Manx Financial Group Plc (LON:MFX) Chief Executive Officer Douglas Grant caught up with DirectorsTalk to discuss subsidiary, Conister Bank Ltd exclusive strategic partnership with Fiinu to launch an innovative overdraft product in the UK.
Q1: Douglas, could you give us an outline of the agreement that was announced today?
A1: We’ve been in discussion with Fiinu about white labelling the overdraft product since January/ February. The agreement that was signed is the Management Services Agreement and that’s an agreement which basically outlines the key terms as to what will be delivered and how it will be delivered to us to enable us to start marketing and selling this.
It’s quite unique, this overdraft product. It’s very much app-driven, it’s on your phone, there’s a lot of AI built within it. So, if you like, at Conister we’ve got plenty of liquidity in customers, it gives us another option in terms of taking a technological leap forward and at the same time bringing something to our customers, which we know there’s a need for.
Q2: How does the Fiinu offering fit into the group’s suite of services?
A2: If we take a step back slightly, maybe we need to talk about the group. What we have is, within Conister Bank, a business that’s 90 years old. It’s got a banking licence on the Isle of Man, same banking licence as HSBC, Barclays, etc. It also has a branch banking licence in the UK, which we got a couple of autumns back.
So, what we have is great access to pools of liquidity and what we do is we raise that liquidity and deploy it into key markets in the UK. The markets that we’re particularly interested in at the moment are markets which have been fundamentally impacted by the cost-of-living crisis, which is impacting both the disposable income levels of SMEs and retail customers alike. So, we’re interested in short-term lending products because we understand that longer-term lending products, and you’re seeing it at the moment, the large banks are pulling in because of uncertainty. We all fully expect the Chancellor’s autumn statement to have tax rises and there’ll be more pressure on disposable income.
So, what we’re interested in is what is the product that would really suit a customer during these turbulent times? In short-term lending, it sees more of an unexpected invoices.
We’ve got one business which is one of the largest buy-now-pay-later suppliers to the automotive repair industry and an example I often use, if you maybe take a car into a repair shop, it needs four new tyres that’s £1,000 and you’re not expecting to pay that much this month. What we have is a product within Payment Assist Limited, which basically says, well, you pay a quarter of it today and over the next three months, you pay another £250 in each of the three months. So, over the four months, the customer’s paid £1,000. It’s an interest-free product and what happens is the garage gives us a discount on the bill and that’s our yield. What the garage gets in return is the cash up front and we, quite rightly, as the lender, take the credit risk. Garages shouldn’t really be in a position of having to deal with credit risk.
So, those short-term products, also such as premium finance, we all have life insurance, house insurance, contents insurance, car insurance. We can bundle all that admin up, as I like to call it, and if we can fund that through short-term lending and just spread the bill, that makes it easier for everybody.
This overdraft product falls into that same category. It’s a short-term product and it’s just to help customers when they feel the pinch, if they need an overdraft, to be able to quickly access an overdraft and go on with their daily life.
So, a lot of our products at the moment are really focused in on the customers and SMEs dealing with the hardship that is currently around because of their economic environment they’re all living in.
Q3: Why do you believe Fiinu to be the right partner for Manx Financial Group?
A3: We looked at a few businesses that were offering an overdraft type of product. What I liked about Fiinu was its AIM-listed, so you know it’s got a set level of governance built within its organisation. The principal shareholder, good background in this market and the product itself, when I got a demo on it, it looked quite intuitive, it looked easy to use.
We’ve done a lot of due diligence on the technology because that’s the biggest risk probably in this transaction so they ticked a lot of the boxes that we would look for in terms of de-risking our entry into the sector.
Q4: Why do you feel that the time is right now for the group to enter into this sort of agreement?
A4: As I said, the economic environment is pretty rubbish for a lot of people. There’s a lot going on in the world at the moment. The cost-of-living crisis is probably an expression that we’re not hearing this much, but it’s still there, and this overdraft product will just enable the average person to be able to deal with the bumps in the road that life throws up to them.
Q5: How do you see this product fitting into Manx Financial Group’s longer-term growth plans? Can you tell us more about those plans?
A5: We are quite unique. We’ve got a lot of liquidity that we can raise.
There’s 350 licensed banks in the UK, there’s 11 clearing banks, that means over 300 banks bank for a bank in the UK. The interesting opportunity for me is there’s over 3,000 non-bank lenders, these could be market sector-specific, could be geographically specific, but these are non-bank lenders who raise the liquidity from receiving facilities from businesses such as us or from high-net-worth.
What we are interested in doing is developing our brand and connecting our liquidity into these non-bank lenders. If you look at our history over the last dozen years, we’ve made 12/13 investments into these businesses because there have been sectors that we like that have proven to be resilient over the last few years. They may well be that we want to gain more market share in that sector, hence the reason we buy into the businesses. Or it may be that these businesses are start-ups and are in sectors that we’d like to be in and just putting the debt in alone doesn’t give us a return that’s suffice for the risk. So, we look at taking equity, and we take options, etc. as well.
So, whilst we’ve got a highly regulated banking environment and four FCA licences within the group, we also have an entrepreneurial side to the group outside the banking regime, which is where we house and look for these investments.
