Johannesburg, 17 Jun 2021
There are two main challenges when it comes to compliance and loan management in the industry, according to Pierre Bezuidenhout, General Manager of Delter.
“The biggest challenge in the South African landscape is complexity arising from the National Credit Regulator (NCR) requirements. These requirements include breaking up a loan into various components, including interest rate calculations, service fee, initiation fee and VAT. Some credit providers might add credit life to the mix.
These components all have to appear on the credit agreement and they all entail very specific calculations. Managing this complexity is one of the biggest challenges faced by credit providers in this sector because they can’t just use a normal Excel spreadsheet to assist them with these calculations.”
The second challenge faced by businesses around credit management is reporting. “Over and above the usual financial reports, credit providers must submit statistical reports to the NCR, if the business is big enough, quarterly. This isn’t a financial report, it’s a statistical report, so the normal financial figures that are put forward by an accountant aren’t sufficient.
"The report includes number of credit agreements concluded by gender and within certain earning brackets. If you don’t use a credit management system that allows all of these fields to be captured when you initiate the transaction, it could end up taking you a lot of time – and money – to compile these reports after the fact.”
Over and above POPIA, which comes into force in July, there’s a fair amount of compliance around credit management, including loan calculations, NCR reporting, data sharing and affordability studies.
“Regulation requires that an affordability study be conducted prior to issuing credit, to protect against reckless lending, which in turn requires access to a credit bureau. The data needs to be shared in a specific format, so having the right platforms and integrations in place that automate this will mean that the business doesn’t need to invest in in-house technical expertise.”
Technology and automation have a major role to play in ensuring compliance by allowing the business to correctly configure various loan calculation fees with the minimum amount of information. “By correctly configuring your credit management system, you can ensure all fees comply with NCR requirements because the system automates working out those fees once you enter a capital value.”
Having data in an electronic format means that all forms can be generated automatically to complete reports in line with NCR and SACRRA requirements. Web services and cloud solutions mean that all the latest data can be collected and formulated into the required layout to be uploaded into the credit bureau space. This can be automated to occur at the end of each day.
It’s key for the credit management solution to be integrated into various other systems, including credit bureaus, insurance and pay systems. “Access to credit bureaus means you can get a report at the click of a button. You need to be able to upload to the pay system that processes your debit order, and then provide reporting to the insurance underwriters to ensure you’re compliant in that space.”
Bezuidenhout says there are four key things to look out for in a credit management solution:
Firstly, you require configurability. You don’t want to invest in a solution that requires new software development every time you want to change the functionality. You need a system that can adapt to the Credit Act as it is interpreted by your business.
The ability to integrate is vital as the more providers that your solutions integrate into, the more options you have. If your system only integrates with one other credit bureau or pay system, you have to work with them regardless of the service you receive.
User-friendliness is also key because not everyone who will use the system has a degree in IT. It must be easy to operate and allow the user to generate accurate reports quickly and easily without involving an IT professional.
Then security is obviously a factor. In an industry where money is involved, fraud is always a risk, whether it be internal (in branch) or external (by customers). This can be limited to some extent by functionalities such as the ability to take photos of clients, upload documents electronically, capturing biometrics and being able to send an OTP to the client’s cellphone.
Bezuidenhout concludes by saying: “People are very much creatures of habit; they like to keep doing things the way that they’ve always done them. However, the current business environment means that out of necessity there’s constant change to processes and systems and regulations, so it’s key to partner with a service provider that is flexible in bringing technology to the table that can accommodate all of these changes, but with minimal impact on your environment. If something is difficult to use or perceived as not working ‘properly’ people tend to revert to their old way of doing things, without considering that previous systems may be more vulnerable from a security point of view.”
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