Collections & Recoveries

Benefits of a new debt collection system

Benefits of a new debt collection system


2018 is expected to bring adverse economic conditions caused by rising inflation, flat earnings for many, increased interest rates and subsequently, increased consumer debt. This will squeeze living standards next year and push more people in the UK into financial difficulty.

Collections and recoveries operations will be likely therefore to need to cope with increased volumes when continuing to be faced with meeting challenging Bad Debt Charge and Provisioning targets coupled with a constrained Opex position and a necessity to improve customer experience and satisfaction. TCF (Treating Customers Fairly) and compliance standards will remain in place and will need to be demonstrably met.

Organisations can help to achieve these many objectives through the introduction of better collections and recoveries technology.

We in Arum have recently seen a marked increase in new initiatives to assess whether existing collections and recoveries technologies will be fit for purpose over the next 5 years and, if necessary, select new tools.

Collections and recoveries systems technology has evolved rapidly over the last 3 years bringing exciting new features and agility. A typical system set will usually contain:

  • Innovative and modern technology enabling tight integration with host and ‘bolt on’ systems and modules. This is essential in todays ‘highly connected’ environment where real-time interface and decision capabilities can instantly respond to customer and business events.
  • A market leading decision and workflow tool enabling deployment of a flexible and agile strategy. This flexibility provides the capacity to quickly implement new strategies in a rapidly changing business, regulatory and economic environment.
  • Flexible repayment plan options that are driven by insight for example on customer affordability derived from advanced analytics conducted on data from I&E capture, 3rd party/bureau and internal sources. Kept repayment plan rates can be significantly improved based on this capability alone.
  • Omni channel communications capability that provides seamless customer interaction across Voice, IVR, IVM, SMS, Letter, Webchat and Self-Service Portal channels. This capability should provide enhanced customer experience and positive engagement driven by data insight. In an environment where customers will only engage on their own terms, contact data, preference data and advanced analytics can bring significant benefits.

There is a much wider variety of powerful tools available on the collections and recoveries systems market than ever before. Options for cloud hosted and managed service solutions mean that a minimum viable product (MVP) can be implemented in aggressive timescales, providing early benefits if that is what is needed. A business case to introduce a new collections system in short timescales or in a more measured way can be very compelling but selecting the right product is key, as is managing the installation – otherwise time/cost may be exceeded or projected benefits not realised.

There are lots of considerations that should be made in the initial phase of systems selection. Some key items are:

  • Understanding the current situation – what factors are significant to the organisation, and will ultimately drive the decision. This can be influenced by maturity of the organisation, budget and benefits, risk appetite, agility, scalability, legacy and future IT architecture, externally hosted or cloud versus on-premises preferences, future ambition, as well as many other factors.
  • Requirements to deliver benefits – high level business requirements and key ‘Must Haves’ should be defined at the earliest opportunity as they will heavily influence the collections systems decision and the implementation approach. It is also essential to drill down to mid-level requirements in some key areas of functionality e.g. automated affordability validation for Repayment Plans.
  • Transformation approach – a new collections system often enables business transformation and therefore a key question is whether the organisation will replicate the current processes and operating model or use the technology change to introduce further improvement. Either are value decisions but have implications for the project that need to be managed.
  • Outline plan – consideration should be given to outline planning for business case development, collections and recoveries system selection and the implementation. The time, resources and skills required to select and deliver an optimal system will be significant, and should be considered from the outset. Collections system implementation times can range from 6 months for a MVP up to a typical 18 – 24 months for a 3-phased migration approach. Experience over many projects has shown us that all can work with appropriate planning and a healthy dose of realism.

Arum has published a range of related articles here on our website in News and Insights that provide more information on aspects of collections systems selection, implementation and management.

If you would like any help considering whether new collections and recoveries systems might be of value to you or help to implement them then Arum can do so in many ways including:

  • Assisting define requirements, identifying and selecting vendors. Many of our clients say that they value Arum’s independence and unbiased view of vendors and products at this stage.
  • Working with you to develop your Business Case and support Cost – Benefit analysis. We have lots of experience in helping clients manage the case for change, for example through proposing benefit metrics and highlighting typical implementation costs.
  • Reducing the time to achieve results and mitigating project risks by helping with implementation using experienced and skilled members of our team. Our team members typically have hands-on ‘time-served’ managing BAU operations and have successfully completed many systems projects in many sectors and countries – feedback from previous projects is that our customers value this experience that can significantly reduce the selection process and implementation project timelines as well as achieving a better result.

If you would like discuss how Arum can support you on a specific project, contact us today.

Matt Riddall – Lead Consultant