Finance
Corporate loan recovery rates much higher than assumed, confirms second Global Credit Data report on LGD

For the second year running, Global Credit Data releases extensive analytics on loss given default, confirming the positive results from 2018
Global Credit Data (GCD), a not-for-profit data-collection initiative jointly owned by more than 50 leading global banks, has today released its second authoritative report on loss given default (LGD) for large corporate borrowers with a turnover above €50m. The LGD Report 2019 reveals that long-term recovery rates for large corporates are significantly higher than industry estimates. According to the data, banks recover, on average, 76% of debts owed by large corporate borrowers after default. This is significantly higher than the 55% recovery rate implemented by the Basel Committee on Banking Supervision for corporate exposure under the foundation IRB approach.
The findings are based on a reference data set comprising 10,737 defaulted borrowers and 18,465 facilities, from 58 lenders worldwide.
“With three new lenders, over 1,000 more borrowers with more than 1,500 loans and an additional year’s worth of defaults, these results are based on a larger and richer data set than last year’s industry-standard report,” says Nunzia Rainone, Methodology and Membership Executive, Global Credit Data. “The fact that the findings are in line with the previous report confirms the stability and consistency of our data sets and the reliability of our long-term estimates.”
Results also reveal that seniority and collateral remain important tools for minimising LGD. Indeed, LGD outcome is usually lower for collateralised defaults, supporting common bank lending policies that assume that the taking of collateral will improve their position.
The data indicates that secured LGDs are generally lower than unsecured (22% vs. 27% on obligor level; 22% vs. 25% on obligation level). Meanwhile, for unsecured LGD, seniority is confirmed as a driver at obligor level (26% senior vs. 38% subordinated) and obligation level (24% senior vs. 36% subordinated).
The time banks take to recover defaulted debt is also quicker than might be expected. While time to resolution is two years on average, the average time to recovery (TTRec) – the average period between default and cash flow payment weighted by the amount of the payment – is only 1.2 years. As a more objective measure of the time in default, only dependent on the time to cash flow, TTRec represents a useful tool for understanding discount rates on LGD. Outcomes for TTRec are also remarkably similar across differing collateral and seniority states.
“Insights gathered from the LGD Report 2019 continue to confirm the benefit of detailed and granular collection of post-default cash-flow data,” adds Richard Crecel, Executive
Director at Global Credit Data. “The consistency of our data sets – compiled from our members’ own high-quality data – allows for objective analysis of LGD drivers. As a non- profit organisation, we insist on this high quality of data from our members – which drives detailed high-quality outputs and well-informed decisions.”
GCD also provides its members with the detailed data sets and extensive peer comparison reports, allowing them to test and confirm results with customised sub-sets of data. This gives banks the opportunity to benchmark their own results against those of their peers and carry out detailed analyses of often complex considerations such as the impact of collateral.
Click here to download the full report.
Click here to download the Appendix: Database & Methodology.
Finance
What’s in store for Financial Services in 2021?

By Miroslava Betinova, Head of Strategic Sales at PPS
If there is anything that 2020 taught us, it is the need for speed when it comes to the adaptation of services and their delivery. The world was changed overnight with the arrival of a virus that challenged and shook up our daily lives to the core.
Across many sectors, organisations worked quickly to help provide services and solutions to support the changes people and businesses were having to make to adapt to new requirements. In particular, the payments and technology industries provided a lifeline not only across the corporate world, but for consumers too, making our day to day lives easier. As part of this progress, it meant that users were able to interact within the retail space in a safer manner through the use of contactless technologies that helped to prevent the spread of the virus. As we kick off the New Year, here are my top predictions for what 2021 might have in store for the world of financial services and fintech.
Your Marketing strategy will focus on Gen Z
Putting spare change and birthday money into a ceramic pot in the shape of a cute farm animal was no doubt one of the first financial management activities we are all likely familiar with. The days of the piggy bank are long gone for today’s youth, however, who now have real-time balance APIs to count their pennies for them. For Gen Z, it is customary for birthday money to arrive via bank transfer, and for different APIs to track and even prevent their spending. As such, it’s the quirky add-ons, funky features and ‘cool’ factor additions that will appeal to this generation who were practically born with a smart phone in their hands that will give your financial products an edge. Gen Z will swift become a main target market for financial services, so their expectations should be taken seriously. If you can turn it into #instastory you can sell it – step aside SWOT analysis, it’s time to ramp up the ‘Likes’.
Fintech will wear green
This time last year Australia was on fire, young climate activists were skipping school on Fridays, and people of all generations were taking to the streets with recycled banners to speak out for the planet.
The need for climate change was recognised more than ever before within every sphere, and the fintech sector was no different. Most of us complete at least one financial transaction everyday – if not several, (for those of us with a slight online shopping addiction!) – so it is only prudent to understand how our purchasing habits, investment choices and the cards we carry in our wallet impact the only home we have.
It’s refreshing to see that climate change and environmental awareness are shifting their position in the world of finance. What was once just an obligatory tick-box exercise is now a central focus and driver behind companies’ strategies and product design. As with everything else that’s hip and trendy, there will no doubt be many more jumping onto the green band wagon this 2021. But don’t just take their word for it – do your homework to truly understand how your selected financial services provider contributes to environmental protection.
Compliance will continue to be the angel on the shoulder of every successful fintech
Whilst ‘product suitability’ and ‘speed to market’ are the words on every fintech’s lips, the long-term success, scalability, and resilience of newly launched ventures depend heavily on compliance. It’s not sexy stuff, and it certainly won’t be the source of the latest TikTok trend, but understanding the implementation and rigours of compliance will be well worth it.
One of the advantages of start-ups is that they usually have a big and resilient partner behind them with a strong understanding and knowledge of the Do’s and Don’ts. I have often been reminded of the importance of listening, so my advice to you is to listen to the angel: Invest a lot in your product; invest even more in your compliance.
Innovation will shift into 6th gear
The question I hear so often when speaking about new start-ups is: ‘Does the world really need another challenger bank?’. Probably not. But do other sections of financial services (that we use less frequently but are still an important part of our interaction with money) need a fintech makeover? Absolutely yes!
Imagine a world where pensions, mortgages, charitable donations, or early salary payments can be processed in a less tedious, paperwork-free way. 2021 will deliver innovation to the areas of financial wellbeing that we usually dread dealing with. Enhanced by Open Banking, new start-ups will bring users closer to their mortgage repayment plans, or provide a credit card facility free from the financial debt and anxiety that often accompanies them. Innovation will be shifting up a gear in this sector, so buckle up – it should be an exciting ride!
ReTech is here to stay, and it’s about more than just loyalty stamps
As the UK, Europe, and wider world continue their battles with C-19, the High Streets will continue the battle for survival. Mobile payments and NFC technology are already ensuring a contact-free shopping experience for those who choose to venture out from the comfort of their homes, but the role of online shopping and e-gift cards will step up a notch also.
e-Gift cards to help with school meals or to say thank you to dedicated key workers will become available. Using a prepaid QR code they’ll be treated to free meals at the end of what must feel like an endless shift. Virtual high-fives and digital thanks will be the theme of ReTech throughout 2021.
No one knows exactly what the future holds, but one thing is for certain: Fintech will be part of it.
Finance
Worldline launches Data as a Service platform for online payments

The new service enables users to do more with their data and is paving the way for a more insightful future in the payments industry
Worldline [Euronext: WLN], the European leader in the payments and transactional services industry, today announced Ingenico’s launch of its first ever Data as a Service (DaaS) platform for payments, Ingenico Insight. The state-of-the-art solution features the latest in machine learning (ML) and data science capabilities for payments combined with an intuitive and tailored user experience. Ingenico is part of Worldline since October of 2020 and offers merchants smart, trusted and secure solutions to empower commerce.
Ingenico Insight is a new evolution in reporting, business intelligence (BI) and transaction management for payments. It transforms the traditional dashboard, used to see aggregated data, into a platform with deep-dive and payment optimization features. The platform will include capabilities to extrapolate data and make predictions and provide prescriptive measures and will offer a benchmarking ability to compare against industry averages. These features built with ML and artificial intelligence (AI) use past data to know how to influence the future.
Worldline customers can act intuitively and in real-time, investigate datapoints individually (such as separate transactions or disputes), take control of data and identify and resolve conversion, chargeback or fraud related issues much faster. By enabling this deep-dive capability into separate datapoints, Worldline is making reporting and problem-solving easier and more precise.
To allow businesses to manage data across the entirety of the payments funnel, the solution can also be tailored to the employee using it. For instance, a fraud manager will be most interested in payment disputes and fraud issues, while payment managers will want to know more about authorization and conversion rates. The solution ensures they see the data they need and recognizes multiple stakeholders such as fraud, finance, operations, developers, and payment managers.
Anne-Claude Tichauer, Global Head of Portals, Digital Commerce, Merchant Services at Worldline explained: “I’m very excited about this product because it is a big change for payment management. Ingenico Insight goes a step further than traditional dashboards, providing tailored advice on top of in-depth insight in payments. Moreover, we built it with a UX centric approach, incorporating feedback from customers along the way. This makes it intuitive and user friendly. You can play around with data while making smarter decisions effortlessly.”
Going forward, Worldline has confirmed that it will continuously evolve the platform, to enhance its capabilities, features and functionality. The roadmap includes the addition of autonomous analytics, ML powered chargeback advice and easier refunds and chargebacks.
Ingenico Insight has launched in beta version and is available now. To learn more about the solution, visit: ingenico.com/insight
Finance
Employee Ownership Trusts increasing in popularity amid a backdrop of continuing uncertainty

With 2020 behind us, the impacts of the COVID-19 Pandemic and Brexit are still being felt throughout the economy, and will no doubt continue to cast a cloud of uncertainty for a good while yet. Businesses and business owners find themselves in a state of flux, not quite knowing which way to turn as circumstances continue to evolve so rapidly.
A traditional sale to an aligned trade purchaser or private equity investor may still be appropriate to many business owners seeking to exit in uncertain times, the long lasting effects of Covid-19 are likely to give rise to an increase in protracted commercial negotiations over company valuations, particularly if trading performance for 2020/21 have been supressed for a long period of time, and the scarcity of potential purchasers who are fair and commercial, rather than those seeking a potential bargain or reasons to de-risk the deal. However, if the thought of going at it for another three to five years is even lower down the list, there are other alternatives available to an owner looking for a different way to hand over the mantle
The advent of Employee Ownership Trusts (EOTs) in September 2014 has opened the door to many owners searching for alternative succession plans, creating a framework for greater employee engagement, and participation in the upside of future success.
Castle Corporate Finance have helped a number of owners and management teams through the process of a sale of shares to an Employee Ownership Trust, enabling not only succession for founders, but also allowing companies to manage and implement ambitious growth plans. The evidence to date [insert source reference to EOA website] indicates a significant increase in productivity within employee owned businesses – perhaps another factor contributing to their increasing popularity.
“Employment Ownership Trusts are not the answer for everyone but offer a distinct path for many owners or founders who may have explored traditional exit routes without success, and who may not be aware of the existence or the potential benefits of an EOT. The number of employee-owned businesses is rising rapidly, and we expect that trend to continue in the coming year as founders seek to de-risk, and management teams seek ways to involve their workforce in the running of the company.” said Victoria Ansell, director at Castle Corporate Finance.
One of the other substantial benefits for sellers is also the generous tax break on this form of exit which currently exists, in the form of 0% capital gains tax on the proceeds of sale, provided the transaction complies with the legislative framework. Employees could also gain a tax-free cash bonus of up to £3,600 per employee per year.
Knowing who to turn to for advice is the important first step for any business owner looking to explore the options available to them. An EOT could be the right solution but there are important criteria and conditions to be met.
“Castle can initially help to assess the feasibility of an EOT, firstly as an exit strategy for the current owner(s), but secondly as to whether it is a viable framework for the company itself as one looks to the future. We can help to assemble (and project manage) an experienced team of professionals to support sellers and the trustees of the EOT alike, covering valuation, taxation, and legal aspects, and drawing all those strands together. Finally, by supporting shareholders or management when presenting the EOT to employees: helping to ensure that transition to employee ownership gets off on the right foot from the beginning is vital.” Victoria said.
Employee-owned businesses in themselves are not new and business models of shared ownership have been around in one form or another for over a century. However, this model is less than ten years old, and many are still not aware of it. Castle Corporate Finance believe it should form part of any discussion around succession plans, and particularly at this time the EOT framework could be a lifeline to some business owners who want to share the success of their businesses with their employees.