But debt collection outsourcing to increase in anticipation of impact of downturn

Research sponsored by Firstsource, a global business process outsourcing company, indicates that the credit crunch has started to affect the UK consumer debt management industry. More than 73% of respondents said they had been affected by the declining economic environment in some manner, and over 20% reported that they had monitored a lot of impact on their business. The poll covered nearly 1,000 consumer debt managers of companies in the financial services, telecommunications, retail, and utilities industries. The research showed that consumers are starting to take longer to pay their bills, and that write-offs of consumer debt are increasing. 27% of respondents said that some consumers are delaying payment of bills by up to three months, and 22% of debt managers reported that they had increased their write offs of customer debt in the last 12 months.

In response to the uncertain economic outlook, debt managers expect to outsource more work to specialist collections and recovery agencies to increase their collections levels, reduce defaults, and lower their costs. 68% of debt managers said they planned to increase their use of outsourcing within the next year; 27% said they would outsource more within the UK, 18% reported they would collect more from offshore, and 23% expect to outsource more both within the UK and offshore (Fig 1).

Debt managers said that the main benefits of an offshore strategy are further cost reduction, the ability to recover more debt, and increased access to talent.

Most of the collections work that has been outsourced to date is debt collection (35% of respondents), tracing (identifying and prioritising debtors to contact, 25%) and legal collections (24%) (Fig 2). The majority of outsourced collections relates to early stage work (debt that is one to 60 days old, 42%), followed by recoveries (six months, 26%), late stage (90 to 180 days, 21%), then mid stage (60 to 90 days, 10%). Respondents said that there were many areas where they could see obvious rooms for improvement in their collections strategies. The main failings relate to poor use of technology.

Over half of debt managers said greater use of online payment systems would improve their collections levels. Many managers also felt that they should make more use of

interactive messaging and interactive voice recognition systems. Better analysis of customers’ debt levels and internal training were two other key areas identified for improvement.