Even in economically depressed times like the present, we are always told somebody will be out there making money. The trouble is, a lot of those somebodies will be receivers, insolvency experts, debt collectors and so on.
Businesses, in short, who might be expertly run, but whose raison d’être would not exactly fill you with joy, and whose customers would probably prefer to remain anonymous. Not a great subject for a business feature, then.
So it comes as something of a turn-up to hear about the successes of Contis Group, a Skipton-based financial company that has just expanded through acquisition, and in particular to hear about how the product Contis is pushing could be particularly appropriate for these times of austerity. The company produces pre-paid credit cards – cards which you load up with cash before you go out and spend.
While there are around a dozen other companies across the UK offering such services, the group is currently unique in that it is capable of being an issuer, processor and programme manager of the cards it produces. Other companies, such as the Newcastle Building Society and Clydesdale Bank, only perform one of these three functions and so have to find partners to fulfil the deal.
Contis, in contrast, is a one-stopshop. Contis cards can also be used in most ATM machines, which again is something of a novelty. The company was identified as a growth opportunity, if not actually founded, by Yorkshire-based entrepreneur Peter Cox.
In 2007 he came across a small company based in Skipton called Credicard which had been set up by a recruitment consultant working for the NHS who had found it difficult to pay the foreign nationals he was bringing in to work in the service because, not having lived for a very long time in the UK, they usually found it impossible to open a bank account. A pre-paid card seemed a clever solution to this quandary.
Cox saw an opportunity for expanding this service into other markets, so he bought Credicard, initially put it into the ID Data Group he was then chairman of and, when that got into financial difficulties through unrelated matters, bought it out again and launched Contis as a standalone group. The company is now owned by Cox and a number of investment trusts.
But what is perhaps more significant is who Cox has managed to persuade out of retirement to come and work for the company as managing director – one Mike Fromant. Fromant, now aged 59, is something of a veteran of the credit card industry.
He first joined Barclaycard in 1972 when it was then the only UK-based card issuer. Back in the days of the three-day week and double-digit inflation, a credit card must have seemed incredibly exotic, and something only the very wealthy could afford. But on several occasions between then and now, Fromant has clearly shown that credit cards were something the public wanted. After 20 years at Barclaycard he moved to HFC Bank to launch the GM Card, which was then the UK’s first co-branded card (again something that is commonplace today).
“At that time it was the biggest launch of a card in the UK with 15 million people mailed,” he says. “I then got a job with GE Money, launching their bank card business. GE Rewards was the first cashback card in the UK – we got ours out a couple of weeks before Alliance & Leicester.” And yet now while he says he thoroughly enjoyed his career and is glad that credit cards are widely used across the country, he feels there is a place for something which brings people back to reality.
“Many people now don’t want to have credit cards, because they are concerned that they could spend more than they actually have,” he says. He is deeply aware, for example, of the fuss that was kicked up a few years before the credit crunch set in when Matt Barrett, then chairman of his erstwhile employers Barclays, confessed to a House of Commons Select Committee that he personally would not advise any of his friends to have a Barclaycard, because it was too expansive to run.
Fromant says this was definitely a “Ratner moment” referring to the jeweller who confessed to selling “crap” products. “Barrett was talking about his children having credit cards and getting into debt,” he says. “It is perhaps not what you should be saying when you are running a business. He ought to have recommended the pre-paid card. Products are right for different people, but there is nothing wrong with credit cards.” Even still, there must surely be an opportunity now to promote what his company is doing? “I think so,” he says.
“I have two older daughters who don’t want a credit card. There are far more people being declined than there used to be – I believe it’s over a third of all applications at the moment. The other advantage of our system is that there is no credit rating with us. We do have to have customer due diligence, to make sure they live where they say they do and that they are who they say they are, but that is all.
We don’t check their credit history.” So what exactly does Contis offer? First there’s the standard pre-paid card, which the company produces both under the Credicard name and under private labels.
Fromant says: “If you have a son or daughter at university, and you want to help them manage finances, rather than allow them to run up debt, you can help them with a pre-paid card to help them manage finances.” Students needn’t feel they are losing street cred by having such cards, he says.
“It looks the same as any other card. It’s got the Visa or Mastercard brand on it.” The card still remains useful for foreign workers who continue to come to work in Britain, which was its original intention.
“We deal with credit unions too, so people’s benefits can go straight onto the card,” says Fromant. If the card membership is a closed environment – as a credit union would be – Contis can also add another benefit in the form of a cashback loyalty scheme.
“We are, for example, also currently talking to a restaurant chain which pays all its workers by cash,” he says. “That’s quite a responsibility, so why not give them a card where you can load that money on? You can load it on instantly when the staff leave on a Friday night. That means the cash is on the card, not vulnerable in their pocket.” But one area where the benefits of a pre-paid card can really come into their own is among frequent travellers. “You can load euros directly onto our cards,” says Fromant, “so when you are in Eurozone all transactions are conducted in euros and there are no additional conversion charges. You can’t hold two currencies at same time at the moment, but that is one of the things we are looking into. There is no reason why that can’t be done.” The foreign exchange benefit is one reason why Fromant insists pre-paid cards are not just for what might be considered to be the bottom part of the finance market – customers with limited means who most finance companies would shy away from and who other customers would not want to be associated with. But the cards don’t just go to individual consumers either. Contis also runs an account card service for companies which want to simplify their sales ledger process. It is ideally suited for small businesses, in particular hotel chains, but one big customer is glass company Pilkington.
Fromant says: “Their traders may want account facilities, so we give them a Pilkington green card, and they can buy glass based on the account.
This means that rather than having to keep settling with Pilkington each time, they have a period of credit. One statement consolidates that, and the money is collected by direct debit. For Pilkington it saves them all the business of checking out the trader, managing that credit decision, and dealing with transaction.” Again Fromant belives many other businesses could be interested in this. Contis recently acquired GTP, another card producer, out of administration. It had been running a similar scheme for Travelodge, although when Contis bought GTP out of administration Travelodge opted not to continue with the scheme.
The final offer in the group of three is a standard gift card like a voucher. Virgin Experiences and Pizza Express are two of the biggest clients here. But it’s clear Fromant sees plenty of opportunities for other uses of the cards – ones that haven’t really been tried yet.
“I have been talking to a potential client who is launching something on the internet in terms of gaming which they want a payment card vehicle there for,” he says. “There is a lot going on in the internet for payment. I hope to be able to sign a deal in next couple of months.
“Then gambling is another avenue we could go down, and we are talking to people about that as a product. Our scheme has an advantage, because any winnings you make can be paid directly back onto that card. We can do it 24 hours a day. Banks can’t.” There are other territories to discover as well.
“We believe we are a global company, not just bound by the UK,” he says. “We are looking at making interesting deals in South Africa. The Eastern European market is another interesting area, particularly the Baltic states. I might say western Europe too, but you have to have a presence in Spain, France, Germany to be able to break into the market. That would be difficult for us as we stand today.” It’s partly in readiness for expansion that the company this year invested £2m in new technology both at its head office in Skipton and at its satellite office in Ahmedabad in India, where much of the company’s software is written.
“We have been building some more interfaces around authorisation to make better integration directly with Visa,” says Fromant.
Acquiring GTP gave us membership of Visa and our own FSA e-money licence.
So we are also looking at mobile technology, and possibly having a mobile application that lets you open up and load funds via a mobile phone.
“For our travelling customers, that would mean you could buy euros or dollars via a mobile phone at an exchange rate that is available at precisely that time.” But for the moment there is still something of a marketing exercise too.
Despite the advances in technology, despite the obvious benefits for frequent travellers and the desirability of pre-paid cards for money-conscious students, Fromant says they still have something of an image problem.
“The opportunity is there,” he says. “People just see pre-paid cards as being at the bottom end of the market.” But then of course, to a certain extent Fromant has been here before. “It’s really just like Barclaycard in 1970s,” he says. “We need to keep explaining the product and its simplicity.” And that is a challenge he should be up for. In his early days Fromant was a top-class runner, regularly in Olympic trials, although he never quite made it to the Great Britain team. In his forties he once came second in the World Veteran’s Champions 10,000 metres. Although he has given up running, he is still clearly up for a challenge.