In the consumer collections and recovery business, it seems odd to suggest too much information, particularly about debtors, could be a problem. Feeding software systems with all available data surely is the best way to separate lost causes from potential payers. Yet, data overload arguably led some collection shops and credit grantors astray, suggests Andrew Postell, director of collections for ChoicePoint, an Alpharetta, Ga.-based identity and credential verification firm that offers its Debtor Discovery product to the collections market.
Many companies forgot to focus on the fundamentals of collecting, instead relying too much on tools such as predictive dialers while ignoring the human elements, he says. "Agencies had all these data sets available to them and were getting sidetracked," he says. "Now, they're saying, 'We may have excluded some low-lying fruit. We may have left out some accounts that were easily collectible.'"
Postell believes one of many trends in the collections and recovery business is to forget about FICO, Beacon, and collection priority scores, and just work to get people on the phone. "Now it's about smilin' and dialin'," he says. "Simpler models, better information, and collecting accounts sooner."
The goal is the same. Find the debtors who are mostly likely to pay. Assign collections resources accordingly. It's reasonable to assume-and many times collectors don't-that a life-altering event that prompts a consumer to default could be followed by a second major event that gives her the ability to pay. Those consumers tend to go undiscovered unless collectors simply pick up the phone.
Today's collections and recovery market is driven by several external and internal forces-including pushes for real-time decision-making, electronic data interchanging, and remote data hosting. Also, mergers have brought complexity to the one-stop shop mentality that recovery managers and collections agencies clung to for years. Issuers once held a view of customers best described as "tunnel vision"-but that's no longer the case.
Credit grantors are less likely to write off a customer who defaults on a credit card, knowing they might hold that same customer's mortgage. They now see the bigger picture and know they often can reform otherwise charged-off consumer debt and turn delinquent debtors into good customers.
The software options for collection shops and credit grantors are plentiful and, depending on a company's size, there are choices for large operations and small. ChoicePoint's Debtor Discovery, running on an Internet-based platform, is designed to mesh with a company's existing processes, and can run offline searches to find court documents. Quick Discovery is ChoicePoint's new product specifically targeting early-stage collections.
Jacksonville, Fla.-based Global Software Service's core recovery product, Latitude-a debt collection and recovery management system around for about a decade and upgraded continuously-uses Microsoft's database technology, Microsoft SQL Server for Windows.
Latitude Version 4 was released last fall with new forms to manage accounts in the legal process and new letter and business entry modules. Another product, Latitude AIM (Agency Interface Module), is designed for the outsourcing needs of debt buyers, widely considered a booming field.
Each vendor, naturally, touts its software package as the be-all, end-all product for credit grantors, collectors, and the growing group of bad-debt buyers. And, no doubt, depending on a company's size and specialty, there's probably a fit for everyone, somewhere.
The catch phrase everyone wants to hear when looking for a collections and recovery system is "open architecture." "They want the ability to plug the accounting package they have in place, or the back-office package, into the collections package," says Thomas Mohr, senior director of sales operations with Global Software Services Inc. "They don't want to be forced into getting all products from the same vendor."
John Meehan, chief operating officer of YouveGotClaims, believes a key trend in retail collections is data transmission, or electronic data interchange. "The question isn't whether to use EDI. That's a given," he says. "If you aren't, you just can't be competitive."
EDI has evolved into a Tower of Babel of sorts, with dozens of different systems struggling to communicate. The next trend in EDI is a consolidation of those different 'languages' into one standard that everyone can use regardless of business model.
Scott Weaver, president of JS Technologies, makers of CollectMax, says nobody wants to key in accounts any more. "It's all going electronic and one of the challenges with that is format standards," he says. "Our programmers get run ragged keeping up with all the different formats, so we've developed a template translator."
EDI by nature leads to another industry trend known as data hosting, in which data about debtors is placed on systems controlled by the software vendor. Some insiders believe it's the wave of the future. "Just think of all the time spent playing phone tag trying to get information on a claim. This makes claims data available remotely, 24/7 to the sender and receiver," says Meehan, who stresses remote data hosting usually is much more secure than remote access.
"Another reason to use remote data hosting is that it alleviates the risk that comes with allowing someone access to your own computer system," he says. "For example, giving your neighbor a key to your house doesn't mean they have permission to look in your closets, your medicine cabinets, and your dresser drawers."
Phillip DeKemper, global product marketing director for London Bridge, also believes more industry players will turn to hosted offerings. For credit grantors, there's the obvious plus of not having to maintain the internal structure or software. A Web-hosted application can run entirely on someone else's data center. "I think it actually would lower risk because it's difficult having people in-house understand all the upgrades and how to handle them, among other things. A lot of organizations like to keep their data close to their chest, but a lot of banks already have turned to it."
But Postell, with ChoicePoint, believes there are some inherent problems with remote data hosting. "Who's going to validate and make sure the information gets updated? Who's going to make sure the information is secure once it's out of your hands? How do you keep someone from hacking into it?" he says.
Another collections trend that's trickling down to the software vendors is the debt-sales industry's growth, which is hot thanks to an influx of public and private investor activity.
There's a corresponding need for supporting software systems. "Debt buyers are having a tremendous impact and companies like ours recognize there is a vacuum in that marketplace," Mohr says. "We see demand from smaller buyers who may buy and then outsource to different agencies for collection. There needs to be software that lets them input all the accounts and manipulate the data to say, for example, 'I want all the accounts in Florida to go to this Florida agency, but not telecom accounts because they're weak in telecom. This other company in Georgia should get the overflow telecom,'" he says. "The point is, these buyers need the flexibility to make decisions and changes on the fly."
While debt sales started as an end-of-year, quick cash infusion, the strategy has evolved in the past five years, says Julie McMurtrey, vice president, strategic initiatives for TSYS Debt Management. "It's not either/or anymore. A creditor might want to outsource, collect in-house and, with some accounts, sell them and not work them at all," she says. "Software that was out there didn't accommodate that strategy. So what we've done with the TSYS recovery product is give the tool the ability to accommodate new strategies."
Ontario Systems offers Artiva Debt Buyer as part of its Artiva software suite, a product designed to manage accounts and identify trends with vendors before they become problems, officials say.
Fearing collectors spend too much time looking at irrelevant historical records and other payment data, London Bridge plans to introduce a method for real-time decision-making. "The idea is to allow for more individual decisions to be made on the spot, rather than the traditional batch-decisioning process," DeKemper says. "For example, it would decide what is an acceptable rate for a settlement offer based on things like employment status and marital status."
London Bridge offers RMS (Recovery Management System) and Debt Manager. Last fall, the company launched a Web-enabled version of Debt Manager. "Our big areas of focus are an increased depth in the agency management space. There's been a major uptick in volumes and in outsourcing," DeKemper says. "Our clients are looking for more sophistication."
Ontario Systems and TSYS Debt Management partnered in late 2003 to unveil a recovery system geared to credit grantors. TSYS Recovery System, in beta testing, targets pre-chargeoff collections and post-chargeoff recoveries. The markets served include card issuers, retailers, banks, and telecom, says Steve Beard, Ontario's vice president of strategic relations.
McMurtrey says pure credit card providers of the past are now more complex, with strong M&A activity expanding card issuers into other types of loans. The Ontario/TSYS joint venture was designed to provide for their changing needs. "They need the ability to dynamically route accounts to an agency, internal collectors, or into asset sales-to automatically and quickly get them out to the right party," she says. "And they need the ability to evaluate the reporting and then go into the system and make changes quickly."
Despite technology advances that have made software more affordable for smaller firms by lowering costs for essentials such as predictive dialers and scanners to scan accounts and boost document imaging, there are many challenges facing vendors. If something works, the tendency is to keep doing it that way-even when all evidence points to a better way of doing business.
"Old habits do indeed die hard," Mohr says. "The trick is to help them see how things will improve with an upgrade here, an upgrade there."
Collections shops, meanwhile, should consider adding employees to make more outbound calls. "Go get your best data on the front end and quit being cheap about it," advises ChoicePoint's Postell.
And don't get too caught up in the details and the numbers, or risk losing "good" debtors forever.
Authoritative analysis and perspective for every segment of the payments industry
Authoritative analysis and perspective for every segment of the industry
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