In our latest survey of European credit risk professionals conduced with Efma, the delinquency forecast held steady from recent quarters. That is to say, it’s not good, but it’s not surprising.
Delinquency forecasts are consistent with our last survey in July, with moderate increases projected across the board. While big increases are not expected, it’s worth noting that in every category at least 40% of respondents see increases coming, while at least 40% say delinquencies will stay at their current level.
This survey reveals the ongoing challenge to risk managers. Delinquency figures are way above comfort levels. Risk managers face more customers that are depleted, almost bankrupt. These customers are also harder to collect from, and will demand more expert collections and recoveries strategies. Roll rates could rise (in fact, some regions are already seeing this phenomenon), increasing volumes and costs.
We recommend revising operations and strategies to ensure that tight recovery controls are in place. Virtual and mobile collections efforts are rising, due to the low cost and high efficiency. Also, the use of external collection agencies is increasing, so lenders will need strong placement strategies and revenue optimization.
This is not an easy market in which to develop innovative strategies, as most strategies have already been tested. That said, sophisticated optimization techniques can make a difference, and this is where the leaders in consumer lending will look to eke out better returns in such trying times.