Big banks had it good for a long time. There was little competition or disruption. Banking was a captive market that provided generous profits.
Banks and collections teams have a data problem. The issue isn’t the data itself or even a lack of data. Indeed, banks with thousands of customers are swimming in data.
Instead, the challenge is data governance and management. Large banks are complex entities with more than one core banking system. And it’s not only difficult to find the right information in the right system but also to sketch a holistic portrait of individual customers.
A cursory internet search will reveal a number of sobering stories relating to debt collections in the Middle East, but it’s important to understand that the region is still developing. Insolvency laws are still unclear, court practices are evolving and the payment terms are often incredibly generous.
What might be further delaying progress in the region is the cultural stigma that surrounds debtors.
Digital transformation has never been more of a hot topic. 79% of North American banking leaders believe their bank’s existence will be threatened if they don’t innovate faster. However, “digital transformation” is also a loaded phrase: it can mean a lot of different things to a lot of different people, and still puzzles executives in all industries. As a result, it can be quite overwhelming, particularly for debt collections teams who have been operating via the same systems and practices for years.
Digital transformation has been something of a rallying cry in European banking for years now, but do those words come with action?
Try as we might to change customer opinion, debt collections has struggled to shake its bad reputation in both established and emerging markets. Regionally, this could be down to a multitude of factors; from cultural differences and complicated local court systems to overly aggressive collections practices. These local debt collections problems have a knock-on effect on a regional scale. There are also various shared problems faced by debt collections agencies and banks across the globe.
Between 2015 and 2016, World Bank figures reveal that the average proportion of all loans that are non-performing (NPLs) rose over half a percent from 6.99% to 7.07%.
According to Gartner,the cost of servicing a delinquent loan is now 15 times higher than the cost of servicing a performing loan.
Pair this with a trend towards cutting operational costs, and you’re left with a situation where banks are being asked to collect more with fewer resources.