Much like what has been transpiring within the U.S. debt collection and accounts receivable management (ARM) industry since the formation of the CFPB, there have been significant changes in collection procedures and priorities in the UK market over the past several years.
Having traditionally focused on the performance of individual accounts in isolation, during 2012 progressive creditors began to think about the debtor at an integrated level with the Treating Customers Fairly (TCF) agenda starting to play a key role in their overall recoveries strategies. With the regulators taking an increasingly firm line on how consumers are treated once they enter recoveries, this new normal is expected to continue.
I am pleased to share this summary of the top trends shaping UK collections and recoveries from my friends at TDX Group, active industry insiders. This is part one of a two part series.
1. TCF will impact processes more than ever before – In 2013 we believe there is going to be a more significant change in the market around ensuring adherence to the compliance agenda because it is becoming clear that the spirit of these regulations is much tighter than many are currently interpreting.
2. There will be a huge increase in the use of electronic channels – At the end of 2012, online payment of outstanding debts in collections and recoveries only accounted for around 5% of all payments, with DCAs and creditors preferring to speak directly with consumers. However, in 2013 we expect this to change dramatically. We expect 2013 to be the year of online payments in the collections and recoveries market as the industry catches up with the penetration level of online channels in other parts of the credit cycle. We expect the use of online channels to at least double in 2013, accounting for over 10% of all payments in the sector, and then more than double again in 2014. A lot of this growth will be from the mobile market that already accounts for 40% of the online payments.
3. US debt buyers will move into the UK – Many U.S. debt buyers are now looking for alternatives to hedge their US position, and it appears the most likely outcome is that those who are not already active in different geographic markets will look to diversify over the next 12 months. The obvious first step is the UK market.
4. Customer-centricity will drive both compliance and results – Another key trend we expect this year is for all participants in the sector to focus on the debtor, over and above any individual debt. Entering into collection and recovery discussions with individuals as if they have a single debt with a single creditor, will become recognized as sub-optimal from both a TCF and liquidation performance perspective.
5. Big push for technological enhancement and real-time data transfer – The majority of players in the recoveries sector still rely on batch data transfers and encrypted Excel spreadsheets as a means of transferring information. Some market participants are already stepping up their capabilities with the use of portals to manage the DCA to creditor query process. This is just the first step in the process and we expect that 2013 will see many creditors improving their processes.