Consumer Finance Trends with Matt Welton
In this inaugural installment of our new executive interview series, we're joined by Matt Welton, a tenured leader in consumer finance and fintech. Matt is currently VP of Sales at UOwn Leasing, a lease-to-own financing provider operating in the consumer goods sector.
NICK: The economy is in a strange place right now. We’ve got really high inflation. The Fed has been slowly moving up interest rates to try and control it, which may be good for the long term correction but causes a lot of short term pain. Then there’s been a bunch of layoffs across multiple sectors. Goldman Sachs just ditched its plans for a consumer credit product.
All that sounds precarious, but then we turn around and boom, nominal retail sales are up 3% in January: the largest MoM increase in almost 2 years. In fact, it’s the first time since COVID that every category of retail is up! Now granted, there were some one-time adjustments to the data that may not repeat, but at the very least it seems consumer retail spending is roughly flat or slightly up net of inflation. Where do you see things heading for the retail sector and the credit-challenged consumer?
MATT: As you mentioned, retail sector sales are up, and we expect there will still be a demand for goods that are more needs-based (appliances, tires, etc.). Consumers will still have to replace essential goods, and with supply chain issues mostly resolved, demand should remain strong. Industries that are more related to the housing market (furniture) or luxury items may see some slowdown over the summer if inflation continues as expected.
As for the credit-challenged consumer, unfortunately they tend to have more experience dealing with harder economic turns, so we expect less of a drop in demand with these customers. The recent job losses in tech and other industries may not have as much of an impact on them directly. However, something like a gas price hike will have an impact on payment performance and loss rates.
NICK: Talk to us about UOwn. Sure, merchants can get information from your website, but what do you personally consider your major value propositions for your merchant partners?
MATT: We believe our ability to be more flexible than other providers really separates us from competitors in the space. At the end of the day, we all operate a somewhat similar LTO product, so to differentiate, we must do things the others will not or cannot do. Being able to offer customer solutions in all channels with customized user experience, payment terms, cost, and payment options uniquely positions us as a value leader in the space.
NICK: UOwn is part of a private equity firm, but from what I can see, it’s definitely not a traditional firm (and I mean that in a good way). For one thing it’s in Florida, off Wall Street. It also seems to really emphasize a collaborative, entrepreneurial (or I guess I should say intrapreneurial) culture that you typically see more in VC than in PE. What’s your internal stakeholder experience like being part of a non-traditional PE portfolio, and how does that play into the experience for your merchant partners and their customers?
MATT: It's amazing to be part of the 777 organization. The unique structure of the organization across so many similar yet different businesses gives us access to valuable insights and technologies other companies most likely do not have. Having the full weight of an organization like this behind us affords us the opportunity to have some of the best talent in the industry working on our projects and solutions. Our merchant partners greatly benefit from the resources we leverage across the organizations.
NICK: LTO seems to have a bad reputation among a lot of people who style themselves ‘consumer advocates’ and group all subprime financing providers together as ‘predatory lenders.’ And a lot of merchants are concerned about how third-party vendors that directly interact with their customers will impact their own brand, reviews, and CX. I’m sure we’ve all seen companies that fit the negative stereotype, but there’s also some really great companies operating in this space.
A lot of well-intentioned people attack this entire industry without nuance, not realizing that without it, countless credit-challenged customers wouldn’t be able to buy essential things their family needs. I’m not talking about asking some guy who can barely pay his rent to finance a new luxury home entertainment system; in many cases you’re helping people buy essential stuff like refrigerators, tires, and ovens. So talk to us about the importance of customer experience at UOwn and how you ensure the merchant can maintain their brand’s reputation.
MATT: Great question - we want to set the bar for industry best in the customer experience category. Our ability to white label solutions for our merchant partners really can take away some of the branding issues that some may fear. Additionally, we have created a user experience to really minimize customer negativity through the process, requiring very little data to process the application.
Because of this, the customer is appreciative, and feels like they are being treated fairly like every other customer. Our back-end collections and support use advanced technology and collection practices to minimize the negative backlash that might be of concern to retail partners.
NICK: E-commerce took on a whole new vital importance during COVID, but now 3 years on, things seem to be leveling off. E-comm is no doubt a much bigger piece of the pie than it was before COVID and I doubt that ever goes away, but with travel and social interaction in most places back to normal, brick & mortar is definitely back in action in a big way. As we wrap up, what are some of the major channel trends you’re observing in retail and D2C?
MATT: With COVID being less severe than at the onset, we are seeing a return to retail. We have also seen a spike in some more direct-to-consumer channels, specifically in the tire and wheel space. Customers are spending more time online buying items that will cost them considerably less than in store, and are finding ways to save themselves money. There are still customers who want both options to shop, so omnichannel solutions will be necessary moving forward.
This interview is not sponsored content, and no remuneration was made in exchange for publishing it.
Previously published on NickGausling.com See licensing details.