CM MARCH 2022

CREDIT REFERENCE AGENCIES
INTELLIGENT
THINKERS
Credit Reference Agencies are stepping up
to the plate to support the economic recovery.
AUTHOR – Sean Feast FCICM
LATE payment, the cost of living, and
the need to accelerate Companies
House reforms are three of the
biggest challenges facing credit
reference agencies (CRAs) and
the wider business information
industry at large. Meanwhile, ongoing uncertainty
surrounding the COVID-19 pandemic remains
a concern, but has accelerated innovation,
especially in the digital space, and the industry
feels it is well placed to support the economic
recovery.
Tim Vine, Head of International Finance
and Risk Solutions, Dun & Bradstreet, says late
payment – defined as customers paying their
suppliers beyond the agreed payment terms –
is putting pressure on cashflow for millions of
businesses: “Late payments from customers
initiates a domino effect,” he explains. “Should
the final end customer pay late this ripples up the
supply chain which all businesses in the chain
have to contend with.
“When late payments do occur, it is
small businesses who feel it most and are
disproportionately impacted. In 2020 we found,
on average, SMEs were owed £130,445.04 in late
payments, and over a fifth needed to use personal
savings or assets to cover shortfall. When you add
the impact of COVID loans which are starting to
become due, alongside existing business loans,
the pressure is mounting on businesses’ cashflow
and their ability to pay suppliers in a timely
fashion.”
Tim believes it is more important than ever
that businesses have a comprehensive view of
their potential risks: “To gain this view and help
stay protected financially, businesses can leverage
data and predictive analytics to gain a detailed
understanding of the previous payment behaviour
of their customers, while seeking to anticipate
future performance, to mitigate the potential
impact of late payments on their cash flow.”
LEVERAGING DATA
Jo Kettner, Chief Executive Officer of Company
Watch, a specialist commercial CRA, agrees that
leveraging data is key to managing risk. To that
end, she is keen to ensure that Companies House
reform gets before Parliament: “The resignation
of Lord Agnew in January 2022 was due to the
Government deciding to drop the Economic
Crime Bill which would have been the vehicle
for this happening,” she explains. “Subsequent
pressure, and perhaps the situation in Ukraine,
led to the Prime Minister saying on 2 February
that there would be an Economic Crime Bill in the
“Mundane and
manual tasks that
would typically
take hours to
complete – and
often using pen
and paper – can
now be automated,
giving finance
departments time
back to do revenue
generating work
instead.’’
third Session of Parliament. One member of the
House of Commons Treasury Select Committee
said he would ‘be amazed’ if this doesn’t include
Companies House reform, but we’ve not seen the
Bill yet, so it isn’t certain that these vital reforms
that are so long overdue will be included.”
Jo also believes that now is the time to make the
case for the release of more Government datasets:
“We would particularly welcome the employee
numbers in Real Time Information filings which
can be used both to validate information held at
Companies House, and also provide a more up-todate
pulse on company performance,” she adds.
James Jones, Head of Consumer Affairs at
Experian UK&I, says that the cost of living is
likely to be a significant factor for all sectors of
the economy over the next 12 months: “Rising
inflation, coupled with a substantial rise in energy
prices from April, could see household finances
becoming strained, dampening demand and
confidence around spending, which will have a
knock-on impact across the economy,” he says.
COVID, he continues, has hit the sector hard,
but CRAs have been fast to react: “As a result of the
pandemic and associated lockdowns, consumer
spending, borrowing and almost all economic
activity reduced. However, by last summer
demand for borrowing had recovered to reach
pre-pandemic levels again, with many households
also able to swell their saving balances causing
pent-up demand to spend.
“During the crisis, we took a number of
positive steps to support consumers, clients and
the wider industry. Working with the other CRAs,
we agreed the introduction of the emergency
payment freeze, which meant those who agreed a
payment holiday with their lender had their credit
scores protected.
Our open banking powered Affordability
Passport, which gives organisations a more
complete picture of someone’s financial
circumstances quickly and can help identify
those who maybe become vulnerable because of
a change in circumstances, was made available
for free. And our data expertise helped local
authorities, councils, NHS Trusts, fire services,
food banks and other major charities to get help
and support to the most vulnerable during the
crisis. Our business data has also been used by
the UK Government to plan and forecast support
measures for businesses.”
TOUGH TIMES
Dan Hancock, Managing Director of CoCredo,
says that the last two years have been tough, and
with uncertainty comes the increased need and
Brave | Curious | Resilient / www.cicm.com / March 2022 / PAGE 12