What are some of the biggest issues collection heads face with their technology solutions in the Asia-Pacific region? What key features are they looking for in a collection and recovery system?
We recently completed a series of meetings with banks and financial institutions in half a dozen countries in Asia Pacific. We talked to senior leaders in collections and recoveries with a view to understanding their major issues and discussing best practices we’re helping to implement globally.
Some quick context on delinquencies, first. Asia Pacific has not suffered as badly as North America and Europe in terms of delinquencies during the global financial crisis. This is because lending practices have been more conservative in most countries, especially since the Asian crisis in the late 1990’s. However, we did find that smart management of delinquent accounts remains high on the priority list of many organizations, and there is a keen desire to learn from the experiences of banks outside the region.
Even though we spoke to banks in markets as diverse as Korea, Indonesia and Australia, common themes emerged during our discussions:
- Many organizations rely on several disparate collection systems. For example, card collections may be separate from retail bank collections, and there may be other systems for business banking and other areas of the bank. Hence, it’s difficult – if not darn near impossible -- to gain a timely overview of collections performance through strategic reporting for the organization.
- Because of the use of multiple disparate collection systems, collections is typically done at the account level. That means a costly and cumbersome integration to pull customer information into a single place for collectors to access.
- There is often a disconnect between collection strategy managers and the operational collection teams, leading to operational negation and making it difficult to interpret the results of champion-challenger strategies. For more on champion-challenger strategies, I encourage you to read our Insights paper on the topic (you must register to access).
- Many organizations generate collections scores or other predictive analytics for delinquent accounts. However, this is done outside of the collection system, making it difficult to integrate scores so they can be used in a timely manner and to maximum effect within collections.
- And, lastly – and perhaps not surprisingly -- everyone had the same story to tell around implementing changes: it is a very time-consuming and often complicated process, and relies in part on scarce (and costly) IT resources.
In terms of solutions, the business users we spoke to were looking for the following features:
- A single platform for collections and recoveries for all products, including secured and unsecured.
- A system that made it easily to define, test and implement strategies, preferably using modern graphical tools.
- A system that made champion-challenger testing easy to do. Most organizations we spoke to were not actively using this as part of their BAU collection processes due to the difficulties involved in implementing and monitoring.
- Built-in predictive analytics (e.g. collection scores) that could easily be used within the strategies to accurately segment and prioritize delinquent accounts.
- A platform that could be used for customer and/or account level collections. Collectors need to have information on the delinquent account and the customer’s other accounts, whether delinquent or not, to understand the customer as a whole and the associated risk.
- A solution that included a robust reporting component that could be used by business users and IT folks alike.
In our experience, the above features are must-haves, and the solution should be based on a modern IT platform, which typically means web-enabled SOA technology.
Here are some final thoughts to keep in mind when assessing collection and recovery solutions:
- Analytics are necessary to aid lenders and creditors with collecting their assets in the most efficient and profitable way. Ensure your solution is able to host both traditional predictive analytic models such as collection and recovery scores, and is also capable of taking advantage of the newer decision models used in optimization techniques
- Collections strategies need to be constantly assessed and refined to respond to the real-time situations of borrowers and lenders. It’s key to have a solution that makes this process quick and easy for business users and does not involve a lot of technical know-how.
- Getting access to the right data in a timely manner is of utmost importance in collections. Working on day-old information or processing payments received once a day in batch mode can lead to missed opportunities and customer service issues. Look for a solution that offers modern methods of integrating with other platforms in real-time via web services.
- Understanding the overall customer position and making automated decisions using customer and account information leads to more powerful strategies, better results and enhanced customer service.
