Credit Intelligence is adopting a three-pronged strategy for growth, as the economy recovers from the pandemic and a new landscape emerges.

There was plenty of momentum in the stock market last year, following an initial COVID-19 driven crash in March.

But as the global economy emerges from the pandemic,  government support programs are gradually being rolled back.

For ASX companies like Credit Intelligence (ASX:CI1), that scenario could actually translate to more business.

CI1 focuses on the financing and debt restructuring solutions to small and medium enterprises (SMEs) and individuals, covering the markets of Hong Kong, Singapore and Australia.

These SMEs in particular could be looking for alternative sources of funding as government support dries up.

Stockhead caught up with recently-hired Credit Intelligence COO, Will Banks, and asked him what the rest of 2021 would hold for CI1 against this backdrop.

Hailing originally from England, Banks has over 20 years’ finance and banking experience, and has worked in Europe and Australia with global banks such HSBC, Banco Santander, and Deutsche Bank.

He was also the first migrant from Europe to be granted permanent residency in Australia via the Distinguishing Talent Visa Program, which recognised his international reputation within the fintech sector.

“Credit Intelligence reacted in an agile and decisive way to the pandemic, and we’ve taken an approach to seize opportunities during the pandemic,” Banks told Stockhead.

“This has enabled us to be well placed to capitalise more effectively on opportunities arising in post COVID-19 recovery.”

In Australia, he points to the deregulation of the responsible lending laws, which would make doing business easier for companies like CI1 as the new requirements are less stringent.

The government had announced that it would be stripping responsible lending laws out of the Credit Protection Act, which would now put the onus on borrowers, not lenders, to assess their own ability to take on debt.

“But as a business, we recognise that there is a balance – between those that are looking to take on new debt to expand, and those in debt-stressed positions.”

According to Banks, Australian firms and sole traders have borrowed around $5 billion per month during the pandemic, and with the stimulus being rolled back, it’s a market where CI1 could tap into.


A three-pronged strategy

Across all its business lines, Banks says that CI1 could take advantage of the new landscape by adopting a three-pronged approach.

The first strategy is to build its brokerage lending book.

“We can support our customers across Australia, Hong Kong and Singapore with our lending services within the brokerage network. We have forecast growth for our current territories, and are confident that this will be exceeded,” he said.

Banks said that Singapore is an especially appealing market where CI1 could take market share in the credit lending space, as the government there is no longer issuing credit licences.


Chapter Two

The second strategy, Banks says, is to build on the momentum of its debt restructuring and individual voluntary arrangement (IVA) business in Hong Kong, and also Australia.

“The ongoing effects of the pandemic, and the fact that it’s been changing markets and business models, will inevitably result in some businesses becoming financially distressed or even insolvent.”

“Due to our diversified services, we can also support these distressed businesses. We can provide lending, but with a clear emphasis as a responsible lender. ” Banks added.

To date, CI1 has handled 14,000 bankruptcy cases and 9000 IVA cases in Hong Kong.

In Australia, the company is about to make inroads into the space via its subsidiary, Chapter Two.

Chapter Two provides informal debt negotiation and mortgage broking services to individuals experiencing financial hardship in Australia, a situation which is all too common, especially during the pandemic.

It has a wide network where it can engage with lenders and help individuals get on the property ladder.

The third growth strategy, according to Banks, is to build on the company’s innovation and diversification program.

“We’re investing into our businesses so that we can provide the market with new and exciting innovations,” Banks said.

The company will soon be launching a new app for Chapter Two, which Banks says will have a unique way of taking a borrower’s loan repayment, and distributing it to pay down creditors.

Yozo, the company’s unique AI-powered lending tech platform, can also help SMEs to get their loan application accepted within just minutes.

Initially offered as a BNPL platform, Banks said that he’s about to overhaul the Yozo business model.

“The first issue I have with BNPL is that it is an absolutely saturated market, and will become heavily regulated in Australia,” Banks told Stockhead.

“The other issue is that when you look at most of these BNPL businesses, you will struggle to find many that actually make money. “

“And when you look at the delinquency rates of BNPL, you will see how easy it is to get people into a financial stress position really quickly. Therefore, watch this space as we are working on a new incarnation of the BNPL” he emphasised.

In contrast, the Yozo platform does not bypass the standard KYC and credit checks, even though the approval is rapid, according to Banks.


Growth and valuation

Having explained that, Banks believes that technology should be an enabler, and not the actual driver of the business.

He says CI1’s core growth will not come from technology or acquiring more businesses, but instead will come from growing its customer base and retaining them.

“Retaining them is the hard bit, so our growth will have to come from marketing, and once the business is able to grow to the size we want it to, then we’ll look into other acquisitions.”

“I’m not saying that we won’t go for other acquisitions, but our initial focus is to grow and nurture what we’ve got,” he added.

Banks also wants to diversify the business from its main revenue profit centre of Hong Kong, and build market share here in Australia, saying that it’s one of his goals when he joined the company.

He also thinks that now is the perfect time to invest into CI1, because the stock price is vastly undervalued.

“When you look at the newsflow coming out of CI1 over the last six to eight months, they are all about positive results and growth,” Banks argued.

“These results have exceeded expectations, and the money is being reinvested into the group. This will help us to grow, not just organically but also through acquisitions.”

“It’s a great time to invest in CI1 now,” Banks said.

The CI1 price is currently trading at 2c.

This article was developed in collaboration with Credit Intelligence, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.