Credit reporting becomes an even more competitive game
AUSTRALIAN FINANCIAL REVIEW - SPECIAL REPORT − FACTORING AND DISCOUNTING
Two companies have cornered the Australian credit market, reports Miriam Hechtman.
Coca Cola and Pepsi; Qantas and Virgin − these companies know about competition. In the lesser known area of credit reporting services, two major players are fighting a similar competitive battle. With company information changing by the minute, providing accurate and up−to−date data is paramount. This competitive battle affects factoring and discounting, as credit assessment of clients is a key part of the industry.
“Credit reporting in Australia is in a healthy state with good competition between two large major players, Veda Advantage and Dun & Bradstreet,” says chief executive Terry Collins at industry body, the Australian Institute of Credit Management (AICM). Historically Dun & Bradstreet (D&B) has a commercial or business to business background and Veda Advantage, formerly Baycorp, traditionally has covered the consumer or personal market. But Collins says both have expanded to cover both services. “They have done this by developing their own resources but also by purchasing in other organisations that provide this resource to them.”
D&B’s recent purchase of 47 per cent of FCS OnLine “has strengthened their ability to report in the consumer area,” says Collins. Veda’s purchase of Australian Business Research in September last year “has also provided extra resources and expertise into Veda Advantage”. Collins says this type of two−team playing field is not a bad thing. “We haven’t necessarily lost two smaller organisations but rather those organisations and their resources have been absorbed into larger and potentially more efficient organisations that can better utilise their expertise. They are both well resourced and well run and I think the industry is better for it.”
A commercial credit report provides information on a company’s credit history and status. “It’s understanding and really having some quantitative measures in place about who you want to do business with and then, during the ongoing term of the relationship, keeping yourself well informed about the performance of your customer in their relationship with other businesses,” says Veda’s commercial division’s general manager Russell Evans. “The small business segment, which is now increasingly concerned about preserving its cash flow, is the fastest growing user group of credit reports,” says D&B’s chief executive, Christine Christian. With the economic landscape changing so much, mitigating risk in the current economic climate is very important, says Christian. “There is a new level of sophistication emerging in this country where risk managers and credit managers are now looking for more information.”
According to Evans, Veda has approximately three million individual commercial entities on its database, about 2,500 directors and about 1.1 million proprietors and partnerships. As a domestic company (including New Zealand) Veda provides access to overseas reports for customers looking at export opportunities. Fees to purchase a credit report range from $10 − $100. Says Evans: “Fees really depend on the level of the risk involved and the complexity of data that’s required in that decision.”
“We’ve been enjoying pretty strong double−digit growth over the last three to four years and we see that continuing,” says Evans. “A lot of organisations are feeding off the growth in the resources boom so the whole eco−system around that is creating a lot of growth. We’re projecting similar growth, if not increased levels of growth, over the next 2−3 years.”
D&B’s global commercial database contains more than 130 million business records or profiles, and according to Christian, “is the largest commercial database in Australia comprising a credit risk profile on all 2.8 million commercially active businesses in Australia.” Since expanding into consumer credit reporting in 2001, D&B has tripled in growth, says Christian. “The last eight years have been very positive for us. We have enjoyed significant growth on the back of what has been a very active credit environment in this country.”
Today’s fast moving economy, coupled with customers having a lot of choice, means organisations need to make decisions quickly, says Evans. “Gone are the days when a credit manager could sit around for two or three days and contemplate whether they wanted to do business. It’s really getting the balance about being proactive in the marketplace with growing revenue, but ensuring that you’re partnering with the right sort of entities so cash flow is protected.”
As data decays very quickly, matching data accurately is crucial, says Christian. “Because our customers have to make real−time credit decisions, our absolute competitive advantage needs to be the accuracy of our database.” D&B’s global database is updated a million times a day. She says competition is good, noting the impact that technologies, such as the internet, are having on access to business information. “We are an industry which is subject to highly competitive conditions in all aspects of our business.”
Pace of change·
A new business forms every 54 seconds·
A business files for bankruptcy every 29 minutes.·
A company address changes every five minutes.·
A company enters external administration every 15 minutes.· A company name changes every 22 minutes.
Source: Christine Christian, Dun & Bradstreet
