Debt collection Services

Global Consumer Debt collection Services Industry Outlook

• Outsourcing of debt collection to third-party agencies is higher in North America and APAC

• APAC banks have a higher tendency to outsource the international debt collection activities

• Increasing complexity of the regulatory environment across North America and Europe is acting as a threat to the growth of the debt collection industry

Debt Collection Industry Trends

• Increase in the tendency to outsource in-house process of debt collection has been witnessed, especially among the North American companies

• Higher adoption of the final demand letter, an additional service for the debt collection industry, has been seen mostly among mid-sized companies

• Invoice or transaction verification, the process for checking the accuracy of the debts, is expected to be lower in North America, due to the higher internal efficiency of the creditors

• Credit issuing companies have attempted to manage cash flow and costs by outsourcing debt collection services at higher rates. This trend has resulted in increased opportunities for industry operators

Debt Collection Drivers and Constraints

Drivers

Better recovery rate

• Creditors, incurring huge losses due to increase in delinquent debts, have experienced an improved recovery rate of 10-12 percent, by outsourcing debt collections

Better utilization of time and resources

• Debt collection is an extremely complex and slow process, especially for smaller banks

• By outsourcing this process, banks have realized better cost savings, as well as resources which can be utilized for their core functions

Technological advantage

• Better offerings of technology by the Debt Collector Agencies (DCA) such as skip tracing, text messaging, analytics, etc.

Low Interest Rates

• Record low interest rates in countries around the globe have made it easier and more attractive for corporates, individuals and governments to borrow and incur more debt

Constraints

Increasing labor and technology costs

• Debt collection is a labor-intensive process and salaries comprise 30–40 percent of the total costs. But the advent of technology can not offset the costs incurred as subscription to software and other services are just as expensive as hiring extra FTEs. The increasing labor rates, especially in the developed countries, is expected to affect the profit margins

Stringent regulations

• Governments are expected to impose stricter regulations on the debt collection industry, especially in matured regions like North America and Europe, which are already bound by directives and acts like FDCPA, TCPA, CCD

Supply Trends and Insights : Debt collection Services

Strategic Partnerships

• Agencies are looking at strategic collaboration and M&As for growth and larger players are increasingly looking for attractive acquisition partners, who would contribute to profits, expansions, and technological changes to their agencies. The major acquisitions are Experian Group acquiring the digital identity resolution service provider, Tapad, to improve their fraud and identity management services and Atradius expanding their global presence in Europe by acquiring a Portuguese collection agency, Gestifatura. This brings up the presence of Atradius in 34 countries around the globe.

Analytics and Advanced Underwriting Services

• Agencies are using advanced underwriting tools to track the client customer’s repayment history and patterns, their credit scores and risks, and assets under their name to come to a more informed decision after buying portfolios from banks and other financial institutions. This will help the agencies to prioritize and focus on the sure return of investments (people who can repay the debts) and send the high-risk cases over to legal as soon as possible to speed up the collection process and increase the steady cash flow within the company.

• Investment in Debt Collection Software: The remote working nature due to the pandemic has made several agencies invest in Debt Collection SaaS providers (both clod and open-API) to facilitate their FTEs to work from their homes and ensure maximum returns during these troubled times.