International Personal Finance plc (IPF) Earnings Call Transcript & Summary

Welcome, everybody, and this is the fifth in our series of inside videos into International Personal Finance. Now for those of you, who've seen some of our videos in the past, you'll know that our purpose is to build financial inclusion for those people, who are underbanked and underserved. And today, I'm delighted to be here in Bucharest in Romania with my colleagues, Florin and Joanna. And we're going to talk all about our business in Romania. Now in particular, Florin is going to talk about home credit and his developments in the business there, and Joanna is going to talk about partnerships. But first of all, why don't we start with some brief introductions. So if we could, Florin, let's start with you. Maybe we should start with a brief explanation, as to why you're sitting down.

Well, life just taught me that perhaps I got to an age, where chess is better than football for me. So it's a lesson...

And you're in recovery mode.

I'm in recovery. Surgery 4 weeks ago, 4 weeks to go, and I should be on my feet.

Great. Okay. So Florin tell us a bit about yourself?

Well, I have joined Provident 9 years ago. And I remember at the time I joined as a Credit Risk Director for 3 countries. And at the time, my father was like, are you really going to Provident, a bit concerned because I usually worked in banks prior to this not in NBFIs. So I told him, look, don't worry. This is a really good company has its own place in the market and covers a specific need, where customers really, really need what they are giving. And what I'm happy now 9 years later, is that my initial judgment was correct. And I'm working in a great company.

And did your dad eventually agree with your choice?

So he was over the moon especially 4 years later when I become a Country Manager.

Yes. Well, fantastic and you've been a great Country Manager for us thanks for the introduction. And Jo, global partnerships leader, talk to us about that. But first of all, talk to us about yourself.

Okay. So my parents wanted me to have my own business. So they are a little bit disappointed. So my experience, I have over 20 years of experience in financial sector, banking and nonbanking financial institution. My area of competence is sales, marketing and broadly defined business development and business development. I mean, I have a proven track record of launching new products, new sales channels, also opening some markets, not only in Europe, but also outside of Europe. In general, I have international experience. I was supporting 10 countries in total, not only in Europe, but outside Europe, Mexico, Australia. And I really enjoy new ventures. So I'm 9 years with this company, but I'm having new ventures with this company all the time. And I'm really happy to lead right now the expansion through retail partnerships, launching new sales channel for the company. And I think this is exciting, a really good place for me to be.

And obviously, Florin, you're based here in Bucharest because this is your home.

Yes.

And Jo?

I'm based in Poland.

Okay.

Yes. I'm from Poland.

So little bit of rivalry in the football [ there ].

Yes.

Not in the same group. So...

Not in the same.

It's okay.

Okay. Fantastic guys. So Florin, we're going to chat for the next 30 minutes or so, all about home credit, the business here and how you've developed us and where you're taking it to. And then, Jo, we're going to come on to you, and we're going to talk all about global partnerships. So I think, Jo, you can take a rest for the next 30 minutes or so, and then we'll get you back up here to talk about that.

Okay. Thanks.

Okay. So as I said, this is going to take about, I would say, in total between Florin and Jo, I would say about 40, 45 minutes. Now at the end of that session, you will get a chance to ask us questions live. But also, as you look at your screen on the bottom of your screen, there should be also the opportunity to type in any questions you might have. And those questions will come to us, and they'll be presented to us at the end of the session. So you've got 2 choices, live questions at the end or bang in your questions, as we go along. Great. Okay. So Florin, first of all, Romania, I think people know a lot about France and Germany and maybe even more about Poland. I'm not sure how much people know about Romania as a country and a nation. So why don't you tell us a bit about Romania?

Well, Romania is very dynamic and very rapidly growing country, which is situated right at the cross center of the Central and Eastern Europe. Maybe a strange fact is that we are a Latin speaking country, which is right amongst a lot of Slavic area. And what I can say is that we are also a generator of stability. If you look from a geopolitical perspective, we are a generator of stability in the region. And it's quite a volatile region, especially after the Ukrainian war, which is quite next to us. But other than this, [ 6th ] largest population in Europe, and this may make -- raise some eyebrows. And I can say about our population that it's quite educated and it's a skilled workforce. And what I can say is, well, we have a table there on the right. It shows us that in the past years, Romania has constantly grown economically. The GDP has grown year-by-year outside of the -- of [ 2021 ], we know everybody decreased in the GDP. But other than this, has a constant economic growth that often made others refer to Romania like the Tiger of Eastern Europe. And this growth has always been based on the consumption on one hand. On the other hand, on political stability, that was able to attract a lot of foreign investments and that is paid off in time. If we look at the big indicators, we can say that the inflation right now is single digit, constantly decreasing. If you look at unemployment, has always been steady, about 5%, so really good numbers from this perspective. If we're looking at things that are not quite well for Romania to put everything on the table, is the fact that we have the lowest financial intermediation in Europe, and we are not proud of it. And as well, we can say that about 32% of the adult population in Romania does not have a bank account.

So nearly 1/3 don't have an active bank account.

That's quite a large part of the adult population that actually most of them probably are in the rural areas or in the underserved communities, but they don't have access to traditional banking services.

From people, who know our business, one of the first things they want to talk about always is regulation and in particular, regulation in Europe because we've seen a lot of change. Has regulation in Romania being reasonably stable? Or what is the situation?

I think for us, it has been quite stable in the past year. So we joined the special registry of the National Bank in 2018. And from those moments, we were regulated like banks. We follow this. What happened in the past period as well is that there have been several attempts to introduce price control caps. And there are a number of them and the latest was passed in the parliament in April, but it still awaits a decision of the constitutional court in order to pass. What we know is that we do our homework. And in this respect, we have prepared. And if it passes, we feel that we will adapt to this regulation as well with no material impact.

And that's a really good point, and that's what I've been telling our shareholders and both shareholders and debt investors for the company. I've been saying to them [ that ], we are assuming that, that regulation will actually become low. And that even though it's going through a constitutional challenge, our working assumption is it will be a reality soon.

Absolutely. And July 11 is the next day. So we'll be waiting.

Yes. But from your point of view, as the leader of the business here, you're comfortable with that regulation and you know how the business will adapt to it?

Absolutely. We've done tests. We know the new products. We know everything that will come with this.

Okay. Great. So as we -- so obviously, it's a well-regulated market. Let's talk a little bit now about the size of the market and who plays in the market, how all of that works, what you think?

So I was saying it's a very competitive market. We have different players, different sizes from local to regional or to national coverage. And if we look for us, we are basically lending in between [ 85,000 to GBP 3,300 ] 0:9:10, the value of our loans and average [ of it ] about GBP 800. And that places us alongside the rest of the NBFIs. And in between the payday lenders, who you know they tend to loan smaller amounts for shorter period of time. And then, we have on the other side, we have the banks, who would have a [ loan ] approval rate, but they will go significantly big and issue value, so they get up to GBP 30,000, GBP 34,000. And basically...

Quite a bit of that, I'd imagine, will be secured lending what is.

That's only the consumer lending that I'm talking about. Yes. So secured lending goes significantly higher than this. And in terms of term, they would tend to go up to 5 years. So longer than us, they tend to go to the maximum legal term for the unsecured consumer credit here. But what I like in this market is that we have our own place, our own space, and we are actually the biggest lender on the market that is not part of a banking group. And I think that's really important. And if we look at the NBFI market, we estimate that we have a share of about 20% of this market.

Okay. So let just -- let me just jump in there. So we have a really good share because you and the team have done a fantastic job of building the business. One of the questions I get asked a lot about is what's your price? How much do you charge? And how does that compare to your competition in whatever market we're in. So given that we're here, how does your price compare to other people in the market?

Well, and you can see the APRs on the right, and you can see that basically, we are cheaper than the payday lenders, and we are more expensive than banks because, obviously, you will always need to take into consideration our characteristics that we don't have deposits that we take more risk, that we have -- we are having a national coverage and have an expense to cover this. So if I look at our pricing, I say it's something that is enough for us to generate a fair return. I mean, we're not into the, I don't know, tens of...

So this is our financial model that Gary our CFO will talk about, which is required return for shareholders is [indiscernible] on RoRE...

And for us, in the past years, and you'll see a bit later, we've been at -- around a 20-plus return on required equity...

Okay. So right where we need to.

Yes. Yes. So...

Okay. And if you look at the screen Florin, you have a lot of names up there. So it looks like quite a crowded market.

It is a busy market. It is a busy market. We have a lot of competition and it's not just busy market. We can see as well that it's a tremendous increase in the credit demand. We see that based on the constant increase in the minimum income that exists in the economy. And just for example, in July, will be another one, the increase of the minimum income. And if you compare the amount that we'll get in July versus where we've been in 2018, it's double. So in 6 years, it's a double, which basically allowed people to have more needs, but also more desires and to be able to do this. So what we see, we see as well that the financial industry is willing to lend more. And that's based on a really, really good 2023. And based on the fact that if we look on the market, the non-performing loss ratio are basically at the lowest ever figures that have been. So this -- basically, if you look, and I think we put somewhere there in the market, if we look at Q1, '24 versus Q1 '23, the market grew by 80%.

By how much?

80%, 80%.

80%.

80%, which is tremendous. I don't know how long it will still continue to go on this direction. But that's what we see. We see that there's a lot of money on the market. Lenders are trying to put the money on the market, and we see that the customers are willing to take loss.

Okay. And I suppose all of that happens because as a country, it's becoming more and more successful. GDP is increasing every year, as you had on your first slide. And clearly, we Provident play a prominent part of that. So why don't we talk about Provident in Romania?

For 18 years, we've been here in Romania. We are a very respectable and well-known business. We are the third largest British employer in Romania with more than 2,000 employees, and we're saying here that for us, the customer representatives are employed. We are very visible. We are part of a lot of important business and trade association, and I'm proud to represent Provident, as the President of the Consumer Credit Council in the largest NBFI Association, which comprises of more than 20 NBFIs, which I think it's a great recognition of the status of Provident in the Romanian market. As well in time, we have been -- received a lot of recognition for our activities. And I'd mention here the work that we've done for our communities. And we invested in time more than EUR 1.5 million in a lot of programs that help people in our communities, either through financial education, helping young talents or maybe helping the vulnerable members of the communities with the latest invisible program, and we reached more than 350,000 beneficiaries like this.

And all of that is based on our purpose, which is building a better world through financial inclusion. So let's talk a little bit about that?

Yes. We like to have some indicators to prove behind this. And if you look here, we'll see that 47% of our customers are living in the rural areas, and there are places, where the traditional banking is non-existent. So for them, in order to be able to get there, it will need to spend time and money in order to get to the nearest city. Similarly, we have a large number of customers that come to us for the first time. It's their first experience with the lender. They have no credit history, and we help them build that credit history. So today, if somebody goes without a credit history to a bank, you'd be rejected. We have a low-and-grow approach, and we can take this opportunity of giving him a smaller loan, but creating the history. And what we've seen in time is that once they create their history, a good number of them are promoted back to the high street banks and are able to take even mortgages and go on with their lives.

And that's the statistic people see in the top right-hand corner there. So those are numbers for 2023, which show the number of people, who build the credit history and then move on from us.

Absolutely. But what I'd like to mention is that even if they went with other banks, they then come back most of the time to us because they just like the personal service that they offer.

And I know from experience myself, Florin, going out into the countryside that people just recognize the name. They recognize the Provident name. So why don't we talk a little bit about our brand here?

Talking about recognizing the name, we have very funny experiences with it's the postman and it's the Provident lady, that's kind of the main figures in the rural areas. But I think we have a tremendous brand recognition here in Romania. We are one of the most well-known and respected brand. And just to give you an understanding, in between banks, and you can see here in the graph, we are top 3 in between the banks. We are significantly in front of any other NBFIs, which you can see with gray color. 9 out of 10 Romanians, who would look to borrow for up to GBP 3,000 when asked about what would be the source of borrowing those money, would say Provident, it's the first brand that comes to their mind, which I think it's amazing.

Yes. Absolutely fantastic.

The fact that I'm a lot proud is that we are one of the few brands that come on TV with pure educational programs.

Yes. I've seen a lot of the adverts you've put up, and I think they're really interesting. We won't play them because they're obviously in local language, but they are genuinely different. They're not trying to do a hard sell. They're talking about more the educational side on finance.

Absolutely. And one time, I can give you an example for last year. I think we went significantly beyond that. We created something called a moderation test. We're basically -- we came from the idea that usually on Black Friday, people are going and buying a lot of things that 1 year later, they are in the trash. So 80% of the things are in the trash a year later. And with this in mind, just before the Black Friday, we went on TV and we really asked our customers, are you really buying or getting a loan to buy things, which are a need or a wish?

To be honest, I do remember the conversations [indiscernible] that you and I had about it because I thought it was quite a brave move to go out and do that. But as it turned out, it won lots of accolades for being open and honest about the cost of finance and only borrowing [ if you genuinely is, right ]. So I thought that was really good very, very, good.

Yes. Of course, some people will consider that oh, you're hypocrites. But the reality is that we have a genuine interest that our customers are doing the right thing.

And the other thing is we're doing the right thing for the customers because you can tell by that Net Promoter Score. I know a lot of banks, who would die for Promoter Score that was [ 1/5 ] of that. So it's -- and that's down to the ethos in the business.

I think customers really love our interactions with them. We love the fact that we have personal human touch interactions, and they give us quite high customer satisfaction ratings. And then they are willing to refer us to their friends, to their family whenever they have needs. And thus, basically, we get to an impressive Net Promoter Score for the industry that we activate in, which we look forward to keep and make.

That's a perfect segue then to talk about our customers and who they are. So let's try and give people some color on who these customers are that come to us for finance?

Well, you won't be surprised to know that we are the first option for a category of customers that would have maybe a bit lower income, maybe fluctuating income. So they would naturally come to us because we know how to -- we complicated it is to manage a tight budget. And in our repayment schedule, usually, we have some forbearance elements included there. If you look at our customers, 70%, if you look at the top -- the first 3 from the left, 70% of our customers are coming exactly into this profile that we are talking about. And if we look at why they are taking the loans from us, most of the time is to do repairs around the house, is to buy new appliances, is to cover any ad hoc medical or educational expenses, just the normal things around the house. And for us, it's important to be there and to be able to support them. If you look a bit to the right, you have the younger category or the high income category, which is not our bread and butter because we felt that we didn't have the right channel to address them. And right now, with the new things that we are adding, and we'll be talking a bit more later, we feel that we'll have a much bigger chance to address to them as well.

Yes. And what's obvious from this picture is that we do provide a reasonably small sum of money. But we -- even though we're more expensive than banks, it's affordable because we give people a reasonable amount of time over which to repay.

Absolutely. And I think what we are creating, we are creating basically a sort of more efficient financial ecosystem that allows for this type or categories of which have maybe a lower social economic status to still be addressed by somebody, who is regulated and to still have access to simple and fair and transparent way of lending. So I think that's a really important part of what we are trying to do for our customers.

And Florin, you don't get to have a successful business as you have and with such high net promoter scores without having a big infrastructure to deliver that, what I would call very personalized service to our customers. So let's talk about how that works in the field, the organization that you have.

But before going there, I suggest something Gerard.

Okay.

I have a great example of one of our customers. Should we have a look at it.

Okay. So we've got a video of a customer, a real customer now we're going to talk about...

A real customer.

Okay. And he or she is not an actor.

He is not an actor.

Okay. Okay. Okay. So we'll -- let's cut in here, and we'll show you this video. How long is the video?

It's about 2 minutes.

2 minutes. Okay. Let's have a look at that then. [Video Presentation] Well, I'd say that's quite a video, isn't it? I mean, that is a testament to everything that you and the team are doing here, the flexibility, the reaching out to customers, who otherwise wouldn't get financed and actually going that -- well, I suppose a lot further than other financial institutions would do to help people.

Absolutely. And you've seen rejected by banks accepted by us being able to do whatever he wanted in life.

Okay. Great. So now let's talk about the structure that delivers all of that to [indiscernible] was that his name.

[indiscernible].

Let's talk about how we deliver that service to these customers.

I think the main thing that we have, and we have always had from the beginning as a big home credit infrastructure that is quite complex, almost impossible to replicate, I would say. And throughout the years, we have built such a strong and experienced sales team that helped us fuel our growth ambitions. And at the middle of any such sales team is basically the customer representative, and they are there. And you can see we have about 1,500 customer representatives. Here, we would need to add the last 2 lines.

So do you need to add the sales coordinators and the sales representatives [ get your ] total.

To get that one.

And those are the people, who literally go out there and physically meet every single customer.

Absolutely. With these people, we are able to cover every isolated area of the country, and we are able to be there at the door of a customer at most of the time in less than 2 hours from a phone call that we receive. And I think that's really, really important for them.

And hence, nobody can replicate.

Yes, absolutely. And looking at how we can build and how we can bring our customers even better services because that's what we are here for. In the last 4 years, we have put a lot of effort into what we call improved business model and the improved business model or IBM, now [indiscernible] is it's something that shows us how the European mindset can work really well because this is something that was created first in Hungary. We replicated here and now Poland is implementing there. And what is it this IBM about? It's about creating a new layer, this sales coordinated layer that you see there in green. We created with the aim to give our business relationship manager, the space to develop our teams and to ensure that we provide the best service with less [ disruption ] and with reduced turnover. Because the coordinators, they have small teams, 4, 5 people, and they are experienced enough and available enough to go in the field with these people to ensure that they are doing everything correct, and all the best practices are received by our customers. And this change, together with the [ Fin customer ] program actually had significantly improved our Net Promoter Score to those numbers.

Fantastic. Okay. So if the sales quarter -- coordinators and the sales representatives are the lifeblood or the DNA, give us a description of who -- I won't -- I don't want to use the word [ average ], but who our representative looks like?

Our customer representative, I think, first of all, for me, they are the image of Provident for the customer. So the customer when he'll meet, he'll meet with the customer representative, he will not meet with me or you. So -- for this, they are the most important part of our business. And if I look at them, usually, they serve in their communities. Usually, they are able to create a long-term relationship with our customers, and that's something that our customers really appreciate it, appreciate them. They are mostly women. So 80% of our customer representatives are women in their 40s. Most of them have already a job. So they come to us looking for some time for extra money. Sometimes they are looking for a more useful way to spend their free time or sometimes they just like to talk to people. And here is a place, where you talk a lot to people. And if we look at them, usually, they work for us for 4, 6 or 8 hours. And what we have served in time is those who work for 6 or 8 hours tend to be more loyal. And we can say right now that more than a quarter of our customer representatives, which are in 6 and 8 hours have been with us for more than 10 years, which I would say, shows that they find the right culture and the right job for them.

And the thing is if anybody were to look at this profile and go back to that page that we had earlier about the customer profile, there is a real crossover between, who serves the customer and who the customer actually is?

And you know why it is because a good part of our customer representative has been our customers before. And so, they have exercised what it is the life with Provident, they liked and then they wanted to work with us. And then they continue to share their experience in the community.

Okay. That's fantastic. Let's very briefly mention for people, the scale of the growth that you've been delivering for the business here.

Yes. You can see here 2 graphs, which are showing that based on all these core elements that we talked about, knowing your customer, knowing having a great brand, basically, since 2020, we were able to grow the customer lending by 66%. We're able to grow the receivables by 72%, reaching numbers that are beyond what used to be pre-pandemic, which I think is fantastic. And I'm happy that we've done this while having the best quality ever of our portfolio. And while showing a strong yet fair financial returns in these years. And I can say from a group perspective that right now, Romania is as well a strong contributor to the profit alongside countries like Mexico, Hungary or Poland. And I think all this gives us a good base to further develop and plant the seeds for a larger Provident footprint in Romania.

Okay. So that's our existing business as it were. Let's talk now about the developments that we're going through and why this business is so much more than just home credit.

So from the beginning, from 2006, we started with the home credit, and this continues to be the main driver of stability and customer appreciation for us. In 2018, we introduced our first value-added services, which was a life insurance, and this was catered specific to the customer to our category of customers. So it was -- it is still the cheapest insurance that exists on the market. And I think this is important when you start from scratch with the insurance product for our category of customers. And then in '23, we actually added 2 new channels, the digital channel and the retail partnership channel. And we added a new wrinkle to the insurance, the credit shield insurance protection.

Okay. So you and I are going to talk about [ ProviOnline the ] digital business, then I'm going to have a chat with Jo about partnerships. And as most people, who are watching this will know, we launched a very successful credit card in Poland last year, so that was 2023. And so, we've decided then that we're going to take that credit card, and we're going to roll it out across other markets, including your market.

We feel it would be a great proposal for Romanian customers.

Yes. Okay. So let's talk about ProviOnline then, so our digital business.

We started ProviOnline at the end of last year, and it's designed to be very intuitive and very easy for our customers to navigate through the screens to be 100% end-to-end digital channel. So basically, if you're in front of a computer, if everything goes okay, you can have 0 human interactions until you get your loan. However, if you still need some help, we have a team on standby that will help you navigate those screens. What I like about it is that in the 5 months that we started -- that we have as a history, we already see an increased demand. So we see a growing lending, which, for us, it's really giving a good expectation for the future, especially since we are advertising through Provident brand, and it can always be a question moving from offline to online. How is this perceived by the customers?

Well, it's going well. And clearly, we're still dealing with the same customer cohort, but these might be slightly better credit quality is what we'll aim for because they're online, rather us going to see them in their homes. So let's talk a bit about the numbers then.

Well, I think if we look at the generation of customers that we track here, it's a bit different than what we are track normally in the home credit is tend to be younger, around 31 years old.

But still underbanked, underserved.

Still underbanked, underserved in the same category of income from this perspective. But the part that I like is that basically 76% of them never had a loan with us. So it's a brand-new pool of customers that we are attracting. And even though they acknowledge that they've known the Provident brand, and they know that it's a serious brand and the experienced people that they are talking, they are just happy that we are bringing them the right channel, the channel that they were expecting for such a long time. And this is why I was saying that the young category of people will increase for us in the future.

Okay. So I suppose one thing we should say for people watching in here is that when we start a new business line like this [ or ] fully digital for a better description, we do have to be careful in terms of risk. So people shouldn't be expecting this to be 100,000 customers by next year. We will take it cautiously, we'll grow it. And when we understand the risk and the profile, then we'll expand it more rapidly.

Absolutely. And maybe the part that I really like, and I think it's going to continue to be a base for us is that the customers really love it. Love the easiness of the process. They love how quickly they receive the money. They already give us a great Net Promoter Score and the great customer satisfaction, as you can see on the table.

Great. So talking about pleasing customers. I think this is a perfect segue to bring Joanna in. Jo, do you want to come on in over here? Because one of the things we do know, Jo, is that when customers most need money, it's when they're purchasing something and the ideal time to provide them with the cash is when they're actually in a retail outlet, but this is a completely new experience for us. So let's introduce people to what we're up to here?

Yes. We -- as an IPF, we decided to enter the channel, which is, as you say, a natural place to be because people are purchasing goods, and they most likely need money for that. And we did this first step for our company exactly here in Romania. That's why we are presenting this new channel from Romania. And what is it exactly? So Provident loans are now injected or seamlessly integrated into the checkout of retail stores of our partners. And we have chosen Romania as a first country because it's a great business. And also, because we knew that consumer demand for in-store financing is very high here. We had also another factor to launch it here because we have big retail partners, who decided to inject our payment option into the checkout of their stores. So...

So you went out, I suppose hunting for or looking for these retail partnerships.

Yes, yes, yes, yes. And because the demand is so huge, this is also a natural sales channel for the lenders in Romania, and I believe also in other countries, but I will cover that later.

And the same cohort of customers, Jo, as underbanked understand or different.

Yes. Yes. Yes. We stick to our purpose. We provide financial inclusion also in this channel. So we are specializing giving loans to the underserved segment of new customers because they are slightly new and different to the customers in our channels of ours. So yes, we stick to our purpose.

Okay. And let's talk a bit about how you deliver that then to -- through the retailers.

So Provident loans are now seamlessly integrated into the checkout. So we provide a unified shopping and lending experience for the consumers.

So what does that mean? If I'm a customer and I walk into a consumer and I walk into a shop and I want to buy something, what does that unified thing mean to me as a consumer.

Yes. You go shopping and you select your product, and you don't need to have sufficient funds for purchasing this product because you know that there will be a lending option available in the store. So you go to the loan officer in the store, employed by the store, and you ask what are the financial options for me, as a customer. And the Provident is one of the options available in the store.

And in terms of stores, you've got pictures up here of eMAG and Flanco would talk to us a little bit about those and why you picked those?

Yes, we can proudly say that we have already a national coverage through the retail partners we collaborate with. And this is especially eMAG and Flanco, they are market leaders in household appliances and electronic goods. And we also are available in growing number of small and medium shops through the existing brokerage platforms. And I think it's important to say you see 2 examples on the slide of eMAG and Flanco stores. But it's important to say that we are available in a diverse range of shops. It could be household appliances, but it could be also furniture. It could be also sport, do it yourself because the solution -- the loan solution in the store is relevant for the consumers, where there is a big value of purchase to be purchased.

And you have an amazing statistic up here, which is, is that 99% of all customers we're seeing here are consumers are new to us?

Yes. Those are the most important -- this is the most important attribute of this channel. We are amazed by this number because 99% exactly are completely new to Provident and never have used our services before. And this channel represents already 10% of the total sales of new loans from all the channels we have in Romania. And I think the number will be growing. But I have other statistics as well because we work very closely with our partners. So thanks to the statistics available from them, we know that Romanian consumers, 34% of Romanian consumers going to the shop already are reliant on having a financing option available in the store. And we can share the number that double digit of share of the loans sold in the stores is already covered by our loans. So it's a meaningful number, knowing that we are not alone, and we are not the only lending option in the store. We are one of the options from 4, 5 options sometimes, yes. So...

That's the perfect segue. Many people would think about options here in retail stores as being by now pay later. Why is that different to what we do?

Yes. It's different. So first, we bring years of our experience in the underserved segment to the stores. And we do installment loans with risk-based pricing -- and we do a thorough credit worthiness assessment, as we always do. And this is all what makes us to be sure that we do a responsible and affordable lending. And those 3 factors are slightly different than what typical buy now pay later providers are doing. They are much shorter for free and very easy onboarding/credit process.

So we would say that we think it's more responsible that consumers understand that there is no such thing as free loans, there's a cost for everything, and we are upfront and we say we will support you and help you to buy this product, but there is a cost to it, and we're very transparent about what those costs are.

Yes. We are very transparent. So customers are introduced to a few options, and the customer is making a choice, and it's from the beginning informed that this is the loan, and this is the condition.

Great. And I do -- I know that not every journey gets completed end-to-end digital. But we are one of the few -- maybe we're the only person that can do what we would call hybrid. So let's talk to people, who are watching this video about what that means for us and what that means for a consumer.

Yes. But we are fully automated in the channel.

Okay. In the channel.

We to say yes, because this is the expectation of modern consumers like the new generation of customers. They go to the shop. They want to have this loan experience naturally embedded into overall shopping experience, and it needs to be seamless, automated real time. So this is what we do in the store. But what is important to say, we still have a beauty of the whole business, which we have in Romania, and we have a multichannel approach in Romania. So post sales service starts with welcome call, again, explaining what is the condition and how to repay the loan. And for the service, the customers with our brand, they have diverse option of repaying the loan or even taking a second loan, including the field network, which is available, yes. And this is the -- we take the best of all our channels, and we give it also to the retail customers.

So many of those consumers, who come to the digital channel might end up being served by the customer representatives.

Yes. If this is the wish or we decide that it's the time.

And the time being, if they're struggling on repayments or...

Yes. If they are struggling with repayments, we can always help with our network, yes.

Okay, Well, Jo, you know from me that I'm a huge believer in this channel. I think it's...

Me too.

An absolutely fantastic opportunity for us. And we're proving the model here in Romania, but that's not the level of your ambition. Talk to us about where you think we're going to go with this?

Yes. I think we -- here in Romania, we have confirmed our strategy for this channel. We have more plans to expand in Romania. We have 350 shops -- over 350 shops right now, but we are adding new shops every month. And by the end of the year, I can say that we have an aspiration to double the number of shops. So that's why I was so confident to say that the share of this channel might be increasing in the future and...

Well, definitely.

Definitely. And in Romania, the next step is also to go with online. And this is a natural step for us because our strategic partners, who are already now cooperating with us in offline, they have also online stores, and this is just natural place to be as a next stage for Romania. But Romania is not the only country we think of. We have 6 other countries in Europe, and we are considering different options to conquer the next market, and we have at least 2 options. We can leverage the experience and the model solution, which we have built for Romania, but we have also our e-money institution license in Estonia, and we can passport this license to other European markets and provide cross-border payment credit as well.

And what about Mexico because people love to talk about Mexico and...

Me too. Me too. So yes, this is -- this will be a surprise because I can already say that we are just starting in Mexico. So we took this decision to launch Mexico. Different to Romania, we will start in Mexico with e-commerce, providing a loan in the online store. Mexico is a nice country to be because it's less crowded than Europe in terms of payment option, lending payment options available in the stores, but it's also a difficult market in terms of the risk of lending. So the steps we are taking for Mexico are very rational and small steps. We have already solution in place. So we can connect to the stores. We have our plug-ins available in the big e-commerce platforms like WooCommerce or PrestaShop, you will recognize the names. But we have also APIs available for the big partners like payment service providers and payment gates. And we see first customers, but we are very rational. This is Mexico. This is new channel and lending in Mexico is yes, it's interesting.

It's interesting, but a great opportunity. And the fantastic thing about your business too is that it's almost infinitely scalable without having to put huge resource behind it, whereas Florin with your business, if you want to add another 20,000 or 30,000 customers, you have to expand that pyramid we talked about before. But for you, Jo.

I'm leveraging the existing ecosystem...

Exactly.

Of retail networks, e-commerce and I'm just injecting the option into the existing places, yes.

Yes. But becoming an increasingly important part of it.

Yes, yes. I think, yes, the customers are already educated. They are expecting it. The numbers from Romania, 34% going shopping with the expectation I will find a loan there. It's impressive. Mexico is growing in e-commerce, 20% every year, and the customers there are started to be educated. I want to have a payment option, lending payment option in the store as well.

Fantastic. Thank you, Jo, and thank you, Florin. So let's go to our last page now, which is a summary. So let's just briefly summarize for the 2 of you in terms of what we think about Romania, where we're going.

Well, as I hope our viewers have seen we have a tremendous business and a tremendous opportunity here in Romania. We feel that we have great ambitions and that we will be able to deliver them because we count already on strong results. We were able to grow and to still show a fair returns. We have a very experienced team that has gone through a lot of things, has seen a lot of things. And we believe that with the new channels that we have added, we have planted the seeds for something bigger. And we feel that we have now a clear strategy towards our vision to double the customer number that we have in Romania in the near future.

Yes. With the retail paying a bigger and bigger part of that.

Yes.

Fantastic guys. Thank you so much. So for now, that concludes our presenting to you, and we're going to be delighted to take any questions that you might have based on what you've heard or just other things you want to know about our business here in Romania or about Jo's global partnership model as well. So with that, if you give us 2 seconds and we'll ask somebody just to come up and put those questions to us. Okay. [ Nikos ], thank you for joining us. And I believe we do have questions that came in while we were broadcasting then. Okay.

We do have quite a dynamic chat. So we have first question. I think, Florin this is one from -- this is for you from [ Guy ]. Will implementing the price cap lead to reduced volumes? Or are you already pricing loans within the cap in Romania?

As we were saying to our investors, we do expect that if this change will happen basically will have some impact, but not a material impact. The impact will come from reducing the price. But this -- when we reduce the price, we do expect that for the customer, it will be cheaper. So basically, we expect higher volumes that will compensate a part of the price reduction in terms of P&L. And when will apply this new price cap regime is when the law will become life.

And that's probably just standard in the marketplace that [ you don't want ] to change beforehand you change when the new regulation comes.

Yes. And we are all prepared for the time when it's right.

Okay. Great.

So the second question is from [ Evo ], and he's asking what is the proportion of loans issued and collected via agents versus the digitally the online ones? And how this ratio will change in the next 3 years to 5 years?

Jo, as you're giving us more and more digital?

Yes. So we have launched the digital channel and retail partnership channel only this year. We started to scale it. So this is in low thousands, but I believe every month, the proportion will change, and it will be growing.

So today, the vast, vast majority would be home collected Florin through your business. But as we go forward, the proportions will shift to be more digital.

Yes, and most likely.

And as Jo mentioned previously, it's about 10% of the new customers right now if you add the partnership, which is bigger than our digital, but we expect to become a bigger portion in the future.

So the third one is from Gary, Gary is saying, what are the financial implications of having the additional layer of sales coordinators. Are you giving up some margin here to help the NPS side?

So this was our pyramid, where we showed...

Sales coordinators is called the IBM. We are giving up some costs. So it is an extra cost here. But let's not forget that the sales coordinators have their own agency. So they continue to work as customer representatives, as well part of their job. And I think the benefits that come are beyond just the NPS are in a better quality of the collections and better sales volume because actually, they are teaching the customer representative the best practices. So when they do good, our customers are happy as well.

And I suppose maybe that's something we need to make clear for people is that those sales coordinators are the best of our customer representatives who've got elevated to this new position. They retain their existing portfolio, a good chunk of it, and they do the educational piece as well.

Exactly. In vast majority, we have some coming from external world, but in vast majority, yes, and we do have the most experienced sales coordinators.

So some costs, but a lot of payback.

Absolutely.

Okay.

I think the next one is for you, Jo. It's from Gary again. Have you built the retail partnership tech yourself? Or is that third party? How easy is it to transfer that tech to new retail partners or and eventually into other markets?

So we decided to do a hybrid. So we kept what we do the best internally. This is the scoring and post sales service with all the channels. And the connection was built by the third party. So we took a company, which is specialized in connecting to retail finance and retail stores, yes.

So when you go to Mexico, same idea?

Yes. So it will be the same concept that we'll be leveraging companies, who are helping with the connecting part.

Okay. So our proprietorial credit scoring, but other people's connectivity.

Yes, always scoring internally.

Okay. So very scalable.

Yes.

Okay.

So a couple of more questions now. Guy, again, you referenced your [ POS ] product is 1 of 4 of the 5 solutions that customers have available to them. Are those competitors similar to your competitors on the more traditional book? Or are they more [ fin-techie ]?

Jo?

Yes. So we don't have direct competitors inside the channel. So the competitors, who are copycats of us. But we do have banks and fintechs. This is right, yes. This is fintech space.

Yes. So no home credit, people competing in this channel with us.

No, no, no.

And for the moment, I think this is the last question for Gary. No, [ Ross ] said that I was wrong. So this one is from Gary. Can you expand on how you might use the e-money license in other markets?

Yes. Yes. So as I said, we have in Estonia, e-money institutional license. So it's a license we can leverage in Europe. And we can do passporting of this license. And through the license, we are allowed to provide in Europe cross-border payment credit, which is designed to facilitate the purchases.

So for instance, if we were to do credit cards cross border, we would use the e-money license [indiscernible].

Another one. This one is from Ross, and I think Jo, it's again addressed to you. How do the financial characteristics of the retail partnerships and digital loans compare to traditional home credit loans in terms of size, pricing, impairments, et cetera.

They are more similar to the digital channel. So you can't compare it with the home credit. So you can't say it's identical, but it's very comparable with the digital channel. The customers are definitely younger in the digital channels and retail partnerships, a little bit lower income sometimes because they are younger. And the average size of the loan depends really on the industry you are connected, yes. So in Romania, it's [ 650 ].

So probably slightly lower income, younger customer, probably slightly lower value. And part of it -- just so we're clear here, probably the lower value for us is a protection because we need to learn about the risk of this channel.

Yes. We always do rational steps. So it's good for us at the moment of time.

So this is -- these are all the questions.

Great, [ Nikos ]. Thank you. And first of all, guys, thank you so much. I think that's been hugely helpful. And hopefully, people will understand a lot more about Romania now. If anybody watching this would like to know more about IPF or Romania or any of our businesses, you can contact us directly, and we'd be more than happy to give you the time. But I know that we've run right to the full hour there and people will probably be jumping off, so thank you, everybody, for joining us. There are 4 more of these videos on our website, and we'll be doing more in the future. Okay. Guys, thanks so much for joining.

Thank you.

Thank you.