Regulations: financial firms appreciate their role in maintaining a balanced and level business environment based on the concept of fairness. Hence the tireless work undertaken by the Financial Conduct Authority to ensure compliance across this expansive business area. However, we should see the FCA’s regulatory actions as more than simply defining restrictions and limitations. One of their most important areas of responsibility relates directly to financial technology (FinTech) as a mechanism for driving positive change.
The development of FinTech continues to advance at a remarkably rapid pace. Yet at the same time, many large-scale financial firms have remained cautious in their adoption of these newer, safer, and more efficient technology solutions. As a result, the FCA has been keen to address the issue directly, with many of their latest regulations oriented toward encouraging and fostering innovation that enhances the customer experience.
We can be confident that innovation will continue to help inspire smarter, faster, more compliant ways of doing business – for financial companies of all shapes and sizes. One particularly important area where such invention is needed is in the antiquated and often obsolete world of debt recovery. It’s here that technology can kick start new thinking and new approaches to core business processes, and help introduce more consumer-friendly practices that offer the industry a more sustainable platform for future development.
The Role of Disruptive Technology
According to Christopher Woolard, the FCA Director of Strategy and Competition, innovation is one of the highest priorities in how the FCA refines its regulations. As he described at the recent event Fin Tech: Regulating for Innovation, the key to achieving this type of large-scale innovation is only possible through the use of ‘disruptive technology.’ [i]
Disruptive technology refers to the dynamic way technology can rapidly and drastically alter the state of business within a sector. Or to put it another way, it’s about survival: newcomers entering the market will increasingly build their business models around these emerging technology solutions to challenge incumbent firms. Over time, a heightened level of competition will make it difficult for some to survive – while also fostering greater innovation, and a better market for those capable of transforming.
Of course, fostering and supporting a competitive environment is not a pursuit reserved for just the FCA. Financial services agencies across the spectrum are doing their part to encourage the adoption of these disruptive capabilities. Accordingly, this level of support for new FinTech means that professionals across the industry must remain at the cutting-edge or risk being left behind.
What Disruptive Debt Recovery Technology Looks Like
To be competitive, in fact to be viable in the first place, the latest generation of debt recovery solutions must adopt an integrative approach to their deployment – and offer secure, scalable deployments that are customisable to specific customer needs. Only then can successful debt collection technology fulfil its potential as a stable, reliable partner within receivables management.
It’s our view that disruptive FinTech, developed for the debt recovery sector, should encompass the following capabilities:
1] Scalable deployment
Debt recovery remains an integral component to all business. Consequently, this technology must be scalable to businesses of all sizes. This is essential, as today’s online marketplace has dramatically shifted our concept of what constitutes a business operation, and the resources/people needed to be successful. Plus, a broader range in terms of business size and scope also means a greater necessity for debt collection technology – capable of scaling from small start-ups to enterprise-level solutions.
2] Compatibility with client systems
As for deployment, debt recovery solutions must also encompass a high level of compatibility with existing IT ecosystems. It’s a broad industry truism that debt recovery technology often remains inefficient due to the legacy systems in place. At the same time, many firms don’t have the resources to transition to newer systems offering better connectivity. By championing compatibility with older systems, new FinTech enables firms to move forward via a successful migration route, and to ‘catch up’ all out-dated software.
3] Seamless, high impact data automation
Automation is the key to processing data fast enough to keep up with the state of the industry. This is particularly important for ease and simplicity of account transfers, as companies’ transition from out-dated systems to more modernised solutions. Disruptive technology continues to push the envelope with smarter and more efficient automated processes, and the most successful debt recovery technologies will include a broad spectrum of automation for handling an ever-increasing volume of data.
4] On-going access to online credit databases
The global world of finance never sleeps – which means that debt recovery technology must allow access to all critical databases and systems 24/7. Credit firms are the lifeblood to all financial services. By keeping access open to these credit databases at all times, debt recovery FinTech will catch up with the ‘always on’ status quo that exists with other core processes found across the finance world.
5] Interactive Voice Response
One of the largest ongoing concerns with debt collection technology is the problem of quantity; where the volume of accounts frequently overwhelms older systems. Here, automated data processing is only one element to successful recovery. The next step is providing systems that effectively communicate with both clients and accounts. Integration of smart, interactive voice response (IVR) is one particular avenue. IVR is a more human-centred tool for telephone-based collection, with automation that accepts voice commands – and responds in a more natural, conversational manner. This smarter, more responsive technology makes it far easier for consumers to quickly achieve their goals when interacting on the telephone, thereby helping to minimise any potential frustrations. Furthermore, a smart IVR system can accommodate an increased customer load without the need for increased staff to handle the volume.
6] Prioritised security provisions
Customer data and account security continues to pose challenges throughout the FinTech world. This holds particularly true within debt collection, as regulations regarding disclosure and communication are becoming ever more rigorous. Debt collection technology must therefore incorporate a high level of security across-the-board – and offer integrated security protocols that are routinely and consistently being updated.
7] Online data backup and simplified recovery
Data redundancy is not a secondary concern reserved to daily tape backups. Instead, backup must be a primary concern for all areas of debt recovery technology. Loss of account data can lead to immediate financial consequences, alongside the resulting decrease in revenues. And as most business owners already understand, razor thin margins mean that companies must ensure they’re maximising income at all times.
An integrated approach to both backup and security should therefore feature an approach to data recovery that removes any source of confusion or complexity.
Integrating Compliance into New Debt Recovery Solutions
Among the most important concerns within debt recovery, compliance is an issue that will become even more important as technology platforms evolve. The question for debt collection agencies is how can they demonstrate adherence to all applicable laws, regulations, and standards of practice – and how this compliance dynamic affects the way they interact with debtors/customers.
These same agencies must also be careful in following the FCA’s guidelines for compliance or risk an operating ban that, depending on the severity of their infractions, could be permanent. This holds particularly true within the FCA’s Payment Systems Regulator (PSR), which reflects the above-mentioned commitment to embracing payment systems that work within the interest of those people who use them.
While changes have certainly affected how this industry works, one element remains consistent: the fair and ethical treatment of customers. New platforms must now integrate specific methods to ensure that compliance is maintained, no matter how or where a customer interacts with them. For example, a debt recovery platform migrating to a cloud-based service must now take into account how their customer data is accessed, stored, and communicated online. Any mishandling of this information due to errors or design problems in the platform could breach compliance rules and lead significant problems.
New Opportunities Ahead
As technology continues to push forward, on-going changes and revisions to guidelines will become increasingly common. Accordingly, this has created a prime opportunity for those firms able to take advantage of this industry-level transformation. A pivotal shift in business strategy, or a start-up endeavour dedicated to addressing gaps in technological capabilities, could open up new possibilities within debt collection and related fields.
For those companies willing to embrace technology the future ahead looks bright. And with the continued push toward disruptive FinTech thanks to FCA regulations, significant changes will likely take hold within debt recovery – changes that will lead to a more robust level of competition, and ensure a more positive environment for businesses, customers, and clients to engage with.