In conversation with our Head of Data Analytics
In the latest instalment of our senior leader series, we hear from Gareth Rumsey, our Head of Data Analytics. Gareth joined ThinCats in March 2020, just two weeks before the covid pandemic started - an interesting time to start a new job! He brought more than 20 years' experience in B2B data analytics and a passion for using data to drive results.??
He tells us why he was drawn to the alternative finance space, what sparked his focus on mid-sized businesses, and how adopting a data-driven approach is fundamental to successful outcomes for our clients.??
How did you get involved in modelling data for mid-sized businesses? ?
I started out at The pH Group, a small but growing London-based management consultancy specialising in database marketing. I was working with blue chip clients - predominantly the main high street clearing banks. ?
Because of this customer base, we increasingly branched out beyond marketing into other areas such as credit risk, fraud, AML / KYC. The company was acquired by Experian in 2007 and I spent the next 13 years working there.?
Most of our predictive models – both risk-related and assessing appetite for finance spanned the whole business population, but within them, we would build separate models (scorecards) for each segment of the market. I spent a lot of time looking at the smaller end of SMEs because that’s considered the area of the economy that’s the least well-understood - the less data there is the more creative you need to be in your modelling and the more valuable “alternative” (i.e. not publicly available financial) data becomes ?
It was when we did some work looking at scale-ups with the Confederation of British Industry (CBI) about 8 years ago that I first focused on mid-sized businesses as a specific cohort. ?
What did you discover and what interested you about this population? ?
What’s interesting is that a relatively small number of high-growth businesses can have a hugely disproportionate impact on the overall economy.??
If you are focusing on small and micro companies with a handful of employees and no more than few hundred thousand pounds of turnover, you need to support thousands of these businesses before you have an impact that moves the needle from an economic perspective. But when you are dealing with mid-sized businesses with tens of millions in turnover, helping a few dozen to double or treble in size can make a tangible contribution to GDP relatively quickly. ?
For example, the mid-sized universe that ThinCats focuses on has around half a million firms – so it is a much larger population than large corporates and a much smaller population than micro-SMEs. Interestingly, each of these 3 market segments are roughly equal in terms of their contribution to the economy - so the population we’re seeking to support represents around a third of UK employment and GDP. ?
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ThinCats is quite extreme because we only have a couple of hundred borrowers with an average loan size of around ￡3.5m per borrower, so the impact that is having in allowing these businesses to grow – organically or by acquiring other businesses is powerful. And of course, while it is hard to quantify this, there will also be a trickle-down effect as businesses of this scale that are growing rapidly will inevitably be spending more on goods and services which generates growth in income for the businesses that supply them. ?
Although we could have chosen to deploy a similar amount of funding to support smaller businesses, it’s inevitable that while some such businesses achieve strong growth – and a few manage spectacular, unicorn level growth – many do not. Whereas to have become a mid-sized business you must first have passed through small. So, although not all these businesses are in a growth period at any given point in time, they have all experienced growth in order to reach their current scale. That means the business owners or directors have proven that they understand how to take a business from small to mid-sized; how to achieve growth. We are here to support them in the next phase of that journey. ?
What drew you to the world of alternative finance??
In my time at pH Group and Experian, I worked with all the main banks and then - as alternative finance emerged out of the last recession - of the likes of Funding Circle, Ratesetter, Iwoca and other fintechs - including ThinCats. It was clear from my dealings with these alternative finance companies how much energy there is within them.??
The world of data analytics requires creativity and innovation, and the traditional banking environment isn’t an easy place to achieve it. High street banks are big beasts and naturally have large turning circles. Alternative lenders tend to be leaner, and they aren’t held back by legacy systems, which means you can be much nimbler in your reactions and adaption of new technology. ?
Why ThinCats specifically??
“Fintech” is mostly associated with businesses using technology to make instant decisions – “money in your account within 24 hours”. But for ThinCats, given the nature of the businesses we work with and the size of the loans that we are doing, we’re never going to be making automated lending decisions. Our clients’ businesses, and their lending requirements are complex. We are typically lending against projected future cashflows rather than tangible assets - this needs human interaction to understand their requirements, how their business works, and to find the best solution. All the loans that we write are still manually underwritten.?
What makes ThinCats interesting from an analytics perspective is that we’re integrating the world of analytics based on big data with the expertise of our internal clients – the credit / underwriting team, the portfolio management team the borrower services team who monitor loans once a customer is onboarded. So, the analytics my team are producing are really feeding directly into the day-to-day decision-making of these end-users. We collaborate with them to help them understand how to interpret and evolve the outputs we are creating rather than it being a pure machine-based process. ?
In a world where people are increasingly using tech to remove human intervention, the blend of machine and human interaction is quite rare and interesting. And that is a large part of what ThinCats is about.??