Collections Industry Increases Hiring and Technology Investments While Preparing for the “Next Normal”

CHICAGO, Ill. —  A new report by TransUnion (NYSE: TRU) and
Aite-Novarica Group found that 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. 

The report, “A Transition to the Next Normal:
The Collections Industry in 2021,” provides the latest annual
look at the trends, challenges and opportunities in the U.S. third-party
collections industry. 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.

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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.”

Technological advancements key for future of
industry

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

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.

About the report

Insights on the challenges, trends, and
innovations occurring in the third-party collections industry are informed by a
quantitative survey of third-party debt collection professionals conducted in
Q3 2021. A detailed look at the composition of survey respondents is provided
in the appendix. Survey results are representative of the market at a 95%
confidence interval with an 8-point margin of error. This is the third annual
survey of the third-party collections industry conducted by TransUnion and
Aite-Novarica Group. The full report is available here.

About Aite-Novarica Group

Aite-Novarica Group is an advisory firm
providing mission-critical insights on technology, regulations, strategy, and
operations to hundreds of banks, insurers, payments providers, and investment
firms—as well as the technology and service providers that support them.
Comprising former senior technology, strategy, and operations executives as
well as experienced researchers and consultants, our experts provide actionable
advice to our client base, leveraging deep insights developed via our extensive
network of clients and other industry contacts. Visit us on the web and connect with us on Twitter and LinkedIn.

About TransUnion (NYSE: TRU)

TransUnion
is a global information and insights company that makes trust possible in the
modern economy. We do this by providing an actionable picture of each
person so they can be reliably represented in the marketplace. As a result,
businesses and consumers can transact with confidence and achieve great things.
We call this Information for Good.®

A
leading presence in more than 30 countries across five continents, TransUnion
provides solutions that help create economic opportunity, great experiences and
personal empowerment for hundreds of millions of people.

http://www.transunion.com/business