The Volvo Group has grown from a series-manufactured car concept in mid-1920s Sweden to one of the world’s leading manufacturers of trucks, construction equipment and buses. Greensboro, NC-based Volvo Financial Services (VFS), with more than 1,400 employees and 28 operations worldwide, provides a full range of financial services through a global network of Volvo Group dealers.

“I think it’s very important culturally as a captive finance company to really understand the reason we exist, which is to support the sale of Volvo Group products,” says Scott Rafkin, VFS president. “Of course, we need to do that in a way that protects the Volvo Group’s assets, controls risks and achieves financial targets. VFS is not an independent bank. We only finance Volvo Group products and we stand by Volvo Group dealers and customers in both the good and more difficult times.

“VFS is very fortunate to be so closely associated with the strong brands of the Volvo Group. And of course strategically, we have the benefit of being able to really closely align with our sister product companies and our dealers to jointly meet customer demands and needs,” he continues.

Seamless Integration

Volvo Group comprises multiple brands that serve thousands of customers worldwide. Rafkin says it is imperative to have seamless integration throughout the Volvo Group’s many segments to provide a full lifecycle experience for its customers.

“From the customer perspective, they don’t perceive our organization as Volvo Construction Equipment or Volvo Trucks or Volvo Financial Services; they see Volvo as one company,” he explains. “So it’s extremely important that we are coordinating internally and with dealers on how we work with customers and how we bundle an offer of hard and soft products to meet their needs. Dealers and customers expect — and rightly so — a very seamless experience between all the offering points of the Volvo Group.”

As part of the organization’s unified approach, Rafkin says ease and speed of doing business are among the top every day goals of VFS, at the heart of which is technology. “I like to say that our business is quite simple: We’re people, processes and systems — with good funding levels sourced by the Volvo Group treasury unit,” he explains. “We’re continually investing in technology, particularly at the point of sale in order to make working with us easy. We’re also standardizing across all of our markets to improve efficiency and service levels so that when a customer or dealer does business with VFS anywhere around the world, they know what they can expect.”

This standardization is important to VFS’ success as the captive provides financial services in 41 markets globally, with substantial operations in North and South America, Europe and Asia. VFS’ North Carolina home base serves as the main hub for the company’s global and Americas operations and is situated in its largest market. However, despite the fact that the financial services group is domiciled in the southern U.S., and Volvo Group hails from Sweden, Rafkin does not see a separation between the two. “In my view there isn’t a dichotomy at all,” he says. “Being close to our largest operation and yet still accessible to each of our global regions is strategically important. Our location has proven to be a very good source of diverse talent for us globally. From my perspective, I think it’s a very logical base from which to conduct our global business.”

Diversified Portfolio in Improving Market

Global business has been good for the captive finance company. VFS has maintained a strong presence in the Monitor 100 top 10 rankings for many years, including from the height of the Great Recession through 2014 when the company ranked ninth. Captive finance companies accounted for 28.8% of this year’s Monitor 100 rankings, and VFS ranks among the top five captive segment leaders, tallying more than $18 billion in net assets in 2013. While VFS new business volume saw a 4.9% year-over-year increase in 2013, what is most impressive is its vitality during the slow economic recovery. According to Monitor 100 data, new business volume faltered slightly from 2008 to 2009, but VFS has since seen an approximately $3.4 billion (89.5%) increase from $3.8 billion in 2009 to $7.2 billion in 2013.

Rafkin says VFS’ diversified and global portfolio helps maintain the company’s stability, particularly over the last five years. “Different markets and economies have emerged from the Great Recession at difference paces and levels depending on where you look around the world. We have definitely benefited from the strong performance of our North America business coming out of the crisis. In Europe, the pace of recovery has been prolonged although we are now seeing a turnaround as well. The diversification of the portfolio is definitely a business cycle benefit with respect to global performance.

“I really believe the true measure of a great finance captive is how well you perform when times are more difficult,” he says. “My focus is always on preparing for those times, and on attracting and retaining the best employees in the industry because they’re the difference makers in the long run.”

The financial services industry is benefiting from the slow but steady economic recovery. With more liquidity than ever and portfolio quality back to pre-recession levels, commercial banks have become more competitive. However, despite the uptick, Rafkin is encouraged to see discretion exercised in the current marketplace. “I think we’re going to continue to see a good market for financial services — of course, without knowing the potential impacts of world events that are beyond our control — and with that comes increasing competition and liquidity, he says. “I think it’s very important that we continue to see good credit discipline despite that liquidity. I’m pleased thus far with how the equipment finance industry has performed. I have seen very few overly aggressive deals.”

In general, Rafkin says the financial services industry is in good shape, but notes the marketplace is watching for the outcomes of recent and pending government regulations. “I don’t know if the full impact of the regulatory changes has been flushed out in the marketplace yet, but there are certainly different rules in scope with respect to capital adequacy and allocation, particularly within the segments we finance. But what the impact is going to be over time, I think we’re going to have to wait and see.”

Competing on Value

When monitoring the business, Rafkin feels a key performance indicator is penetration rates, but he says VFS does not view it as the sole determinant of success. “By definition, penetration is an explanation of the past,” he explains. “It’s based on what’s already been financed. Quite honestly, I’m more interested in what didn’t get sold, and how we can help improve that for the Volvo Group.”

Rafkin explains further that healthy penetration rates can vary depending on the market, segment and competition. He notes that a market with a 60% penetration rate is not necessarily better than the market with 20% penetration. “However, our goal is to be number one in every market in which VFS does business.”

The real differentiator, he explains, is maintaining or exceeding the dealers’ expectations for consistency and speed. “That’s where VFS adds value,” Rafkin says. “Dealers really understand our credit policies and they value the expertise of VFS’ sales and credit teams to support customers and help win deals. Our business is all about relationships. Our dealers appreciate our people, and also our continuous improvement initiatives to make working with us as convenient as possible.

“VFS’ value proposition is the expertise of its employees. VFS competes on value and service, not just on price,” Rafkin says. “Our people are experts and they have built solid relationships with our dealers and customers which survive business cycles. With that kind of focus, our employees really try to drive customer loyalty and retention.”

Rafkin spent about six years at a Big Six accounting firm prior to gaining his nearly two decades of experience in attracting and retaining customers for the Volvo Group’s financial services business. Throughout his tenure, he had the opportunity to live and work in Europe, as well as expand his expertise with responsibilities in financial services spanning audit, operations, risk and strategy. He was named CFO of VFS in 2009 and held that position until his recent promotion into the president’s seat upon Martin Weissburg’s move to global president of Volvo Construction Equipment.

Confident in what VFS has to offer the transportation industry segments it serves, Rafkin is looking forward to seeing what is next. “At the end of the day, we’re all about people, processes, systems and funding levels, and our strategies are focused on optimizing each one. I’m quite positive right now, as we look to 2015 and beyond, on the footprint and the capacity of VFS to continue to be a strong captive for the Volvo Group.

“Leading the global finance arm of the Volvo Group is something I have aspired to for some time,” Rafkin says. “And I’m extremely grateful and proud to now lead this fine organization of exceptional people around the world.”

Megen Donovan is associate editor of Monitor.