit

– Business day

The JD Group’s consumer finance division has gone from generating more than half of the Group’s operating profit in FY2012 to generating a loss of R2 billion in FY2014

488 760

197 383

1185

-214 -188

-1976

234

-2 000

-1 500

-1 000

-500

0

500

1 000

1 500

Op

erat

ing

pro

fit

(Rm

)

Source: JD Group Annual Financial Statements for the year ended 30 June 2012 & 2013. JD Group Audited Financial Results 2014. Note: *Retail includes furniture retail, HiFi Corporation, Incredible Connection and Steinbuild

JD Group (Operating profit by division, FY2012 – FY2014)

The gross loan book increased by only R910 million (FY13: R2,5 billion) to R10,6 billion (FY13: 9,7 billion), highlighting the effect of stricter lending criteria together with the decision to cease the granting of personal loans - JD Group Results FY2014

2012

RETAIL CONSUMER FINANCE OTHER

2013 2014 2012 2013 2014 2012 2013 2014

The increase in the gross loan book of R2.5 billion in FY2013 was matched by a R2.5 billion increase in provisions in FY2014

405

12

1 300

505 409

2 500

841

2500

910

0

500

1 000

1 500

2 000

2 500

3 000

R m

illio

ns

Source: JD Group Annual Financial Statements for the year ended 30 June 2012 & 2013. JD Group Audited Financial Results 2014.

JD Group (Debtors’ cost and change in gross loan book, FY2012 – FY2014)

2012 2013 2014 2012 2013 2014 2012 2013 2014

BAD DEBTS WRITTEN OFF CHANGE IN IMPAIRMENT

PROVISION CHANGE IN GROSS LOAN BOOK

JD’s financial position has had a significant downturn since the writing of the supply side report in 2013. The business case for its credit offering no longer seems relevant given the Group’s decision to divest its Consumer Finance division

The deteriorating financial position of the over-geared target market consumer adversely affected the performance of the Consumer Finance division during the year. This negatively impacted collections and the overall quality of the book - JD Group Results FY2014

Agenda

Introduction

User case

Break

Business case

Summary and Conclusions

This phase of the research focused on assessing the rationale for customers to adopt, and retailers to provide, financial services. There are some implications for banks, insurers and retailers

$ $ $

BANKS

Is the success of retailers in the transfer space an indictment on banks?

Can banks offer immediate fulfilment ? Can they simplify their pricing?

To what degree have wallets taken market share away from retailers? Or is there a status quo bias in favour of retailers that will be difficult to shift?

Debit orders are widely distrusted. Surely we cannot have a mechanism that undermines trust in a system built on trust.

Interoperability and access can be limited by retailers – they don’t have a social mandate. Forcing one on them may simply result in their exit. Is there a risk of cherry picking?

Are (some) retailers easier to trust because they are easier to touch?

Stark differences in perceptions of furniture retailers compared to clothing retailers. Repossession may be rare but it doesn’t take many events to erode trust

RETAILERS

Retailers offer a critical additional channel given mistrust of debit orders, flexibility of premium payment

Does this relegate the insurer to a back office role? Who owns the customer?

Customers were aware that there was an insurer in the background. Both brands were important

INSURANCE COMPANIES

The study did not explore the impact on and implications for financial inclusion more holistically. There are critical issues to explore – particularly with regard to credit

Retailer offers

credit to support

high margin

merchandise sales

Retailer leverages

infrastructure to

offer insurance

and other credit

Merchandise

margin + credit

margin +

insurance margin

increase yield

Higher yield

supports higher

risk tolerance

Retailers offer

access to credit to

borrowers who

otherwise would

not qualify

Deserving

customers are

discovered by

retailers broadening

credit markets

High rates of

indebtedness and

high rates of

default in borrower

base

Impact on

borrower risk

profile and

vulnerability to

shocks

Impact on borrower

credit journey and

ability to access

secured credit to

build assets

Impact on credit

market stability,

social stability and

tolerance of

delinquency

RETAILER

CUSTOMER

SOCIETY / CREDIT MARKETS

Impact on trust

and brand – not

nice to be

hounded when you

can’t pay

Relatively high

default is expected

and priced in (not

always)

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