March 2017 Credit Management magazine

TAILORED SERVICES
I believe it does. Smaller firms typically serve a varied
client base who want responsive, tailored collection
services. They don’t want to be a small cog within a very
large machine; if things go wrong, they want to be able
to pick up the phone and get it fixed immediately. If they
have a bright idea for doing something new or indeed
a new requirement, they want a firm who values this and
delivers it. Smaller firms who have their own systems
and development resource play a vital role here. Smaller
firms are able to utilise ‘pay as you go’ infrastructure that
satisfies even the most demanding information security
requirements. You don’t need to be a large-scale player
to take advantage of these technologies; in fact, smaller
firms have a distinct ‘first-mover’ advantage with these
technologies. As consumers, we are so used to instant
service – Uber and Amazon are clearly pioneers at
this – so why should it be any different when it comes
to our expectations of service and standards from our
collection partners?
Debt Recovery strategies are starting to change,
reflective again of the influence of regulation and market
consolidation. Not everyone wants to sell debt; indeed,
we are seeing some clients challenge this approach,
given the potential of rehabilitation, and some clients
have taken the view that having control over the asset
is a fundamental requirement. Asset sale is hence no
longer part of some clients’ strategy. We are also seeing
some clients start to look seriously at their commercial
models. In the past few years, there has been a race to
the lowest fee driven by clients’ forensic approach to
costs, regardless of the net return impact. Things are now
starting to change.
THREE KEY TRENDS
Looking ahead, I see three key trends developing
for the sector. The first trend is the placement and
remuneration model. Clients realise that their partners
in debt recovery have a similar burden of compliance
as their own. Market consolidation has meant fewer
players and more opportunities for those firms to serve
these clients. It’s no longer a race to the bottom in terms
of fees – firms realise that business-wide activities (not
just front line agent/customer interaction) in support of
debt recovery services need to be considered. Some
clients are adopting much longer placement-only
strategies, and some are adjusting their fee models with
a move away from payment by collection results. This
is an encouraging sign as the cost/return economics of
the ‘traditional’ contingency collection model does not
support the new world of professional debt recovery at
the commission rates many creditors were offering.
The other key industry development is the rising
impact of technology. Many firms are already reaping
the benefits of Cloud computing and Software as a
Service (SaaS) solutions for their business. Technological
advances are happening all the time and one of
the most interesting aspects of this, I believe, is the
customer engagement developments. We are starting
to see AI (artificial intelligence) and Speech Analytics
(SA) develop into specific products – Amazon’s Alexa
being the prime example – but further afield we have
businesses starting to use AI solutions within call
centres.
I appreciate that collections is a more complex
proposition than general customer enquiries, but where
customers can access easy tech that saves them time
and offers better convenience, they will use it. Just
consider how many customers no longer visit their bank
in person, and have ‘converted’ to doing their banking
online.
TECH SOLUTIONS
Now that the collections industry has got to grips with
the obligations and standards of operating a regulatory
business model, I believe 2017 will see the industry
start to really focus on tech solutions that improve the
customer experience and the bottom line. The key
statistic that always surprises me, given the amount
of shopping we do as consumers online, is how little
collection businesses actually process through their
online platforms. I am not aware of any business that has
more than ten percent of their collection levels coming
from their online capabilities. This really is an exciting
area of opportunity. Customers want instant service – so
the more firms can do to mirror great retail experiences
the better. The ‘fast movers’ recognise that the more we
can do to engage with customers, and provide them with
great service experiences, the better the outcome for all
stakeholders.
The third key trend that is influencing the sector is
the ongoing market consolidation. There are a number
of factors influencing this: the increasing scale of Debt
Purchasers; the burden of regulation, meaning some
firms have decided to exit the market; and the fact
that barriers to operating a collection business are
demanding, since the UK is already a mature market.
I see the market shaping between very large-scale
businesses and the small niche players and I think they
can operate in conjunction with each other.
Niche business can provide clients with responsive
tailored services; scale business can offer low cost, scale
solutions, working with different clients with different
needs. I see an exciting opportunity, though, for those
niche business that can take advantage of the rich
technological capabilities – capabilities that offer the
advantages of scale without the burden of scale!
The recognised standard www.cicm.com March 2017
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