Why Competitive Market Strategy Brings A Tough Time For Certain Players - Credit Corp Faces The Heat

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Why Competitive Market Strategy Brings A Tough Time For Certain Players - Credit Corp Faces The Heat

 Why Competitive Market Strategy Brings A Tough Time For Certain Players - Credit Corp Faces The Heat

A competitive market strategy by one player in the industry could give a hard time to other players. To gain a competitive advantage, some firms adopt short-term approach while some do get involved in inappropriate practices. As a result of which, firms which are committed to their pricing and compliance discipline, are impacted as they lose market share in the industry.

Australian financial services company, Credit Corp Group Limited (ASX: CCP) is one such player in the financial industry who has lately lost its market share to its competitors due to their competitive market strategy.

At the recently held its 2019 Annual General Meeting (AGM), Credit Corp chairman highlighted that in its core Australian and New Zealand debt buying business, the company has seen that some of its competitors have been following short-term approach and in some instances, this has involved paying high prices for purchased debt ledgers, while in other instances it has involved the use of inappropriate practices to generate additional collections.

As a result of this, the market share from Credit Corp over the past few years has decreased while the company remains committed to pricing and compliance discipline.

Effective Pricing of Credit Corp

The group’s business succeeds through effectively pricing investments and managing risk. Credit Corp objectively analyse large volumes of data to develop an in-depth understanding of its customers, following which it efficiently allocate resources and to produce an acceptable return on its investments.

In 2019 Annual report, the CEO highlighted that an extended period of high pricing is producing signs of stress in Credit Corp’s competitors. This may create opportunities for additional investment.

Strong Compliance Discipline

In a community that has high expectations of financial services providers that go beyond minimum legal requirements, Credit Corp is committed to meeting these expectations to ensure the success of its business and to protect its clients and other stakeholders.

Credit Corp’s success and reputation as a sustainable financial services provider is based on a culture of strong compliance systems and transparency, combined with a respectful and understanding approach to its customers.

In Australian lending business, the company provide sustainable and responsible loans to consumers who might otherwise be financially excluded. The company is devoted to providing the cheapest and most responsible loan that it can sustainably provide.

During 2019, the intense scrutiny on the lending practices of some of Australia’s largest credit providers has resulted in more consumers being denied access to credit. As a result of this, the group experienced increased demand and have grown its new customer lending volumes by 18% over the prior year.

Preference for Long-term Gains

Credit Corp is committed to all its businesses and all the markets in which it operates for the long-term. Maintaining a positive reputation as a responsible and compliant provider is a critical part of this approach even if it means foregoing some short-term gains.

The company believes that it is now in a strong position to reap the rewards of its long-term perspective and sustainable approach.

At 2019 AGM, Credit Corp chairman highlighted that in a turbulent year for Australian financial services companies Credit Corp stands out as a values-driven organisation confidently looking forward to a period of increased opportunity and growth.

Credit Corp Strong Values

Credit Corp’s values are:

  • Doing the right thing- This is about ensuring that it is disciplined.
  • Making it happen- This means being accountable.
  • Being open and honest - This requires transparency and promptly confronting issues.

In line with the value of ‘Doing the right thing’, the company base all its investment decisions on facts and figures. The company’s performance in 2019 demonstrated the merits of its expansion strategy. For the second successive year, investment in its core Australian and New Zealand debt buying business was around 30 per cent below peaks achieved in 2016 and 2017.

The company’s leadership and focus on returns have delivered a consistent record of success and continued growth. During FY19, the company earned revenue of $324.3 million, up 8% on last year. From the year 2012 to 2019, the company has witnessed a CAGR growth of 14.6% in its revenue. In past ten years, the company’s NPAT has also increased significantly (refer below image).

Credit Corp has been a leader in its core business of Australian and New Zealand debt buying for almost 20 years now. Through years of pricing and workflow management, the company has developed a sophisticated understanding of credit-impaired consumers and the ability to predict their behaviours. Further, it has refined a uniquely effective collection approach, which involves working with customers in a patient and respectful manner.

Not only Australia, the company’s US business has effectively adapted its proven systems and approaches. Despite relative immaturity and the impact of rapid growth, 2019 result shows that the company has a competitive and profitable US operation. The company believes that its US operations have the potential to become as large as its core Australian and New Zealand debt buying business in the medium-term.


The company’ actions in 2019 to expand its debt facility and raise additional equity have provided Credit Corp with substantial debt headroom to ensure that it can take advantage of any sizeable opportunities as they arise while investing at elevated levels on an ongoing basis.

Credit Corp believes that it is well-positioned to continue to perform strongly in the future. As per CEO Thomas Beregi, the outlook for consumer lending and US debt purchasing is for another year of strong profit growth and increased investment.

Credit Corp is of the view that a significantly enlarged consumer lending book coupled with an expanded US workforce will deliver increased profits for the company.

Stock Performance

In the past six months, CCP stock has provided a return of 36.11% as on 4 November 2019.

At market close on 5 November 2019, CCP stock was trading at a price of $31.520, down by 2.536% intraday with a market cap of around $1.78 billion.


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