Traditional utility firms are finding themselves at a crossroads in 2019. One path leads down the road of tradition - with outdated legacy systems, face-to-face collections and antiquated customer service solutions. The other follows close behind the retail banking industry into a digital future where the customer is put at the forefront of every major decision. The latter path is the one with real legs and it is one the industry looks ready to tread, but before the utilities sector can make a significant change, it needs to sort out its image problem.
When it comes to technology, early adoption doesn’t always lead to ongoing efficiency.
Britain’s railway system, for example, is the oldest in the world, with wagonways first built in the 1950s. Now, though, the system is out of date, and proving tricky to improve. Just 34% of British train lines are electrified, the trains and carriages used are 21.1 years old on average, passenger complaints are on the rise and just 62.5% of British trains arrive at station stops on time.
The Japan National Railway, on the other hand, was privatised in 1987, with much work done to improve its infrastructure in the years since. As a result, the average length of delay is just 0.9 minutes on the Shinkansen line, and Japanese trains are built with a lifespan of a maximum of 15 years to keep things new.
Debt collection is in trouble - especially when it comes to delinquent credit. According to figures from the International Monetary Fund’s Global Financial Stability Report, non-performing loans make up 3.925% of total gross global loans.
While this figure is down from its high of 4.064% in 2014, certain countries exhibit a far more worrying ratio: countries such as San Marino at 43.4%, Greece at 36.3% and Sierra Leone at 30.7%.
According to the Supervisory Banking Statistics Fourth Quarter 2016, the average rate of non-performing loans of large European banks stood at 6.17% - a figure that is growing, and that dwarfs countries such as Japan and the US which saw rates of just 1.5% during the same time period. The cost of servicing a delinquent loan, say Gartner, now stands at 15 times the cost of servicing a performing loan.
This year is shaping up to be a roller coaster for European utilities. The sector is lagging behind the Stoxx Europe 600 index. Demand is falling in key markets. And prices are dropping.
Collections and recovery has changed. Previously, it was acceptable to lack insight into loans, lose sight of borrowers across the loan lifecycle and mismanage delinquency. Now, tough market conditions, regulatory pressures and changing customer preferences mean that organizations must embrace modern debt recovery practices.