Michael Lamm

For the past two decades, the accounts receivable management industry has been dominated by firms that purchased and/or collected credit card receivables. But the financial liquidity crisis of 2008 spurred a sea change in that market. In short, card issuers drastically cut back on their lending and purged the credit card debt that was on their books.

Four years later, we continue to see companies that target credit cards struggle. Debt buyers and collection agencies that focus on the sector are unable to find volume to purchase and service.  As a result of these market changes, some mid-size ARM firms are being forced to sell or merge in with larger players. Others are choosing to diversify their service offerings or branch out into asset classes that have not traditionally been their focus.

Back in the spring, Mark Russell and I wrote a piece for the DBA International magazine called “Diversifying Away from Credit Card’s Isn’t Easy.” We wrote about the challenges that exist today and how diversification is frequently talked about, but it is easier said than done.

If you think about the amount of time it has taken some of the leading debt buyers and collection agencies to develop their expertise and brand in the credit card asset class, the process to move into a new asset class, even one that is viewed as complimentary, is a large mountain to climb, especially when you look at in real time. Owners see a call center with excess capacity or hear from investors who want to understand why they are not putting their money to work buying portfolios. This picture does not encourage a long process that will pay dividends far down the road.

I don’t think anyone would suggest to an agency or debt buyer to leave behind credit card expertise, because eventually that sector will cycle back. Rather, seek to find additional complimentary or strategic asset classes to service such as:

  • Student loans

  • Auto

  • Mortgage

  • Commercial

  • Healthcare

  • Local and state government

Our industry is going to look a lot different over the next five years, not just due to sweeping regulatory changes, but where ARM firms’ annual revenue will come from. We have already begun to see these changes, where both collection agencies and debt buyers who are credit card intensive are making the move via acquisition into other asset classes like student loans, local and state government. and healthcare. Others are simply hiring sales and operational expertise to accelerate their diversification strategy.  They are going where the placement volumes and opportunities are growing.

Now that we are in the last quarter of the year, this is a great time to meet with your team and figure out your game plan for 2013, how diversification plays into it and your plan to execute.  Maybe it is simply beginning to develop new relationships by attending a couple of conferences. Maybe you decide you have to be more proactive by making a larger investment and hiring operational and sales expertise in a particular vertical market. Does a strategic acquisition make sense to expedite your diversification plans? Do you need to bring on a financial or strategic partner who can help accelerate your entry into these other asset classes?

Whatever it may be, you can’t stand still.  The credit card asset class will eventually make its way back to being “in vogue,” but in the meantime, it’s time to be proactive and figure out how you want to position your business in the interim.

I would love to hear from you what has and hasn’t worked as you have attempted to diversify your business in 2012. What challenges have you faced in going into different asset classes and what are your plans in 2013?

Michael D. Lamm advises owners on their growth and exit strategies for Kaulkin Ginsberg’s Strategic Advisory team. Michael can be reached directly from Kaulkin Ginsberg’s Philadelphia, PA office at 240-499-3808 or by email. You can also read his blogs, follow him on Twitter, or network with Michael from his social media page.


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