BuergelBűrgel, a supplier of commercial and consumer credit information in Germany, bets on future growth in credit information in Germany.   Bűrgel is poised to make investments in product development and IT systems to position itself as an innovator of the industry.

In an interview with the German Magazine Der CreditManager, Klaus-Jűrgen Baum stated that Bűrgel’s B2B credit information product line was due for a ‘general overhaul’.  The IT-Platform had to be modernized to become more nimble and flexible for product development.  He sees strong trends in modulation and customization; which means saying goodbye to traditional credit reporting.

Baum sees continued excellent prospects in the B2C segment where Bűrgel is active in the booming e-commerce sector.  Bűrgel appears to enjoy dynamic growth in its ConCheck product family.  Baum indicated the need for alternative pricing models, for example for online services, brokerage and considering Freemium pricing models.  He sees potential in the SME segment, which is difficult to reach via conventional distribution methods.

Baum stresses Bűrgel’s competitive strength which is based on an exclusive data sharing arrangement with its main shareholders Euler-Hermes (Europe’s largest credit insurer) and EOS (Otto Group).  Bűrgel, Hermes and EOS operate a joint business information database.  The benefits are multiple:  sharing of performance related data originating from trading experiences (high quality content) and cost sharing.  On the B2C side Bűrgel benefits from its relationship with EOS in the form of data inflows from collection activities of EOS (Otto Group).  The Otto Group is one of the largest mail order companies and the owner of EOS, which supports the Otto Group’s financial services companies with state of the art information and accounts receivable management. Not to ignore the fact Euler-Hermes is Bűrgel’s largest client.

The interviewer pointed out that Bűrgel was number two in the German market after Creditreform and as such being an Oligopoly.  Given this fact the market was ripe for other online-credit reporting companies such as Creditsafe entering the market; the interviewer raised the question whether such companies were a serious threat to Bűrgel?  Baum responded that narrow oligopolies tend to attract new entrants with the effect of energizing the competitive landscape.  However, Bűrgel as an established player in the German market, does hold a number of ‘trump cards’ which cannot be easily matched by new entrants.  Baum reiterated the advantages of having significant depth and breadth of information on businesses and consumers accumulated through its own proprietary research combined with the exclusive sharing of proprietary and non-public data from its major shareholders Euler-Hermes and the Otto Group.

In a nutshell, Baum believes there is untapped demand in high quality credit information and the need of SMEs to embrace credit management tools.  In the B2C space he feels that e-commerce and payment systems providers will continue to drive demand for consumer credit information and fraud protection.   He also stated that the digitization of commerce transactions will turn our industry upside down.  What is happening already in other sectors, the large corporations no longer ‘eat’ the small ones; rather the fastest will ‘eat’ the slow ones.

Source:  Der CreditManager Issue 3/2013

Editorial Comment:  Your editor was quite intrigued by this article (tagged as company profile) because it gave a perspective of a person representing the supply side (information) and the other representing the buy-side (credit management).

Based on your editor’s market observations, the growth prospects for the B2C space are quite excellent. However the current growth trends for the B2B space are rather negative (BIIA Newsletter Sept. I – 2013 Issue). Growth in the B2B segment has been rather anemic for some time.  Furthermore in the B2B segment modulation is already behind us. It is platforms, analytics and workflow which are becoming the norm.

The comment that Bűrgel’s B2B segment was due for a ‘general overhaul’ could be interpreted that Bűrgel is being jerked out of its relative comfort zone of being sheltered far too long by its major shareholders.  Perhaps shareholders current and future needs (as customers) may now stretch Bűrgel’s current capabilities.

Transforming a traditional credit reporting IT platform to become more nimble and product development friendly may take longer than Mr. Baum may want to acknowledge. Take the case of D&B. Its strategic investment in a new IT platform took longer than expected and at a higher cost.  Delays in new product launches put a drag on revenues and share price.  The rest is history: D&B’s chairman will not be able to harvest the benefits of new capabilities and will retire at the end of this year.

Then there is the aspect of being called an oligopoly, accentuated by Mr. Baum’s statement of holding the trump cards in competitiveness, referring to the exclusivity in data sharing, a great benefit, which others including Creditsafe, do not have.  Such statements may not only raise eyebrows amongst competitors, but could also in Berlin or Brussels.  It would have been wiser to push back and state that the industry is no longer oligopolistic.  There are now more choices than ever for information buyers: Creditreform, Bűrgel, Schufa, Arvato Infoscore, Bisnode D&B, Creditsafe etc., not to forget the credit insurance industry, who provide the largest substitution for credit information.

Unfortunately the assessment of market share in Germany (and elsewhere) is an imperfect undertaking simply because the industry is not transparent.  The industry never practices what it preaches to its clients, mainly transparency.  Creditreform provided a nice breakdown of its service segments in 2011, but no longer in its 2012 annual report.  Buergel does not publish its financials either.  Neither do other players.  What is there to hide?

It can be debated whether the digitization of commercial transactions will turn the credit information industry upside down.  One thing is certain, lurking in the wings are predictive analytics offered now by more than a few software houses, thus enabling customers to source data from anywhere, embed them into their own decision systems, without the involvement of information suppliers.  It is this inevitable development which will turn our industry up-side down.  No such possibilities were mentioned in the article.

These comments are the sole opinions of the Editor of BIIA and may not reflect the opinion of its members.