Market study on the asset finance software market
January 2017
Click to launch
PwC
There is a large and growing market for the provision of specialist software and related services to banks, captives and independents offering asset finance
Specialist software solutions are critical enablers of the provision of asset finance, supporting the critical operational workflows of banks, captives and independent providers
Market study on the asset finance software market
2January 2017
The outlook for both US and European asset finance markets appears positive, albeit slowing
This is driven by increasing penetration of asset finance and a broadly supportive economic environment
Providers of asset finance are fragmenting over time, due to innovative new entrants
The addressable specialist asset finance software market was worth c.$3bn in 2015, of which c.$1bn was penetrated
A further c.$2bn of market headroom exists for specialist solutions to replace in-house and tailored ERP solutions
We expect spending growth of c.7% p.a. to reach c. $1.5bn by 2020, driven by increasing penetration, spend and the asset finance market
Leading specialist software suppliers are those serving the largest banks, captives and independents
These suppliers perform well versus customers’ key purchasing criteria: product interoperability and supplier track record
There is a trend of independent suppliers being purchased by broader software houses – a threat and opportunity to specialist suppliers
1 2 3
4 5 6
7 8 9
PwC
PwC
Source: Market data, PwC analysis
The global asset finance market was worth >$5 trn in 2015, with just under half of this value driven by new business volume in year
Market study on the asset finance software market
3January 2017
US, 2.4
Europe, 1.4
RoW, 1.6
-
1
2
3
4
5
6
5.4
US, 1.1
Europe, 0.7
RoW, 0.8
-
1
2
3
4
5
6
2.6
Global New Business Volume (NBV) for asset finance, 2015, $ trnGlobal outstanding asset finance, 2015, $trn
1
PwC
-
20
40
60
80
100
120
140
160
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Forecast
Market growth in NBV for US, Index 2015=100
The outlook for the US and European asset finance markets appears to be broadly positive
Market study on the asset finance software market
4January 2017
1
Source: PwC analysis, Market data
*Europe figures exclude loans
Central case for forecast market
growth: CAGR
2011–
2015
Forecast
CAGR
2016–
2020
2011–
2012
2012–
2013
2013–
2014
2014–
2015
US:
Asset Finance11.5% 11.2% 9.2% 7.4% 9.8% c.5%
Equipment 15.3% 9.4% 10.8% 10.4% 11.5% c.10%
Auto 9.8% 12.1% 8.4% 5.9% 9.0% c.2%
Europe*:
Leasing &
Hire Purchase
1.2% 2.3% 9.6% 10.4% 5.8% c.5%
Equipment (2.4%) (0.1%) 5.0% 6.6% 2.2% c.6%
Auto 5.8% 5.2% 14.7% 14.2% 9.9% c.4%
Market growth in NBV for Europe, Index 2015=100
-
20
40
60
80
100
120
140
160
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Forecast
We have illustrated growth in
the forecast period for the
central case as well as for a
high and low case scenario
PwC
US asset finance growth is driven mainly by increasing penetration, along with a supportive economic environment, partially offset by expected tapering in equipment & auto sales growth and pending regulatory changes
Market study on the asset finance software market
5January 2017
2
• The US economy is forecast to continue to experience steady GDP growth (1.8% in real terms through 2020), along with continued low unemployment (4.9% in 2016) and sustained wage growth (5.3% through 2020)
• Business confidence has been boosted by the conclusion of the US election, with the new administration’s commitment to cut the rate of corporate tax to 15% forecast to result in a windfall of c.$2.6trn for the private sector in the first decade; the threat of continued dollar strengthening remains a possible challenge
• Some short term political uncertainty remains while a new administration is formed and policies elaborated
Economic environment
• Growth in equipment investment has slowed recently (4% in 2015, vs. 7%p.a. 2010-15), but decline in growth is expected to stabilise as the drag from the stronger dollar and low energy prices dissipate and companies invest at rates consistent with an economy growing at c.2% rate
• US auto finance has seen rapid growth (c.9% p.a. 2011-15), but are forecast to remain broadly flat to 2020 (c.0.5% p.a.). Going forward, this is expected to slow significantly due to
i. a reduction in pent up demand post financial crisis; and
ii. the expected rise in interest rates increasing the cost of finance
Equipment and auto investment
• Increasing regulatory scrutiny on loan sales practices, mainly in the auto market (e.g. BMW was fined in August 2016 for selling loans to consumers who could not afford them), could drag on growth as more strenuous qualifying criteria are applied to those applying for new loans, reducing loan approval rates
• New FASB accounting standards (compulsory in 2019 for public companies/2020 for all) will see operating leases treated the same as financial leases: they will no longer be permitted to be treated as off-balance sheet items. This is likely to diminish their value as a financial instrument, although clarifying a complex set of accounting practices that may historically have deterred some potential lessees from taking out leases
Regulation
• Increasing penetration is supported by supply side factors, e.g.
Increasing incentives from captives to shift increasing volumes generated by improvements in manufacturing capacity
digitisation of the asset finance industry is supporting growth of new entrants on two fronts. Firstly, new innovative peer-to-peer finance models are creating new asset finance providers (e.g. Lending Club for small business loans) as well as the development of the sharing economy creating new modes of using vehicles and equipment (e.g. Uber)
Asset finance penetration
• Commercial loan credit supply is tightening slightly (senior loan officers report tightening standards for last four quarters in FED surveys) in line with initial and expected Federal Reserve rate rises from historic zero rates expected over the forecast period, with the consensus view for 2018 and beyond at c.2-3% (from current levels of 0.75%)
• Metrics of financial stress (e.g. St. Louis Fed Financial Stress Index) are at low levels indicating a healthy credit market, however increasing supply of sub-prime auto loans (to c.22% vs. 2010 levels of c.18%) and the settling of delinquency rates at higher levels than historically (c.3% vs. 2% pre -2008) represent some risk
Credit conditions
Asset finance market value Outlook (2015-20) – Key: PositiveNegative NeutralDriver importance: 4 Highly important 1 Less important
4 3 3 2 2
Economic environment Equipment and auto investment Regulation Asset finance penetration Credit conditions
Source: Oxford Economics, OECD, Trading Economics, Bureau of Labor Statistics, Tax Policy Center, Federal Reserve, ELFF, BEA, FT, Edmunds, Wall Street Journal, PwC analysis
PwC
European asset finance market growth is being driven by penetration increases and benign credit conditions, but Brexit provides an uncertain economic and political backdrop
Market study on the asset finance software market
6January 2017
2
• The European economy is forecast to continue to grow at modest levels through 2020 (real GDP at 1.4% p.a.) with historical low unemployment in the UK and Germany (4.8% and 4.1% respectively), and declining levels in other key markets
• Improving performance of the leasing industry as indicated by the Leaseurope Index pre-Brexit, was a positive indicator, however, Brexit is likely to continue to cause economic/ political uncertainty through 2018 in the UK and to some degree in the EU, affecting business confidence and resulting in investment decisions being put on hold (e.g. in August, Business Sentiment fell to a near 3 year low of 0.02 in the Eurozone)
Economic environment
• Investment growth has rebounded in Europe since 2014, with Sweden (4.5% p.a.) and the UK (5.2% p.a.) outperforming the key leasing markets in Europe (2.3% p.a.) during 2010-15
• The European new car market has seen low volume growth in the past (c.0.5% p.a. during 2010-15), with individual markets performing more strongly (e.g. UK 5.3% p.a.). Growth is expected to increase slightly going forward
Equipment and auto investment
• New banking regulation relating to capital requirements and credit risk (e.g. CRD IV) to be implemented by the EU puts pressure on both banks and captives with banking licenses that could reduce the activity of some players in the market
• In the UK, the increase from £25k to £200k in the amount of capital used for investment that can be deducted from tax could disincentivise leases in favour of buying assets outright (this is likely to mainly affect SMEs)
• The new lease accounting standard IFRS 16 (to be implemented in January 2019) may have an impact in the way leasing is structured but unlikely to substantially affect the demand for leasing
Regulation
• Penetration of leasing is low across Europe (20% on average across a selection of 22 European countries), particularly accentuated amongst countries in the south, presenting significant headroom for growth
• In common with the US, increasing penetration is also supported by supply side factors:
- Increasing incentives from captives to sell increasing volumes generated by improvements in manufacturing capacity
- Digitisation of the asset finance industry supporting growth of new entrants (e.g. Funding Circle – peer to peer small business loans and Uber –sharing economy)
Asset finance penetration
• ECB’s and BoE strategy remains supportive of maintaining credit supply through the continued application of low interest rates, with rate rises in the UK and the EU now not expected until 2018-19 at the earliest
• Loan loss provisions have declined by c.9.2% p.a. during 2010-15 indicating a healthier leasing industry status than in the past, providing confidence for continued supply into the forecast period
Credit conditions
1 Less important
4 3 3 2 1
Economic environment Equipment and auto investment Regulation Asset finance penetration Credit conditions
Source: Oxford Economics, White Clarke Group Europe Asset Finance Survey 2016, OECD, Statista, ACEA, ONS, Destatis, Reuters, PwC analysis
Outlook (2015-20) – Key: PositiveNegative NeutralDriver importance: 4 Highly important 1 Less important Asset finance market value
PwC
Within Europe, most key markets are expected to see modest growth, although the UK is expected to see diminished performance due to the EU referendum result
Market study on the asset finance software market
7January 2017
2
Source: PwC Interviews, Next Continent, WCG, Press search, Company reports, Bank of Italy, Associazione Italiana Leasing (Nov ’15)
• After a period of strong performance in both equipment & auto, supported by benign economic conditions, investment in both equipment and auto is expected to slow. In auto, historically strong growth in car sales is expected to taper as demand for new cars weakens and interest rates gradually rise (albeit likely only very gradually). Equipment finance may be impacted negatively by political and economic uncertainty triggered by the Brexit vote as some investment decisions are delayed
Economic environment
• Equipment finance is expected to keep pace with the economy, as economic uncertainty has led companies to hold back investments in areas such as IT and plant machinery
• Auto finance is expected to continue to grow mainly through penetration in private car leasing
• Future growth in auto should be supported by banks continuing to provide new credit and leasing products as well as increasing penetration
• Equipment finance is expected to increase in line with the economy, with renewed support for financing since 2014 continuing
• For both auto and equipment finance, leasing and lending to consumers and the manufacturing industry is likely to grow as positive trends seen since 2014 continue, supported by increasing penetration
• Sweden’s asset finance growth has been supported by its high-end manufacturing base and the growth in private car leasing
• Further market growth is expected to be supported by increasing penetration in SMEs via lease aggregators, and development of new products (e.g. micro-leases with short lease terms)
AutoEquipment
Outlook (2015-20)
Outlook (2015-20) – Key: PositiveNegative Neutral
PwC
Source: Monitor 100, PwC analysis
In the US, small and medium sized providers have experienced growth outpacing the top end of the market as technology and specialised offerings have enabled market share gains
Market study on the asset finance software market
8January 2017
3
55%
28%
13%
10%
9%
9%
3%
3%
21%
50%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2015
100+
51-100
21-50
11-20
1-10
$390bn$253bn
CAGR
2011-15
38.2%
14.5%
11.5%
5.7%
(5.6%)
A reasonable
proportion of the
drop was driven
by GE Capital
disbanding
101+
US equipment provider consolidation, NBV, 2011-15
• The US asset finance space has seen fragmentation from 2011-2015, driven by new providers in both the equipment and auto space
• In equipment, a large amount of fragmentation took place from 2011-15, driven by:
- GE Capital renouncing its position in the market (accounting for c.14% of the market in 2011)
- New providers driving market growth by increasing penetration of underserved customer groups, regions and asset classes
• In auto, some fragmentation is expected to have taken place, due to improved technology and niche propositions from new and mid-market players. The level of fragmentation is unlikely to be as great as in equipment
Provider
ranking by
NBV:
PwC
Europe lease provider concentration, 2011-2015
• The European leasing space has seen fragmentation from 2011-2015 due to attractive investment returns, with a long tail of small providers gaining share of c.7 ppt of the total leasing market
- The share of the top 10 providers has remained stable over time, the increase in share of the tail (providers outside of the top 70) has been predominantly due to a reduction in share of the top 11-20
• New entrants are following an organic build strategy rather than buying established participants to gain a market presence immediately
- Although Europe as a whole has been fragmenting, there are differences on a country basis
- Markets such as the UK, France, Germany and the Netherlands are relatively consolidated with c.10-15 lease providers controlling c.75% of the market
- However, Sweden for example is much more fragmented – Nordea has a strong market leading position but there are few other sizeable providers
Similarly, the European leasing market is becoming more fragmented, as new providers are entering the market and increasing share
Market study on the asset finance software market
9January 2017
3
Source: LeaseEurope, PwC analysis
Top 70 share 57% 50%
PwC estimate
for top 100– 56%
32% 31%
13% 9%
10%
9%
1%
1%
43% 50%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2015
Sh
are
of
lea
sin
g (
%)
Other
51-70
21-50
11-20
1-10
$331bn$265bn
CAGR
2011-15
5.8%
7.7%
4.0%
3.9%
(4.7)%
4.5%
Total
71+
Provider
ranking by
NBV:
PwC
Current global market size for specialist asset finance software and services, 2015, $m
Global market split by revenue stream, $m, 2015
• This market size is the estimated current spend on specialist asset finance software and services globally, for both auto and equipment assets
- Software spend includes licence and maintenance
- Services includes implementation, customisation and hosting (where applicable)
The specialist software and services market serving the asset finance industry is worth c.$1bn globally. The US accounts for c.40% of the market and Europe c.30%
Market study on the asset finance software market
10January 2017
4
1,050
-
200
400
600
800
1,000
1,200
2015
1,050
2015
Services,
555 / 53%
Maintenance,
356 / 34%
Licence,
138/ 13%
Rest of world,
306 / 29%
Europe,
309 / 29%
US,
435 / 41%
Source: PwC analysis
PwC
There is significant headroom for growth as many asset finance providers do not use specialist software solutions
Market study on the asset finance software market
11January 2017
5
Source: PwC analysis, PwC survey (Nov 2016)
Specialist , 36%
In-house , 34%
ERP, 25%
Manual , 5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
There may be some blurring between in-house (i.e. customised) and ERP solutions, if buyers have customised on top of limited generalist functionality
$2,880m
Current market size,
1,050
Headroom, 1,830
-
500
1,000
1,500
2,000
2,500
3,000
3,500
$2,880m
Value penetration of market by type of solution provider, 2015Asset finance software and services market size vs potential headroom, $m
PwC
For asset finance companies above a certain size, alternatives to specialist software for the core in-life functionality are not necessarily fit for purpose
Available solutions to fulfil in-life functionalities
Market study on the asset finance software market
12January 2017
5
Manual ERP In-house, customised solution Specialist solutions
Description Use of manual or very simple software tools
Use of ERP’s lease/loan accounting module (with some minor customisation)
Use of in-house developed or heavily customised third party solution
Use of a third party’s specialist solution (with some minor customisation)
Example solutions
Pros • Inexpensive to run if portfolios of assets are small/non-complex
• Simple accounting functionality may be fit for purpose for smaller/ less complex lessors
• Ability to use one system (e.g. ERP) throughout company
• Ability to design system to meet precise business rules and requirements of buyer (includingdepth/breadth/workflow)
• Minimal manual work required once implemented
• Deep and broad functionalityavailable (e.g. asset-by-asset depth; potential end-to-end system), including workflow between business functions
• Minimal manual work required once implemented
Cons • Highly manual, entailing significant costs for management and reporting if asset base grows
• Risk of non-compliance and ‘human error’
• Simple functionality lacks deep asset-by-asset detail
• Lack of automation/workflow with other asset finance business functions means significant manual workarounds required
• Workarounds can be expensive and time consuming
• Significant investment required to develop and maintain quality product
• Requires highly skilled internal IT team/external consultants who understand industry
• Significant investment required to implement and tailor to requirements
MS Excel MS Access SAP Oracle BMW Cassiopae Alfa
PwC
This is also true for the front office, with the notable exception of a number of well regarded specialist point solutions
Available solutions to fulfil originations and point of sale functionalities
Market study on the asset finance software market
13January 2017
5
Manual Tailored CRM products In-house developed solution Specialist point solutions Specialist asset finance solution
Description Use of manual or very simple software tools to source leads and manage proposals
Use of a tailored CRM solution
Use of in-house developed or heavily customised third party solution
Use of a solution that only serves the front office within the asset finance lifecycle (note vendors may have other business areas outside of asset finance front office)
Use of a third party’s specialist solution (with some minor customisation)
Example solutions
Pros • Inexpensive if managing a small number of leads or proposals
• Inexpensive alternative to full front office system
• Ability to design system to meet desired customer journey
• Able to drive workflow efficiencies across both front and back office
• Minimal manual workrequired once implemented
• Some are seen as industry standard (e.g. Dealertrack for US auto)
• Minimal manual workrequired once implemented
• Wide breadth of solutions available (and able to be configured to niches as required)
• Able to drive workflow efficiencies across both front and back office
• Minimal manual workrequired once implemented
Cons • Highly manual• Risk of non-compliance
and ‘human error’
• May require significant manual workarounds if not used in conjunction with an originations/POS solutions
• Significant investment required to develop andmaintain quality product
• Requires highly skilled internal IT team/external consultants who understand industry
• Solutions typically focus on one niche – so only suitable for one product type within a certain region
• Significant investment required to implement and tailor to requirements
MS Excel Salesforce BMW Dealertrack Cassiopae Alfa
PwC
The specialist asset finance software and services market is expected to grow at c.7% p.a. to 2020 to reach >$1bn in the US and Europe (and $1.5bn globally)
Market study on the asset finance software market
14January 2017
6
Note: Rest of World accounts for c.40% of the global market. Source: PwC analysis
US – specialist asset finance software market, 2010-20, $m Europe – specialist asset finance software market, 2010-20, $m
ForecastForecast
168 190
214 241
273
309 330
353 378
405 435
-
100
200
300
400
500
600
700
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
247 276
309
346
388
435 463
494
527
564
604
-
100
200
300
400
500
600
700
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
PwC
Growth in the specialist asset finance market will be driven by market share wins from ERP and in house providers, coupled with growth in the end market (1 of 2)
Global specialist asset finance market growth by growth driver, 2010-2020, $m
Market study on the asset finance software market
15January 2017
6
Source: PwC analysis, PwC Survey (Nov 2016)
Forecast
% of growth 2010-15
50% 48%3% % of growth 2015-20
26% 65%9%
586
230 12
221 1,050
109 37
269 1,465
-
200
400
600
800
1,000
1,200
1,400
1,600
2010 Growth in endmarket
Spendincreases on
specialistsoftware
Penetrationgrowth
2015 Growth in endmarket
Spendincreases on
specialistsoftware
Penetrationgrowth
2020f
1 2 3 1 2 3
PwC
Growth in the specialist asset finance market will be driven by market share wins from ERP and in house providers, coupled with growth in the end market (2 of 2)
Market study on the asset finance software market
16January 2017
6
Source: Interviews, PwC analysis
• The total volume of financed assets has been growing rapidly but is expected to taper in both the US and Europe driven predominantly by the slow down in new car sales in both regions (per end market description in previous pages)
• Despite on-going fragmentation of the asset finance providers (driven by disruptors), we expect the vast majority (c.90%) of assets to remain within asset finance companies that would be serviceable by specialist software
Volume of assets in market & fragmentation of financed assets
Licence spend
• Despite slowing end market volumes, some asset finance companies are purchasing increasingly comprehensive specialist software, increasing the average licence fee paid. This is due to:
- Greater demand for greater pre-configuration likely to increase licence spend
- Steady proportion of upgrades to systems with ‘better’ functionality which is increasingly defined as the level of granularity and degree to which it can improve workflow and efficiency
• Buyers typically appear profitable, which supports on-going licence spend (albeit delayed if exceptional circumstances arise e.g. recession)
Spend on specialist software and services per financed asset for existing buyers Penetration
Maintenance and services spend
• We expect new maintenance contract pricing to remain flat at 18% of licence fees. This will be uplifted by annual price increases of ‘CPI plus’ of 3% (based on historical averages)
• We expect overall services spend to increase slightly, supported by:
• Man day rates which are expected to remain robust at c.$1.25k due to relative talent scarcity in this specialist field
• A marginal net increase in the number of services man days purchased, driven by:
- A greater number of front office installations as buyers seek to improve customer experience
- An increasing amount of pre-configured software (growing from 7.5% of deployments to 10% by 2020) which depresses man days volume
• Hosted deployments are a small proportion (10%) of new deployments currently, which is expected to increase to 18% by 2020. The impact on pricing is likely to be marginally positive due to an additional ‘hosting’ charge
Specialist asset finance software and services market
2 1 1 3
Economic environment Equipment and auto investment Regulation
1 2 3
Penetration of companies
Penetration has increased from 62% to 65% of companies from 2010 to 2015, and we expect this to continue to grow marginally to 68% in 2020. This growth will be concentrated largely amongst smaller companies whose current in-house/generalist solutions are old/not fit for purpose
Specialist share consolidation
Specialists’ share of modules is likely to increase, from 54% to 63% driven by consolidation of systems as specialists replace a fragmented environment of solutions, plus predominantly driven by front office installations across a variety of channels (e.g. desktop and mobile) due in part to asset finance suppliers’ response to margin compression challenges
3
Outlook (2015-20) - Key:
PositiveNegative NeutralDriver importance:
0 Little impact on market growth
4 Significant impact on market growth
PwC
Buyers believe that their overall spend on software and services will increase in the coming years, with c.10% growth in annual spend expected by 2020…
Specialist asset finance software buyers views on historic and future spend on asset finance software and services, n=56
Q: Thinking about your company's average spend per year [over the past 5 years/in the next 5 years], how much [has/will] your company’s spend on specialist asset finance software [changed/change]?
Market study on the asset finance software market
17January 2017
6
14% 8%
14%
74%
45%
10%
15%
7% 11%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Past 5 years Next 5 years
Decrease a lot (20%+ decrease)
Decrease somewhat (5 - 20% decrease)
Stay the same (0%)
Increase somewhat (5 - 20% increase)
Increase a lot (20%+ increase)
Source: PwC Survey (Nov 2016)
PwC
…driven predominantly by an increasing volume of services that buyers believe they will procure
Proportion of buyers who have increased/will increase spend on specialist asset finance software and services, by reason for increased spend, n=32,40
Q: What are the key reasons for thinking that your company has/will spend more on its asset finance software
Market study on the asset finance software market
18January 2017
6
24% 29% 27%
22% 19%
28%
55%
27% 30%
5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Increased number of modules/ services licenced from the
provider
Increasing amount of servicesbought (e.g., consulting,
implementation, customisation)
Price increases (inflation) Growth in core business (e.g.,more contracts, greater value
of assets financed)
Change to buy morecomprehensive / detailed
software that is moreexpensive
Past 5 years Next 5 years
Survey results for this category
run somewhat counter to strong
qualitative evidence from
interviews with buyers and
market commentators
suggesting that buyers
increasingly value greater
product granularity
Source: Survey (Nov 2016)
PwC
Asset finance software specialists Illustrative
Amongst asset finance specialists, Alfa, Cassiopae, FIS and White Clarke are part of a group of leading Tier 1/2 providers, clearly distinguishable versus firms servicing tier 3/4 clients
Market study on the asset finance software market
19January 2017
7
• Tier 1/2 customers are asset finance providers with >$500m of assets financed –tier 3/4 have <$500m
• Most ‘global’ providers have notable presence in the US and Europe with a less mature proposition in other regions
- NetSol are the main exception and are a supplier with a significant presence in AsiaPac
• Global providers are of European or US origin and have expanded to operate across other regions in the last 5-10 years
• Developing market share in new regions can take time as success depends on having a local track record
Source: Company websites, Public Information, Interviews, PwC analysis
Target
customer
size
GlobalCountry
focusGeographical coverage
In country and
pan-European
providers with
Tier 3/4 focus
‘Global’ providers
focusing on Tier 1/2
customers
LeaseTeam
Liscor
CIC Group
Copernicus
Sofico
TotalSoft
Banqsoft
Leasepath
IFS
Linedata
Defi solutions
Odessa
Fiserv FIS
White Clarke
Alfa
Cassiopae
NetSolIDS
Shaw
Systems
Tier 1
Tier 2
PwC
Illustrative
Within Tier 1 / 2 specialists, White Clarke Group and Alfa appear to have the broadest functionality and offering
Market study on the asset finance software market
20January 2017
7
Source: PwC analysis
Note: Based on exact ratings for functionality (including back office in-life functions and front office) and breadth of offerings (asset classes and finance type covered) per pp. 23-4
All asset classes and
finance types covered
Asset finance software specialists – Tier 1 / 2 suppliers only
Functionality
Focused asset
class and finance
types covered
Breadth of offering
Strong front
and back
office
Capable
front or back
office, limited
other
Alfa
FIS
Fiserv
White Clarke
Cassiopae
NetSolOdessaIDS
Shaw
Systems
White Clarke Group and Alfa –both British based suppliers –
have the strongest functionality and broadest coverage of asset
and finance types
PwC
The majority of these Tier 1/2 suppliers are present in the US and UK. Fiserv and FIS are the largest companies by revenues and employee numbers, however they offer a much broader suite of products
End-to-end specialist asset finance software providers: company overview
Market study on the asset finance software market
21January 2017
7
Supplier Company description HQ Ownership
Sales20151
$m
EBITDA margin20151
No. employees2
Office locations
UK FR DE SG CN IN AUOther
Alfa Asset finance specialist UK Private 83.0 45% 260 ✔ ✔ ✔ ✔ ✘ ✘ ✘ ✔SE, PL,
NZ
Cassiopae Asset finance specialist France Sopra 34.9 (15%) 500 ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✘ KR
FISCore banking software
providerUS Listed 6,595.2 28% 55,000 ✔ ✔ ✘ ✘ ✔ ✘ ✘ ✔ -
Fiserv Financial services software US Listed 5,066.0 30% 22,000 ✔ ✔ ✘ ✘ ✔ ✘ ✘ ✘ MX
IDS Asset finance specialist US Private n.a. n.a. 250 ✔ ✔ ✘ ✘ ✔ ✘ ✔ ✔ -
NetSol Asset finance specialist Pakistan Listed 51.1 14% 1,500 ✔ ✔ ✘ ✘ ✘ ✔ ✘ ✔PK, ID,
TH
Odessa Asset finance specialist US Private 37.5 n.a. 450 ✔ ✘ ✘ ✘ ✘ ✘ ✔ ✘ -
Shaw Systems
Asset finance specialist US Private n.a. n.a. 100 ✔ ✘ ✘ ✘ ✘ ✘ ✘ ✘ -
White Clarke
Asset finance specialist UK Private 50.9 13% 500 ✔ ✔ ✘ ✔ ✘ ✔ ✔ ✘ AT
US Europe AsiaPac
Note 1: Revenue converted to USD at year average. Latest financial data available for Cassiopae is 2014 and 2016 for Odessa Technologies;Note 2: Number of employees estimated based on information availableSource: Company websites, LinkedIn, Interviews, Orbis - Bureau van Dijk.
Fiserv and FIS’s broader offering mean they are not directly comparable
Illustrative
PwC
Alfa and Cassiopae have been by far the fastest growing suppliers by revenue; Alfa has also maintained industry leading EBITDA margins. Average levels sit at c.11% revenue growth with EBITDA margins of 16%
Financial performance of selected suppliers2
Market study on the asset finance software market
22January 2017
7
Note 1: Financial performance based on the period 2013 – 2015 for Alfa, NetSol, White Clarke and NetSol, and 2012 – 2014 for Cassiopae and Banqsoft; Note 2: Financial data not available for Shaw, IDS and Odessa technologies; Source: Orbis - Bureau van Dijk, Company reports.
(10%)
0%
10%
20%
30%
40%
50%
60%
(15%) (10%) (5%) 0% 5% 10% 15% 20% 25% 30% 35%
EB
ITD
A m
arg
in (
avg
. la
st
3 y
ears
1)
Revenue CAGR (last 3 years1), %
EBITDA not available
Bubble size =
c.$80m revenue
Key:
Tier 1/2
provider
Tier 3/4
provider
Average, 16%
Average, 11%
Alfa
CassiopaeBanqsoft
White
Clarke
Linedata
NetSolLiscor
PwC
All of the Tier 1/2 products have been updated in their lifetime but the Java and .net based modern code bases of some providers are in stark contrast to the legacy mainframe solutions
End-to-end specialist asset finance software providers: Product specification and breadth of market coverage
Market study on the asset finance software market
23January 2017
7
Source: Company websites, Interviews024
Doesn’t cover asset / finance type
Covers asset / finance type but less tested / recently developed
Track record covering asset / finance type
Key:
SupplierCore product
nameCurrent version
Release year of current
version Platform
Asset class coverageType of asset finance
covered
Auto Equipment Lease Loan
Alfa ALFA v5 2009 Java 4 4 4 4
Cassiopae n.a. v4 2010 Java 4 4 4 4
FIS n.a. n.a. n.a. .net 4 2 2 4
Fiserv n.a. n.a. n.a. Mainframe 4 2 4 4
IDS Infolease v10 2014 Mainframe 0 4 4 4
NetSol LeaseSoft v8 n.a. .net 4 4 4 4
Odessa LeaseWave v5 2015 .net 2 4 4 4
Shaw Systems n.a. n.a. n.a. Mainframe 4 2 0 4
White Clarke CALMS n.a. n.a. Java 4 4 4 4
NetSol has developed Ascent, a new .net product. The product was only released in 2016 so has few users to date
Illustrative
PwC
Most solutions provide end-to-end functionality, but Alfa stands out for the core in life function; White Clarke scores well for its front office offerings
End-to-end specialist asset finance software providers: Product functionality
Market study on the asset finance software market
24January 2017
7
Source: Company websites, Public information, Interviews
✘02Doesn’t provide functionality
Provides functionality but interviewees perceive capability is below market average or functionality is incomplete
Provides functionality
Provides functionality and interviewees perceive capability is above market average4
Key:
Alfa Cassiopae FIS Fiserv IDS NetSol Odessa Shaw Systems White Clarke
In-life functions 4 2 0 2 2 0 0 2 2
End of life functions 2 2 0 2 2 0 2 0 2
Front office 2 2 2 2 0 2 2 2 4
Comments Alfa has developed a back office led product which is recognised as being particularly strong for back end functionality (front end is perceived in line with other products)
Cassiopae scores well against other products and performs consistently across different functions
FIS’s back office does not have supplier management functionality in the back office.The product was developed out of a loan focused solution reflecting reports that end-of-life lease management is behind other offerings
Fiserv’s product is perceived well across the market, with a particular strength in its originations module (part of the front office)
IDS’s front office performs less well than other solutions and buyers reported occasions where users were having to use work around solutions
NetSol’s back office does not have supplier management functionality.Further, its ability to manage the end-of-life process was perceived to be modestly behind other offerings
Odessa’s back office does not have supplier management functionality
Shaw’s product was developed out of a loan focused solution reflected by reports that end-of-life lease management is behind other offerings
The front officeof White Clarke Group is strong; buyers commend its modern interface, functionality and digital proposition
Ba
ck o
ffic
e
User requirements for end of life functions is limited therefore there is little ability to differentiate
Illustrative
PwC
There are several factors which influence a customer’s purchasing decision: ability to use one system, interoperability with other vendors and track record are the most significant
25January 2017
8
Source: PwC survey (Nov 2016), PwC interviews
Importance of KPCs, weighted average (1 = very unimportant, 5 = very important), n=56
Value for money and speed of implementation are less important as customers understand the cost and time required to deploy a new mission critical system
The most important purchase criteria are one consolidated solution, interoperability with other vendors, track record and functionality
3.66
3.70
3.70
3.71
3.73
3.77
3.77
3.79
3.80
3.88
3.93
3.95
3.95
Granulairity of Configuration
Asset class specialisation
Speed of implementation
Customer support services
International coverage/scale
Choice of deployment model
Implementation executed by software provider’s in-house team
Value for money
Payment model
Best of breed’ or very strong solution for specific functionalities
Strong track record of delivery
Partnerships/interoperability withother vendors
Ability to use one consolidatedsystem throughout entire business
Market study on the asset finance software market
PwC
There has been some M&A amongst asset finance software suppliers with the most significant being the acquisitions of asset finance specialists by broader software providers…
…which makes for a compelling proposition for banking customers versus standalone specialists
There have been a few notable examples of asset finance software supplier consolidation in recent years, including the purchase of asset finance specialists by broader groups (e.g. FIS SunGard and Sopra Cassiopae)
Market study on the asset finance software market
26January 2017
9
Source: Press releases, Mergermarket, Interviews
• There are now 3 broader software suppliers with asset finance specialism targeting Tier 1/2 customers (FIS, Fiserv, Sopra/Cassiopae)
- Sopra acquired Cassiopae in 2016. Cassiopae currently operates as a standalone supplier, however there is the potential it could pursue a more integrated go-to-market strategy with Sopra in the future
• A broader proposition (including e.g. customer billing, fraud detection, AML solutions, etc.) is compelling to banking customers in particular due to ease of use and consistency considerations across the bank’s full portfolio
• For independents this trend represents increasing competitive intensity in the market, particularly in the pursuit of banking customers; at the same time it also offers the prospect of interesting new partnership opportunities (e.g. with Fiserv who is yet to make any such acquisition)
2011
Field Solutions
2012
2013
2014
2015
2016
SNEDAReal estate solution
Disoft Solutions
Singhammer Software
TalianceReal estate solution
Acquisition of asset finance specialists
FIS acquires SunGard
Sopra acquires Cassiopae
Logo acquires TotalSoft (European Tier 3/4 supplier)
Cassiopae acquisitions
Prior to the acquisition FIS’ specialist asset finance software was focused on auto. SunGard included an established equipment finance solution
This publication has been prepared for general guidance on matters
of interest only, and does not constitute professional advice. You
should not act upon the information contained in this publication
without obtaining specific professional advice. No representation or
warranty (express or implied) is given as to the accuracy or
completeness of the information contained in this publication, and, to
the extent permitted by law, PricewaterhouseCoopers LLP, its
members, employees and agents do not accept or assume any
liability, responsibility or duty of care for any consequences of you or
anyone else acting, or refraining to act, in reliance on the information
contained in this publication or for any decision based on it.
© 2017 PricewaterhouseCoopers LLP. All rights reserved. In this
document, “PwC” refers to the UK member firm, and may sometimes
refer to the PwC network. Each member firm is a separate legal
entity. Please see www.pwc.com/structure for further details.
161228-184344-BM-UK
Contact
Barry JaberPartner, UK Technology Industry Strategy Leader
T: +44 (0)20 7213 3522E: [email protected]
Glossary:
Asset finance market – the value of loaned and leased assets including cover ‘auto’ passenger cars and ‘equipment’ such as machinery, commercial vehicles, IT equipment, healthcare products and aircraft; note Real Estate is excluded
Asset finance specialist software and services market – spend on dedicated 3rd party software supporting the critical operational workflows of banks, captives and independent providers and services required to implement, maintain and develop the software on behalf of customers
Asset finance specialist software suppliers – software providers predominantly focused on serving the critical operational workflows of asset finance customers; suppliers may provide services in conjunction with software or outsource this function to another party
Back office – in-life and end-of-life management of the asset and finance product
In-life functions – activities to manage the asset and finance product for the duration of the lease/loan term, including: contract, customer, asset and supplier management (as applicable)
End-of-life functions – activities to process the termination of a contract including settlement and any remarketing of the asset (as applicable)
Front office – origination and point of sale functionality to manage the quotation through the proposal stage, including credit scoring (as applicable)
FASB – Financial Accounting Standards Board
IFRS – International Financial Reporting Standards
CRD IV – Capital Requirements Directive IV