“Living without credit, without a credit card in particular, is unfathomable,” says David Johnson, founder and CEO of Vervent. “It’s basically impossible to get along in our society without some ability to transact.”
Unless you carry wads of cash around.
Few consumers have heard of Vervent, but the company’s services touch millions of lives. Operating with 1,800 employees across its global facility network, “we provide ‘invisible’ infrastructure that keeps consumer credit flowing,” Johnson says.
Founded in 2008 during the Great Recession, Vervent has built its reputation on operational excellence and trust in an industry where reliability is paramount. The company maintains its headquarters in San Diego and is a portfolio company of Stonepoint Capital.
Vervent has moved steadily from being a U.S. only company to having operations in multiple countries including the U.S., Canada, Mexico, India and the Philippines.
The company has three lines of business. The first is Direct to Consumer (DTC) which consists of the direct marketing and issuance of credit cards to consumers. The second is Vervent Services, which is the primary servicing and program management of credit card, loan or lease accounts that our clients have originated or acquired. The third is Capital Markets Services including eVault solutions and backup servicing solutions.
“We service or administer most consumer or small business asset classes, but we do not participate in the mortgage industry,” Johnson says.
Bulletproof Servicing Solutions For Lenders
Johnson has built an industry powerhouse that delivers “bulletproof servicing solutions” in private credit, capital markets, and risk management.
Startling fact: Vervent is cyber attacked more than 100,000 times a day.
Little did Johnson know when he was a high school dropout digging ditches, that one day his company would be called upon to fight a monster problem facing the lending industry.
“The financial industry is a frequent target of cyber-attacks like ransomware, phishing, credential harvesting, and data breaches,” he says. “It’s basically an arms race with no end in sight.”
The FBI confirms Johnson’s reading of the cyber-attack dilemma.
“Cyber-attacks are the reality of today’s business world with the FBI is receiving more than 30,000 complaints a month.,” says John Iannarelli, former FBI Assistant Special Agent in Charge of overseeing all Criminal, Cyber, and Counter Intelligence Investigations. “It is no longer a matter of if, but when, and business survival depends upon whether or not you are prepared to respond.”
How bulletproof? Despite the millions upon millions of cyber-attacks, “we have never suffered a data breach,” Johnson says.
Protecting Two Important Assets
In addition to being the behind-the-scenes entity servicing the loans, Vervent protects two important assets for clients.
“One is information and it’s private information on consumers,” he says. “It’s the most important information they have. The other one is their money. Managing both their money and their information requires a large degree of trust, and we built up that degree of trust by having a bulletproof operation over all these years.”
Vervent’s priority is optimizing loan servicing, credit card servicing, lease servicing, and capital market operations for its clients who lend the money.
“A more efficient and a more secure form of account servicing benefits everyone,” Johnson says. “It benefits everyone throughout the value chain from the capital markets all the way down to the consumers.”
Capital markets are financial markets where long-term debt and equity securities are traded, facilitating the flow of capital between those who have it to invest and those who need it to finance projects or operations.
“Clients need a partner that they know can seamlessly step in during a crisis,” Johnson adds. “Our clients mostly want risk mitigation. That leads to a better rating, which leads to a lower cost of funds. That is a virtuous cycle throughout. “
Vervent’s risk-mitigating execution enables the financial institutions it serves to scale efficiently, enhance collections, and improve overall portfolio performance.
Johnson left his blue-collar jobs in the 1980s to earn a degree in finance at UC Berkeley and a MBA from Stanford. Prior to founding Vervent by purchasing a company in the field, he had the rare distinction of being a consultant at both McKinsey & Company and Bain & Company, where he worked with Global 500 clients across North America, Europe, Asia, and Africa.
Trends In The Financial Marketplace
Vervent’s growth has benefited from a number of trends in the marketplace.
“Generally, it’s cheaper to outsource than do things yourselves,” Johnson says. “We are creating a cheaper, more efficient model of servicing and driving down the cost of funds by providing these capital market services we use in our own lending business.”
“Credit cards,” he adds, “is an extremely complex business. If you’re not actually in the business, then you probably are not going to be able to participate as a servicer or originator. You need to be in the business in order to understand it.”
Johnson says another trend to note is that “private credit is eating the world.”
“Eating the world” is a figurative expression popularized by Marc Andreessen’s 2011 essay “Why Software Is Eating the World. ” It means that a particular force or technology is becoming dominant and reshaping industries and the economy.
The metaphor highlights the disruptive and transformative power of new technologies and trends, indicating that they are changing industries and fundamentally reshaping how we live and work.
“Private credit is eating the world and more and more transactions are going into the private credit markets,” Johnson says. “There’s many reasons for it, like flexibility, speed, and breadth of offering, Our business is in large part with those private credit funds, so is a very good trend for Vervent and it really favors our kind of core clients.”
The trend accelerated as the financial world came to the end of the great recession and the financial institutions did not immediately step back into the consumer lending market.
“This opened the door to these private credit funds,” Johnson says. “That was a big ‘aha’ moment for us.”
While banks favored vertical integration of services like account servicing, private credit favored the horizontally integrated outsourcing model.
“You really have to have some scale in order to do it successfully, and you need a very deep well of market knowledge. We can scale quite rapidly with our clients and for some of our clients, that’s a challenge. “
Operational efficiency and complying with myriad financial regulations is challenging. Vervent “must” be able to service the loans while accomplishing three objectives: being compliant with regulations, increasing the returns on the portfolio, and increasing client and customer satisfaction.
“Many of our best clients are the ones that we’ve gone through some kind of a significant crisis with,” Johnson concludes. “Usually it’s a backup service and conversion, but sometimes an emergency hit. We’ve worked through it with the client, and that really bonds people together.”
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