Navigating the Launch and Adaptation in Romania: An Insightful Journey

In an interview with Vadym Bortnyk, Country Manager at Space Crew Finance, we're given a rare glimpse into the ambitious plans and strategic nuances behind launching their new digital lending  business in Romania. Vadym's insights provide a roadmap of preparation, from assembling a robust team to navigating the complex risk management landscape, setting the stage for a groundbreaking entry into the Romanian market.

So, why Romania? What makes it the chosen land for your digital lending business expansion?

Great question! Choosing Romania wasn't just a spur-of-the-moment decision; it was backed by some solid reasons that align perfectly with our growth ambitions. For starters, the average loan size here swings between 300 to 500 euros, hinting at a pretty promising profitability potential. But that's just the tip of the iceberg.

Interesting! Could you delve a bit deeper into what else tipped the scales in Romania's favor?

Certainly! Romania's advanced electronic court system is a game-changer for us. It means we can recover debts from online loans swiftly, a process bolstered by the presence of specialized debt collection firms. This efficiency in loan recovery is a big win.

Then there's the regulatory environment. The National Bank of Romania not only regulates the market but also keeps it fair by weeding out the overly aggressive players. Plus, the lack of legislative caps on interest rates for short-term loans gives us the leeway to balance default risks with profitability.

How about the cultural and social dynamics? Do they play a role in your strategic decision?

Absolutely. Romanians, particularly from the older generation, place a high emphasis on repaying debts. It's a cultural trait that reduces the risk of non-repayment significantly. Moreover, the payment discipline among clients here is commendable, underpinning the efficiency of our digital lending activities.

You also mentioned the opportunity to analyze competitors. How significant is this aspect?

It's quite significant. The transparency in licensing allows us to conduct a formal analysis of our competitors' financial indicators. This visibility into the market dynamics confirms the potential for digital lending organizations like ours to succeed here.

Shifting gears a bit, tell us about the roadshow you conducted in Romania. What were your goals and what did you discover?

The roadshow was pivotal for us. Our aim was to understand the lay of the land - from key market players to regulatory nuances. Meeting with a variety of stakeholders, including association representatives, marketing and risk directors, and leading CEOs, opened up a wealth of insights.

Romania's strict regulatory framework, managed by a vigilant central bank, was a key takeaway. The requirement for the CEO to be a Romanian citizen, for instance, underscores the responsibility companies have towards their clients here.

What were some key insights gained from these interactions?

The systemic approach by the Central Bank of Romania was enlightening. The market is regulated through a series of about 26 procedures, including KYC policies and risk management, ensuring companies adhere to high standards. Despite the tight regulation, there's room for flexibility in setting interest rates and developing products, which is crucial for innovation and adaptation.

Moreover, the emphasis on fraud prevention and data protection, through collaboration with certified KYC providers and access to crucial data sources, gives us a holistic view of a client's solvency. This comprehensive approach to regulation and operation reaffirms Romania's strategic importance to our digital lending business.

Diving into the details, could you walk us through the stages you go through when starting a business in Romania? It sounds like a meticulously planned process.

Indeed, it is. Launching our digital lending business here involves a sequence of well-orchestrated stages:

1. Management Team Selection: It all starts with getting the right leadership in place. We appointed a CEO who brings a wealth of experience from leading market entities. This strategic move provides us with insights into the local market trends and management practices crucial for our success.

2. Legal Groundwork: Next, we lay the legal foundation by partnering with legal experts to establish a legal entity and navigate the licensing maze with the National Bank of Romania. This stage is pivotal, ensuring our operations align with local regulations right from the get-go.

3. Business Plan Development: Crafting a business plan in tandem with insights from seasoned consultants and market leaders allows us to validate our strategies and ensure they're grounded in reality.

4. Infrastructure Setup: Preparing the physical backbone of our business involves securing office spaces and meeting the financial prerequisites for licensing, a crucial step toward operational readiness.

5. Product Development: Parallelly, we focus on creating bespoke credit products tailored to the Romanian market, ensuring our offerings resonate with local needs and comply with regulatory standards.

6. Policies and Procedures: Developing robust procedures for risk management, data protection, and compliance sets us up for seamless operations, safeguarding both our interests and those of our clients.

7. Marketing Strategy: With the groundwork laid, we then shift our focus to crafting a compelling marketing narrative, leveraging digital platforms to introduce our offerings to the market effectively.

These steps ensure comprehensive preparation for launching the business, guaranteeing that by the time of receiving the license and starting operational activities, all business elements will be set up and ready to operate at a high level.

That’s quite comprehensive. What about the unique features of the Romanian market? How have you navigated these?

Romania presents a fascinating mix of opportunities and challenges. The high cost of client acquisition drives us to innovate in customer engagement and retention strategies, such as utilizing telesales for a more personalized outreach.

The diverse digital lendingproduct landscape necessitates a deep understanding of consumer needs, guiding us to tailor our offerings for standout value. Regulatory caps on debt-to-income ratios prompt creative structuring of our credit lines to ensure accessibility for a broader clientele.

Moreover, the regulatory mandate for transparency through financial disclosures reinforces the importance of establishing trust and reliability in our operations.

And when it comes to product development and dealing with legalities, how do you approach these aspects?

We're implementing a hybrid strategy, blending our proven technological frameworks with local adaptations to meet the specific needs and preferences of the Romanian market. This approach allows for rapid deployment and scalability of our digital lending products, ensuring we're both competitive and compliant.

Legal and licensing challenges are navigated through close collaboration with regulatory bodies, guided by our seasoned CEO and legal team. This strategic alignment ensures we not only meet but exceed the regulatory expectations, setting a benchmark for operational excellence in the Romanian digital lending market.

As you embark on this new venture, assembling the right team is crucial. How do you approach this critical step in Romania?

Indeed, assembling the right team is paramount. Our strategy emphasizes a blend of local expertise and global insights. We start with recruiting local talent, leveraging our CEO's network to identify individuals who not only possess the requisite skills but also embody our core values of integrity, efficiency, and effectiveness. Furthermore, we tap into our global talent pool, offering opportunities for internal candidates to lead and innovate within this new market. This approach is underpinned by a matrix management structure, fostering best practice sharing and agility across our global and local operations.

Risk management is another pivotal aspect. Could you elaborate on your strategy in this domain, especially considering Romania's unique market dynamics?

In Romania, our approach to risk management in the credit business is based on the use of rich market data and modern anti-fraud technologies: 

• Credit bureau and tax data: The foundation for risk assessment is the mandatory integration with the credit bureau and the tax service of Romania. This allows us to obtain accurate data on clients' credit histories and their incomes, ensuring reliable assessment of their solvency and overall debt burden. 

• Anti-fraud policies and KYC providers: Working with certified KYC providers, approved by Romania's digital ministry, is also critically important for our activity. This ensures the authenticity of client data, confirming their reality and reducing the risk of fraud. 

• Development of a scoring model: Using credit bureau and tax data, combined with experience from other markets, we develop a scoring model with separating ability, allowing for accurate prediction of client behavior in terms of loan repayment.

• Collaboration with risk consultants: Active interaction with risk consultants facilitates the effective development of a scoring card, taking into account local features and experience with credit and tax data. 

• Use of international services: Additionally, we integrate with international anti-fraud services and data providers to strengthen our verification and risk assessment mechanisms. 

These measures form the foundation of our risk management strategy in Romania, allowing us not only to meet regulator requirements but also to provide a high degree of protection against potential risks associated with lending.

Looking ahead, what are your immediate plans for the first half of 2024 in Romania?

The initial 6 months are critical for laying a solid foundation. Our immediate focus is on securing the legal and operational frameworks, starting with company registration and the appointment of a seasoned general manager. 

Concurrently, we'll be finalizing our office setup and advancing through the licensing process with the National Bank of Romania. Product development is also in full swing, aimed at delivering tailored financial solutions that resonate with Romanian consumers. 

Our goal is to commence lending activities by the third quarter, with an ambitious target of reaching a significant loan issuance volume by year-end.

It sounds like a well-structured and ambitious roadmap. How confident are you about navigating the regulatory landscape and market entry challenges?

We're cautiously optimistic. Our confidence stems from our comprehensive preparation, the expertise of our team, and our proactive engagement with regulatory bodies. While challenges are inevitable, our strategic approach and adaptability position us well to overcome hurdles and successfully establish our footprint in the Romanian digital lending market.