Harnessing Data At The Internet’s Dawn

by By Rita E. Garwood
The internet was in its infancy when Bill Phelan introduced the equipment leasing industry to PayNet. Through various business cycles and an acquisition by Equifax, Phelan has continued to lead the organization as it transformed from a startup to a trusted source of information.

Bill Phelan,

In 1999, Bill Phelan was an outsider in the equipment finance industry, but he and Dan Michalek, co-founders of PayNet, saw an opportunity in the private credit markets to provide some clarity on the 32 million small and medium-sized companies the industry served.

To further PayNet’s influence, Michalek suggested gaining an insider’s view, so Phelan decided to roll up his sleeves and expand his network, first meeting with Ron Orndorff, the former CEO of M&I Leasing, who was retired and working as a consultant. Orndorff introduced Phelan to the Equipment Leasing Association, the predecessor to the Equipment Leasing and Finance Association, where he met Mike Fleming and Ralph Petta and inked a partnership with the association.

Phelan says the ELFA’s research was a terrific resource for him to learn about the number of transactions and credit losses in the industry as well as to expand his knowledge about financing various asset classes.

“The mission then and the mission today is capital access for private companies,” Phelan says. “That was the dot-com era, so there was quite a bit of fear in the marketplace about credit losses. And the timing for PayNet was excellent because we were early to the party, offering a database business, using the internet, using analytics, using a lot of technology to shed light on the credit risk of the equipment leasing industry.”

Early Reactions

PayNet launched at the dawn of the internet, so naturally, Phelan encountered some hesitancy at the beginning. “There was quite a fear of sharing data in the database,” Phelan says, adding that, overall, the industry responded with openness and a genuine curiosity about what data could do for their businesses.

“Pioneers are individuals that see a different world and are singularly determined to make that world a reality despite the risks and despite the odds,” Thomas Butler, former CEO and board chair of PayNet, says. “In 2000, Bill realized that more data coupled with scoring models could improve the credit assessment process for the equipment leasing industry. So began a decades-long effort to gather more and better data to make credit modeling a reality. Bill took the risk of starting a new company that asked for more data in a given business model. This was his whole focus, not a sideline. It was risky but rewarding in the long run. The wonder is it worked, and the dream came true.”

At the end of the day, Phelan says the market is what matters most. While credit managers were reluctant to share data when PayNet started, analysts were curious about how it could help them improve and CEOs were concerned about competition. “The ability to reach critical mass of data and accurately reflect credit risk were keys,” Phelan says. “Just listening to the market and reacting to it was really an important step in PayNet’s early success.”

“Bill understands customers and trends in the commercial segment better than anyone else,” Paul Tennola, CFO of Neon One and former CFO of PayNet, says. “The ability to continually grow and scale a business is highly dependent on new product initiatives which Bill is so attuned to and demonstrated by his proven track record of consistently delivering new products and analytics which are at the center of his customer’s critical lending decisions. There is no ‘quit’ in Bill and his commitment to driving excellence.”

Phelan says there have been many metamorphoses along PayNet’s journey from a dining room table-based operation to an established leader in credit reporting. Building and maintaining trust has been a consistent theme throughout those transformations.

“It’s about the credibility of the information, so there’s a lot of trust there, and you’ve got to earn that trust,” Phelan says. “You have to earn it from the industry with quality, with doing the right thing for the customer, saying you’re going to do something and then doing it, and putting the customer first.”

Other challenges PayNet has faced along the way have been like those many businesses face — adapting to business cycles and continuously planning for the future. Phelan has learned that each business cycle is unique: “We had to navigate through three recessions and found you really can’t anticipate exactly how they’re going to affect your business,” he says.

Becoming Equifax

In April 2019, Equifax acquired PayNet and Phelan was fortunate to be asked by Mark Begor and Sid Singh to join as general manager of Equifax Commercial. “One of the most interesting events for me was coming in and being the general manager of a competitor and now being one organization,” Phelan says. “I get to work with world class execs like Mark, Sid, Joy, Craig, Rob and other Equifax leaders.”

Phelan discovered incredible resources and capabilities in the union of the businesses. “We’re now able to provide transparency and information on 32 million private companies that make up about $11 trillion in gross domestic product. And we’re able to give that information and transparency to our clients to help them grant credit more safely, authenticate business easier and to also help them to acquire more customers faster at lower cost.”

After the acquisition, Equifax has focused on expanding the platform from ‘get capital’ to ‘get paid faster.’ “Certainty and velocity of cash flow is really important in business,” Phelan says.

Equifax has also expanded to help its customers get more customers. “We have a new tech platform called B2BConnect Portal that can enable our customers to get more customers and lower the cost of acquisition,” Phelan says. “We’re able to do some great analytics and digital products with the expanded database and with the profiles on 32 million private companies.”

During the pandemic, many have questioned the reliability of credit reporting data given the circumstances, and Phelan says maintaining the integrity of the data has been a top priority for Equifax. First, the company tagged stimulus dollars separately for greater transparency. Second, Equifax modified its reporting to give customers more transparency on forbearance agreements and their terms.

“We can see the actual recovery has been so much faster after the pandemic,” Phelan says. “We see that the origination volume is actually above where it was pre-pandemic, and that is a record 18 months from contraction back to recovery. Just by way of reference, in 2008, it took five years to fully recover.”

Leadership Lessons

When it comes to leadership, one of the most important things that Phelan has witnessed and learned from equipment finance leaders is the importance of collegiality. “What’s amazing to me about the leasing industry is the fact that you have all of these highly competitive CEOs that do what’s right for the industry and their customers. This rising tide lifts all boats in the industry.”

Phelan believes that everyone wants to do well. “You have to assume people’s best intentions in what they do, and if you do, you bring out the best in folks,” Phelan says. “It puts folks on a path to success, and I think it brings the best out in people. Collegiality, to me, creates a great work environment, and it creates very positive energy among a lot of people.”

Butler says Phelan infuses the cooperative philosophy into his leadership style: “Bill is a superb leader. His style is open and direct. His entire team participates in shaping the business plan. The details of the final plan are shared with all, board and employees alike. The quarterly performance is covered in an open-door meeting with all in attendance. In doing so, Bill was able to forge a bond of trust with his team that few leaders can achieve. He makes it the team’s plan, not his plan.”

“Bill was ahead of the curve over 20 years ago when he formed PayNet and saw a market opportunity and need before anyone else,” Tennola says. “While always maintaining a forward look as a visionary, Bill was also a ‘hands on’ leader who leveraged intellectual curiosity, talent, data and sheer grit to grow and scale PayNet, leading to the eventual successful combination with Equifax where he continues to lead the commercial division.”

Mentors have shaped Phelan into the leader he is today. Several mentors stand out in Phelan’s memory: Bill Wozencraft at Ernst & Young taught him how to value intangible assets, Rick Pederson was incredibly patient helping him learn the bond business, Jerry Hitpas had great confidence in Phelan and put him in front of the board during his first year and, finally, Butler, who “had the answers before you asked the question.”

As someone who has learned a great deal from mentors, Phelan has two pieces of wisdom to share with the leaders of tomorrow: 1) have confidence in yourself and 2) the leader is always last. “What I mean by that is the leaders are the last ones to go through the lunch line, the last ones to get the bonus. The leaders are the last ones to turn the lights out at night,” Phelan says. “If your customers, colleagues and shareholders are successful, success will follow for you.” •

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