The board of downtrodden doorstep lender Provident Financial has been blasted by its former boss for a lack of experience in home credit and a flawed decision to turn the business into a fintech firm.
John van Kuffeler, who presided over Provident’s expansion from a small cap to a FTSE 100 giant, told City A.M. he was “saddened” by the sharp drop in the company’s share price earlier this year. The drop, in August, was among the biggest one-day sell-offs in blue chip history.
At the heart of one of the firm’s biggest problems – its inability to collect its debts – was Provident’s decision earlier in the year to terminate the contracts of its large agent workforce.
Instead, staff would be brought in-house, leveraging new technology to streamline operations.
Company insiders say the board still believes its use of technology is the right way forward.
However, Van Kuffeler said: “I think there came a time when nobody on the main board of Provident had a background in home credit.
“Then they brought a couple of technology experts onto the board, which gave an indication of ‘we’re going fintech’.”
He said the “inevitable result” was “that something goes horribly wrong”.
“They tried to institute change, which anybody in home credit could tell them would never work.”
Provident Financial declined to comment.
Provident’s stock market valuation is languishing around 70 per cent lower than the start of the year.
Van Kuffeler said: “I put 23 years of my working life into it… It is rather sad that those that took up the reins have presided over something that is quite as catastrophic.”
The 10-11m adults in Britain’s sub-prime lending market suffer from a lack of supply, according to Van Kuffeler. And it was for this reason – with financial backing of City heavyweights such as Neil Woodford – the 68-year-old set up Non-Standard Finance.
“We are a seriously profitable business. We built this from nothing. Two and three-quarter years ago we were a Powerpoint presentation and nothing else.”
But the man who delivered a “64-fold” return to investors while leading Provident insists online sub-prime lending is flawed.
“There is this perception that fintech is the answer. I am the person who says the emperor has no clothes.”
He added: “Home credit is basically a woman-to-woman business. You have the agents, who are mostly women and the customers, who are mostly women. For the women who are the agents, totally flexible working hours, which they can decide and build around their lives and their customer lives is what really works.”
Non-Standard Finance has benefited from Provident’s travails, not least by attracting around 400 of its best agents to come to work for it.
But Van Kuffeler said his Bradford-based rival is salvageable, albeit in a different, smaller, form.
“It will be put back together by Chris Gillespie, who used to work for me, but to probably less than half the size of what it was,” he said.