Digitised Debt Collection Process Upscaling the Sector's Business Value

A digitised innovation in the debt management collection process critically upscales the region’s market value, thereby enabling businesses in the sector to stay at top of the competition table.                                   

FREMONT, CA:Generally, outsourcing the collection of defaulted and unsecured consumer debts from lending, insurance, utilities, and telecoms has carved its niche in the European arena. With individual claims valued at more than 500 euros, debt collection agencies meticulously generate good rates of return per collection model, encompassing substantial manual components like litigation.

On account of the technology-driven innovations in the sector, collection forms have undergone seamless transformations in recent times, emerging as an attractive and viable business space off the back of the internet-driven products and digital services explosion, like streaming services. Individual consumer debts often have a minimal value, favouring the economical viability of incumbent agencies’ collection methods.

Therefore, new players in the domain are likely shifting their priorities towards the efficient leveraging of leading-edge tech capabilities over market share in the incumbent’s core territory of varied industries. However, early success may cause disruptions, for which steady and customised handling is crucial where incumbents are feeling a greater need to develop a strategic response to stay ahead of the competition. Therefore, private equity firms and investors with debt management sector investment expertise and the backing of innovative tech-based companies ought to review the market for opportunities critically. That is, following the massive expansion of services and geographic operations, upending the traditional space, and examining the advantages, they have likely gained momentum in recent times.

Therefore, technology frontiers in the debt collection industry are emphasising an induced overview of market growth, enabling key considerations for incumbent debt management firms and industry investors. As a result, they are most likely evaluating their debt collection strategies to effectively combat challenger brands.

The core markets for traditional debt management providers like unsecured consumer lending, insurance, telecoms, and utilities are radically encompassed in a small number of industry verticals. One testament to this composition is Germany, where a mature debt collection market accounts for around 70 per cent of the total value of the market, with the largest segment incorporating unsecured lending. Furthermore, the average individual debt in unsecured consumer lending exceeds 500-1000 euros.

Incumbent debt management companies normally opt for a customised process in the collection of large debt files from their chosen markets and are thus highly reliant on manual working models like physical letters and telephone calls by humans. Similarly, they make use of limited automation and technology, resulting in relatively high collection costs, despite the uneconomical scenario that may be involved. Hence, debt management collection agencies are substantially travelling into a digital zone, driving an efficient landscape in the arena’s market.