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Industry Increases Hiring and Technology While Preparing for the New Normal

  • Written by Steel Rose

The collections industry is boosting hiring and technology investments as it transitions into a “next normal” stage. Approximately seven in 10 collections professionals (69%) said technology solution spending will modestly or significantly increase in the next two years. About two-thirds of collections professionals (67%) said employee compensation will increase in the same time period, according to the report, “A Transition to the Next Normal: The Collections Industry in 2021.”  The report is informed by a survey of 151 third-party debt collection professionals and interviews with 12 industry thought leaders conducted in Q2 and Q3 2021.

 The ramp up in tech and employee investments is occurring against a backdrop of a growing collections employment market. The number of collections employees is expected to increase to 137,928 in 2021 compared to 134,347 in 2020, though it remains below 2018 levels (139,273).

The collections industry is experiencing modest employee growth even as industry activity slowed in recent years. According to the report, in Q3 2021, 77.6 million consumers had at least one collection tradeline, collectively totaling $188 billion in outstanding balances—a 1% and 3% decline, respectively, from year-end 2020.

“After a better than expected pivot to remote work and surprisingly good collection rates in 2020, 2021 has brought greater uncertainty for the collections industry,” said Jason Klotch, vice president of third-party collections in TransUnion’s diversified markets business. “While collections performance continues to be a bright spot, particularly for larger companies, reduced account volumes, a changing regulatory environment and shifts in the consumer credit market are among the challenges the industry is facing today. Companies, though, expect more accounts to be placed in collections in the coming year and investing in new technologies and employees is critical for the anticipated volume increase.”

While letters and phone calls continue to be nearly universal approaches for collectors communicating with consumers, the use of text messaging has become more common. More than three in 10 respondents (31%) reported that their company uses this channel today compared to 22% in 2020 and 16% in 2019.

The report also found that use of technologies such as online payment portals has multiple benefits: 1) they may be preferable to certain customers who do not want to have a human interaction and want to deal with their debt at a time of their choosing; 2) this service is beneficial due to the limitation on outbound telephone calls that will take effect with the implementation of new regulatory requirements.

While certain technological tools have been adopted somewhat uniformly across the industry, others are far more likely to be in use at larger companies. Medium and large companies have similar adoption rates for online payment portals and predictive scoring tools and at generally much higher rates than smaller companies.

Larger Collections Agencies More Apt to Use New or Recent Technologies

Collections Agency Types/Technology Tools

Percent of Large Agencies (1 million or more accounts) Using Technology

Percent of Medium Agencies (100,000 to 999,999 accounts) Using Technology

Percent of Small Agencies (fewer than 100,000 accounts) Using Technology

Online Payment Portals

93

%

97

%

53

%

Predictive Scoring to Prioritize Accounts

79

%

61

%

21

%

Text Messaging

62

%

21

%

15

%

Speech Analytics

52

%

34

%

6

%

Employees will be a major differentiator

Advancements in technology have also allowed more employees in the collections industry to work from home. More importantly, this practice could help companies retain more of their top employees. Since the onset of the pandemic, 87% of larger companies represented in the survey had collection agents shift to remote work compared to 43% for smaller companies.

Companies that shifted to a remote working environment in response to the pandemic largely expect to continue to offer at least some degree of remote work in the future. This most often takes the form of a hybrid arrangement, rather than never going in to the office. As one interviewee in the report noted, “Unless there’s a regulatory or client-driven requirement to be in the office, most companies appear to be okay with some sort of hybrid model.”

Nearly two-thirds (64%) of companies are either considering or already offering remote work arrangements for new hires. This consideration of remote work is distributed among a variety of roles, including collection agents. The main reason companies are considering remote working arrangements? Approximately 71% say it is to attract better applicants and 62% say it is to increase employee retention. One-third (33%) said it was to reduce costs.

“The last two years have proven how resilient the collections industry can be, and as account activity increases it is clear that the agencies that are investing in technology and talent will be best prepared when the market shifts,” concluded Klotch.

To download the full report, please click here.