Tag Archives: Collections

Collections & Recovery Should You Open Your Wallet for Omnichannel Collections?

Woman in call centre
Sep272017

In debt management, everything comes down to money. Even the collections systems you use are about stretching that last dollar or pound or euro until it snaps. However, if you don’t know what’s on the market today, you don’t know what you’re missing. You might be missing the opportunity to make a dramatic improvement in your performance and productivity, without spending a whole ton of money. In my last post, I pointed out ways that you’re probably leaving money on the table in your approach to IFRS 9. Now I’m going to repeat myself. If you spend all your time trying to move cap ex into op ex, or substantially reduce op ex, you’re probably leaving money on the table. The Dreaded Omnichannel Let me give you an example, and I’m sorry to be so obvious, but yes, it’s one of ours. Our Customer Communication Services for Collections isn’t a... [Read More]

Leave a comment

Risk & Compliance FICO Data: Have Premium Cards Lost Their Edge in the UK?

Gold card
Sep182017

Are Premium cards becoming harder to distinguish from Standard Classic cards? Is there still a place for them in the market? Traditionally, Premium* cards (gold and platinum) were perceived as reserved for the lowest-risk, best-quality accounts, and so had higher limits. Spend was thought to be greater, though a larger proportion of full-balance payers made them less profitable than Classic cards. However, over time the FICO Benchmark Reporting Service data for the UK reveals that the Premium customer is changing and so is the performance, particularly of the more mature accounts. In July 2017 25% of the accounts in the FICO Benchmark Reporting Service were Premium accounts, along with 25% of balances. With the exception of New accounts (<12 months on book), which were 20% of accounts and 20.4% of balances, Established (1-5 years on book) and Veteran (5+ years on book) accounts were about 25% of the relevant vintage population in the service. Common Beliefs... [Read More]

Leave a comment

Collections & Recovery Collectors: Don’t Let IFRS 9 Blindfold You

IFRS 9 on blindfold
Aug302017

There’s a clear pecking order when it comes to the IFRS 9 accounting standard that goes into effect in January. It’s an accounting standard, not a piece of banking regulation, so the hierarchy is Finance, Risk and then Collections. This makes sense, but for debt managers it will cause problems. It’s likely that many debt managers will be blind next year on how they can influence impairments. Here’s how things will happen. Your Finance team will talk to your organization’s accounting firm and auditors, and they will agree how IFRS 9 should be implemented. They will probably work your Risk department when it comes to preparing the predictive models that are required to determine expected loss under IFRS 9. Once that’s done, the rules for your organization will be binding. It’s unlikely that the Collections team will be part of the process. And if you’re in Collections, you might think... [Read More]

Leave a comment

Collections & Recovery Collections & Regulations: Are You Leaving Money on the Table?

Stop sign
Jul262017

Debt collectors, like everyone else in financial services, are drowning in regulatory changes. In my last posts I’ve discussed IFRS 9, GDPR and, to a lesser extent, the basket of fun known as PSD2. One of the natural human responses to change is to narrow one’s focus to the necessary task at hand and push everything else away. Just focus on ticking the boxes, and ignore the cries to rethink the way we’re doing business. Sweat what we’ve got and don’t spend any money. That’s what I’m hearing at many collection shops when the conversation turns to optimization or advanced analytics. There’s a cost to this approach, though. Collectors are in danger of leaving money — a lot of money — on the table. The IFRS 9 Bucket Challenge Here’s the first reason: Impairment provisions and losses. This is what I have dubbed the IFRS 9 Bucket Challenge. I wrote... [Read More]

Leave a comment

Collections & Recovery GDPR – Two First Steps for Collectors

GDPR logo
Jun152017

If my last post on GDPR and collections left you feeling mildly depressed, you’re paying attention! Now that we’ve scoped out the difficulties, here are a couple of things you can do to prepare. And preparation, like compliance, is important: GDPR sets out some steep fines for non-compliance, and you don’t want your department — or your vendor — to be the trigger. 1. Create Your Data Inventory GDPR wants you to only use the data that is absolutely necessary. Whether your decisions are based on rules or algorithms, you’re going to have to show what data you are using and how it impacts decisions in collections. As someone executing collection strategies, you want to make sure neither you, your department nor the third parties serving you cause the business to be exposed. You need to make sure you understand where the data you’re using comes from, and prove that... [Read More]

Leave a comment

Risk & Compliance Early Warning Signs on New UK Card Accounts

Pile of credit cards
Jun072017

As noted in my previous post, over the last five years there has been significant growth in exposure, card balances, sales and, to a lesser extent, cash usage on UK cards. This is despite a decrease in the number of total accounts, as acquisitions have not outpaced attrition. Looking at our March 17 report, less than 1% of total card accounts were booked that month, and just under 8% of accounts had been on the books 12 months or less, showing slow growth rates. Fortunately, payments growth has exceeded these metrics and total 1 to 3 cycle accounts and balances decreased over this period. That reduction in delinquent balances isn’t true across the board, though. If you look at the vintage level, you see a different story. Veteran accounts (5+ years) are responsible for the positive news above, and to a lesser extent Established (on the books 1 to 5... [Read More]

Leave a comment

Collections & Recovery Collectors — Get Ready for the IFRS 9 Bucket Challenge

Ice bucket challenge photo
Jun012017

Remember the ice bucket challenge craze? Get ready for the IFRS 9 bucket challenge — it’s even more startling, and nobody’s standing by to give you a warm towel. Like GDPR, IFRS 9 poses major challenges for collectors, just as it does for accountants, IT, risk managers and anyone else in the credit business. So now let’s talk about what you can do. Note: While I’m just talking about IFRS 9 here, you do have to approach it and GDPR in concert, because in some areas they seem to be in conflict. You don’t want to gear up for IFRS 9 and then realize you have to undo some of your strategies or processes to avoid GDPR fines. Build your 30-day plan IFRS 9 says if a customer’s risk deteriorates — including becoming 31 days overdue — they go into Stage 2, and you have to start holding lifetime impairment.... [Read More]

Leave a comment

Collections & Recovery IFRS 9: Three Critical Areas of Focus for Collectors

May152017

My colleague Bruce Curry recently published a blog on “IFRS 9 & Collections – The 31 Day Time Bomb”. During my various client interactions, I can see that many businesses are developing and testing the impairment models that will give them a good understanding on the financial impacts that the new standard will have on their balance sheet performance, but the operational implications are currently less clear. From a practical perspective, I believe there are three areas across collections that should be reviewed to mitigate the increases in impairment that are expected to result from IFRS 9: 1. Pre-arrears strategy – These strategies have been a topic of conversation for a number of years and their success has been mixed. IFRS 9 means that it is now more important than ever to adopt a “prevention rather than cure” approach in mitigating the risk, and flow, of accounts into Stage 1... [Read More]

Leave a comment