Third-party collection companies are incorporating new technologies into their communication strategies to stay ahead, according to recent findings from TransUnion and Datos Insights.
12/06/2023 1:40 P.M.
2 minute read
While traditional channels like letters remain the primary mode of communication for most (98%) of collection companies, there is a slow but steady shift toward adopting more modern methods, according to the new TransUnion and Datos Insights report, “Seizing the Opportunity in Uncertain Times: The Third-Party Collections Industry in 2023” (PDF).
Text or SMS messaging, for instance, has seen a modest increase from 37% in 2022 to 40% in 2023. Interestingly, 34% of collection companies surveyed indicated plans to incorporate text messaging within the next two years.
“One of the most promising opportunities we see for companies is to invest in omnichannel communications,” said Jason Klotch, vice president of third-party collections in TransUnion’s diversified markets business. “Reaching consumers where they are most likely to respond is the key to effective and efficient operations that also better enable regulatory compliance.”
The report identifies a notable trend in the size of collection firms that are willing to invest in new communication technologies. Larger companies, boasting higher budgets and more sophisticated operations, are more likely to adopt innovative technologies. Over the next two years, large companies also said they plan to invest significantly in text/SMS messaging (31%), chatbot or digital assistant technologies (43%), and email (17%).
Additionally, the report underscores the growing presence of AI and machine learning (ML) in the accounts receivable management industry. Approximately 60% of companies are on the path to adopting AI/ML technologies, with applications spanning internal and external functions. These technologies are being leveraged to predict payment outcomes, segment and profile customers, enhance self-service platforms, recommend communication methods, analyze account lifecycle workflows and anticipate consumer behavior.
Despite these advancements, the report highlights challenges stemming from broader macroeconomic trends and consumers’ financial resilience. As a result, 58% of companies express concern about growing their businesses, and 64% agree that diversification is crucial for long-term success. To overcome these challenges, companies are exploring new avenues such as entering different verticals like auto lending or medical debt collection and offering Business Process Outsourcing (BPO) services.
Looking ahead, 17% of third-party collection companies said they plan to expand into the FinTech/unsecured consumer lending market within the next 12 months, while 12% plan to offer BPO services. Overall, 45% of companies have plans to venture into other types of businesses in the coming year.
Data Collection
Insights were informed by a quantitative survey of 212 third-party debt collection professionals conducted in Q2 2023. Survey results are representative of the market at a 95% confidence interval with a 6.7-point margin of error.
Read the full report here (PDF).
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