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?
No industry is safe from the fast march of digital progress, and the banking sector is no different. In Europe alone, well over a thousand fintech companies have launched in the last decade and, as of 2016 according to Accenture, these same fintechs make up almost 7% of the industry's overall annual revenue.
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.
There are forces at work aiming to reshape the banking sector, and retail banks need to choose whether they want to brace for impact or lead the charge. With 2018 winding to a close and retail banking in a state of perpetual change, everyone's eyes are currently on 2019.
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.
Whilst APAC presents a potentially lucrative market for businesses and investors, when it comes to debt collection, unfamiliarity with local legal systems and taxation – not to mention some antiquated collection practices – has lead to some serious challenges. As a result, debt collection in the region has become notoriously tough.