From Collector: A Fresh Perspective
How startups and other newcomers are changing the landscape of the accounts receivable management industry.
2/12/2019 8:00 AM
After years of expansive government regulations and increasing pressure to both invest in pricey technology and cut costs to stay competitive–resulting in a tidal wave of mergers and acquisitions—the market for new accounts receivable management firms appears to be opening up again. TrueAccord was one of the first of the newcomers to make a splash back in 2013, ultimately attracting more than $34 million in startup funding, according to Crunchbase.
It was an outlier in many ways; it arrived after the creation of the Consumer Financial Protection Bureau, when many mom and pop agencies were closing up shop, and it leaned heavily on emails and machine learning at a time when most agencies were relying mainly on letters and phone calls due to regulatory confusion. To many industry veterans, TrueAccord seemed too risky to be sustainable—and possibly doomed to fail, Collector magazine Managing Editor Anne Rosso May reports in the February issue.
But it didn’t fail. In fact, despite continued uncertainty about using emails and text messages to contact consumers, it has grown. The company doubled its revenue in the last year, and was recently recognized as part of the CB Insights Fintech 250 list of emerging private companies working on groundbreaking financial technology. And it has steadily announced a slew of new hires in recent years, many of which are well-known professionals from established agencies, including Tim Collins (from Convergent Outsourcing) and Kelly Knepper-Stephens (from Stoneleigh Recovery Associates).
And while TrueAccord does seem to be a bit of a phoenix so far, in part thanks to its Silicon Valley roots, it’s not alone in its optimism for the industry.
“I’ve gotten more calls and have been seeing more ARM executives that are starting from scratch or companies setting up ARM business units than I’ve seen in a long time,” observed Michael Lamm, managing partner at Corporate Advisory Solutions. “Some of these are tech-focused, some are hybrids.”
Like TrueAccord, these newcomers aren’t reliant on the legacy technology that older ARM companies may be using, and they are free to build their operations unencumbered by that’s-how-we’ve-always-done-it thinking.
Chris Shuler, a 30-year industry veteran, has helped launch several new companies in his career, among them Vital Recovery Services. In September 2018, First Associates CEO David Johnson tapped Shuler to helm Activate Financial, a new third-party collection agency specializing in auto, credit card, health care, personal and student loans.
Shortly after Gordon Beck left his post as CEO of Diversified Consultants Inc. last July, he met with the owner of a large business process outsourcing group who ran several customer service call centers and was interested in breaking into the accounts receivable management industry.
Beck agreed to take on the project, and Valor Intelligent Processing (VIP) will launch in the first quarter of 2019.
On the other side of the coin, Matt Carroll and his wife, Peggy Carroll, launched PMC Integrity last year without the help of a holding company. The couple put up capital and took on some debt to get the business off the ground, and is currently looking for additional funding to increase their staff size.
These startups remain a small part of the ARM space, and while they have a lot going for them, new companies in general face an uphill battle breaking into the industry, Rosso May reports. It takes a lot of time to set up an office, write collection letter templates, hire and train staff, obtain bonds and licenses—all the more challenging when you don’t yet have the financials some states require for this— and on top of it all, convince clients to trust your brand-new business.
Read more about startups in the accounts receivable management industry in the February issue of Collector magazine.
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