Debt Collection Trends

After the turbulent 2020, collectors worldwide began looking for ways to recover. The pandemic caused an unprecedented economic crisis, followed by serious changes in the direction the industry goes.

Of course, things are more complicated than they may initially seem; otherwise, there was no point in writing this article. Let’s break down this status quo and see what trends shape the near future of the collections industry.

Top Debt Collection Trends that Depict the State of Things

The Industry Gets Smaller…  

Through the last five years, the number of third-party collection agencies has been steadily declining in its volume. To be specific, since 2016, the number of collection firms has shrunk by 15% (from 7,894 to 6,999). Given the post-pandemic recession, there is no reason to doubt this trend will continue.

One of the causes is the widespread use of M&As. Indeed, most collection firms are truly small, counting five employees or so, which pushes them in the merger direction. However, the pandemic changed the rules of the game, with the merging activity slowing down. Now, buyers approach such deals with even more thorough due diligence when valuing a company and assessing its performance.

As a result, the number of employees in the industry also declined, culminating in an abrupt drop in 2020. Most likely, the situation won’t change for the better until 2022.

and Profits Decline as well…

These adverse changes in the industry cause a snowball of consequences, one of which is profit losses. Primarily, small firms were affected, with a 42% reporting decrease after the pandemic.

As we can see from the infographic below, larger companies have shouldered the post-pandemic consequences better than smaller ones. However, the largest ones with 1 million accounts and more came out from the crisis better than their smaller counterparts and even managed to increase their profits.

…but the Right Talent is the Key to Survive the Crisis

The post-pandemic recession made it clear to collection firms that they need to grow to survive in this fiercely competitive market. According to the survey by TransUnion, business growth is a real challenge for collectors. Another challenge is finding the talent able to ensure that growth. At this point, some relief was presented by the ability to hire employees remotely, which allowed saving on office expenses.

A bit less severe yet still perceived is the challenge to comply with state and federal regulations. Those are followed by macroeconomic uncertainty and government restrictions. But what presents a real interest for our study is the insights we can derive from TransUnion’s statistics.

  • 64% of businesses say it’s “Somewhat Challenging” to stay up to date to Compliance with Consumer Privacy Laws
  • 62% say it is “Somewhat Challenging” Adopting & Integrating new technology
  • 59% say it is “Somewhat Challenging” Communicating with Debtors
  • 50% say it is “Somewhat Challenging” abiding by the TCPA Compliance

Another important thing to keep in mind is that these challenges affect collectors’ ability to grow and earn profits. That’s why a robust, modern, and universal debt collection solution able to solve all these problems for collectors is strongly required given the current conditions. We have one to make you excited, and further, we will talk about it.

Communication challenges

Communication is the critical aspect and, perhaps, the primary pain for debt collectors at all times. To avoid repetitive calls from collectors, consumers increasingly use call-blocking technology to the extent that already made 81% of collectors believe that its usage is the main reason for failed collections. 27% of collectors also state that at least 1 in 10 outbound calls to consumers are blocked.

However, traditions persist; most collectors continue using phone calls and letters as the primary means of contacting consumers, believing that those are the most effective. The majority of them use letters as the initial form of contact: 2/3 of collectors start communication with a letter against 1/3 who do that by phone, respectively.

At some point, newfound contact means may replace the current ones. The statistics below show that such tools as email, ringless voicemails, and even chatbots began gaining momentum.

But who are the early adopters of these new forms of communication? Another study shows that larger companies are more likely to adopt these; for example, 1/3 of companies with 1+ million accounts use a chatbot or another AI medium to communicate with consumers, and 38% of them use text messaging for that purpose.

One may say with relative confidence that things change as the industry is slowly moving away from phone calls. But whatever innovative methods collectors will use to contact consumers, these methods must be user-friendly, which will grant collectors the vantage point in front of competitors.

Paydit: A Solution to Stay Up to Date with the Collections Industry

Compliance and Automation

Paydit is our white-label debt collection platform that introduces an innovative way of debt collection. The onboarding is intuitive; as a collector, you can provide debt repayment options that are always compliant with your collection firm’s internal rules and state and local regulations. Once a payment plan is chosen, the debt will be collected automatically according to the set schedule, so you won’t have to supervise it or deal with often ignored text messaging or phone calls.

Custom Payment Plans

To increase the possibility of successful debt collection, you can make your collection process as flexible as you need, with payment schedules, options, billing frequency, and other essential parameters adjusted to each consumer’s current financial situation and payment history. Additionally, consumers may renegotiate payments if none of the provided options aligns with their budget.

No Debt, No Stress

One of the main reasons consumers today use call-blocking technology is that calls from collectors make them feel under pressure. With Paydit, however, debts are negotiated online, which means consumers can pause negotiations to consider the offer and then pick up where they left off.

For collectors, it means that from now on, they won’t have to walk consumers through lengthy legal disclosures as they did in the case of phone calls. Paydit has compliance requirements initially built-in, so you don’t have to worry about legal aspects when negotiating debt.  

Always Available and Transparent

Thanks to process automation inherent in Paydit, it delivers the service available 24/7. Trust Paydit with common customer issues and focus on more complex tasks that require your undivided attention!

Finally, Paydit equips you with a set of performance reports to assess the performance of each consumer at a glance. The aspects covered include daily installments, unique logins, payment options, and more. To enhance the reporting coverage, you may request to add custom reports with the data of your choosing, and we will include it in your debt collection solution.

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