Last week I sat down with around 20 executives who manage collections for both lenders and debt collection agencies in the UK, to discuss what’s happening in the industry and how analytics — FICO’s specialty — can help. I will discuss my takeaways from this meeting in a separate post, but first I want to share some of the statements made during this meeting.
If you ask me, the diversity of opinions in this group, and the participants’ clear desire to improve collections and customer relationships, show how much the industry is changing. This was not your father’s back-room chat on how to squeeze people for cash. This was a group of highly engaged professionals who understand regulations, customer needs and technology as well as anyone in the lending industry.
Here are some quotes that should get anyone in the collections industry thinking.
“The FCA is asking, ‘Are we ambitious enough in our regulation, based on the data and tools collectors either have or should be able to access?’ “
“Nobody is telling consumers that they should engage with DCAs.”
“I thought FCA regulation would be the best thing for the industry. An FCA authorisation would be a badge of honor saying, ‘This is a regulated, well-run business.’ But on a letter you send to consumers, the FCA makes you say, ‘Here are some other people you can go to.’ “
“One in five of my bank customers have digital collections operations.”
“Non-users of digital are a dying breed. Right now, we’re dealing with customers that are not Millennials. As the newer generation becomes more of the population, they will demand digital. “
“At our bank, when customers enter arrears, their use of our apps drops by 70%. They don’t want to look at it.”
“An SMS gateway, dialler and an IVR is not an omni-channel platform.”
“It’s on our roadmap to look at social media to see how it can be used in profiling customers.”
“The value is in the metadata of social media – not the content.”
“Surely we’re not a long way from sending collection messages on WhatsApp and Facebook – but enforcement is a long way behind.”
“Twitter and Facebook data is owned by them. We could analyse it and find it adds value, then have it taken away. I wouldn’t touch it. We have enough tools already that we don’t use.”
“In the two years post 2008, the time for defaulted customers to return to financial good went from 2.5 years to 9 months. After the Great Recession, we saw a different class of debtors, who had suffered economic hardship but were motivated to get back to normal. But did lenders change their collections analytics, strategies, policies or their charge-off point? No.”
“Some banks demand that the DCA execute the same strategy that they were following on an account. And they expect it to work!”
“We used to get debt that was collectable, because anything that was queried, the banks would keep. Now, DCAs get everything.”
“What hasn’t changed for DCAs is remuneration. It’s still collections commission – it doesn’t work. Lenders are expecting more bells and whistles, but not paying for them. Lenders need to understand you get what you pay for.”
“40% to 70% of the accounts are not going to perform. You’ve had that in every tranche, every portfolio, forever. Analytics can tell you who those accounts will be, so you don’t have to waste your time. If I believe my car would never work again, I wouldn’t take it to a garage.”
“The problem is, all our analytic investment goes to the front end — collections only gets a look in when everything goes wrong.”
“Speech analytics – within two to three years, the industry needs to go to that. You can get much more from speech analytics than just listening to calls.”
“There has to be more investment in data and analytics. There has to be.” (I promise I didn’t say this.)
Watch this space for more discussion of these issues.