Michael Lamm outlines industry trends for the upcoming year and beyond.
ACA International company member Corporate Advisory Solutions (CAS) forecasts in its 2020 Year in Review Tech-Enabled Outsourced Business Services Market report that going into 2021, increased regulation will exert mixed impact on the ARM sector. It also says that overall consumer willingness to take on additional debt may decrease as long as recessionary circumstances continue.
Nevertheless, according to Managing Partner Michael Lamm, the firm projects industry revenue and profits will rise as aggregate household debt and consumer confidence indices are expected to rebound in 2021.
In the aggregate, deleveraging trends have had a very positive impact on industry growth. Looking into 2021, aggregate household debt and consumer confidence indices are expected to increase as the pandemic subsides, while the national unemployment rate is projected to decline an annualized rate 14% over the next five years.
As consumers increasingly take on debt as job security and charge-offs rebound, industry revenue is expected to increase an annualized 4.5% to $16.7 billion over the next five years, particularly from 2021 through 2023. Furthermore, outsourcing of collections is set to increase, particularly at earlier stages in the delinquency process. This will further improve the ARM industry’s outlook.
As there is a time delay between the issuance and repayment of debt, the downward effect of lower debt issued in 2020 will not necessarily be demonstrated in 2020 industry revenue and may instead impact collections in 2021.
On the other hand, the two stimulus packages, though debatably inadequate, have had a positive impact on the ARM industry as they increase consumer disposable income and promote deleveraging. In general, the paydown of pre-existing debt overshadows decreased debt issued in terms of impact on ARM revenue in 2020. As a result, the industry has benefitted from a mix of recessionary behavior this year.
CAS looks forward to a robust M&A market in 2021.
Michael Lamm, Managing Partner of CAS, hosts the ACA Cast podcast series Leadership Fuel with Michael Lamm. He is also a frequent contributor to ACA International's award-winning Collector magazine. CAS is an ACA International member company in Philadelphia.