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Sub-prime lender links technology upgrade to financial problems

Lender partly blames new automation software for its poor performance

Provident Financial said that problems with its automation of traditionally manual tasks are linked to its profit warning and stock market devaluation.

The firm, which lends money to people who would struggle to secure loans for traditional lenders, changed its business model this year in an attempt to make better use of automation technology.

According to the Guardian, the company replaced 4,500 sales agents, who were self-employed, that went from door to door and replaced them with 2,500 full-time staff known as customer experience managers. These workers connect to the head office systems via iPads and use analytical software to help them better manage their time. But debt collection rates have dropped dramatically.

The company pointed to problems with the software it uses to support the full-time staff in a statement to the stock market, Provident said the software had “presented some early issues”.

According to the Guardian, Manjit Wolstenholme, who became executive chairman following the stepping down of CEO Peter Crook, said the strategy of using full-time employees supported by technology will remain, but added that the software that supports them might need to be tweaked.

“We seem to have lost something along the way in trying to be too automated about it,” she said. “We had a good business and need to make sure we get back there.” She said part of the problem was that staff were visiting borrowers when they were not in.

This is a warning to other financial services firms not to jump on the automation bandwagon despite the fact that the sector is driving the take up of automation.

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For example, a report from financial services management consultancy Opimas predicted that in 2017, not including acquisitions of startups, finance firms in the investment sector would spend $1.5bn on robotic process automation, machine learning, deep learning and cognitive analytics, increasing by 75% to $2.8bn in 2021.

Lenders are also looking at ways to reduce their costs through the automation of processes. For example, HSBC’s mortgage business is using software from Capita and will increase automation for and make it simpler for brokers to transact with the bank and manage applications.

Firms face increasing competition from IT-led companies including peer to peer lenders and challenger banks, with lower legacy and overheads, and are looking at technology as a way to keep pace. But their business moodels make this a complicated change.

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