Category: Opinion Pieces

Collectors are doing more collecting

One thing that has become clear over the past few years is that debt collectors are doing more collecting. With a rise in inflation, fall in household incomes and a decrease in employment, people borrowing money is at an all-time high. The Guardian recently published that the average UK household will owe close to £10,000 in debts by the end of 2016. [i] Increased activity is therefore needed more than ever, throughout all stages of the collections cycle.

Driving debt, credit and collections with the data

One crucial element of the collections cycle is data, other sectors such as Media, Healthcare and Energy have unlocked the opportunities of “big data” and are now excelling in terms of their processes, efficiency, and effectiveness. Whilst some of the financial sector, for example, Insurance, is keeping up with technological trends, the systems and infrastructure that support the collections industry are lagging. Being unable to handle data, information and analytics efficiently are not only frustrating collections professionals but also hindering businesses and their output.

“Information is the oil of the 21st century, and analytics is the combustion engine.” – Peter Sondergaard, Senior Vice President, Gartner Research.

Data couldn’t be a more vital piece of the debt management puzzle. Information is gathered at every stage of the collections process from making the initial customer contact at the point of sale, to in-house collection teams, and then on to external collection partners. By harnessing the right data, improving its quality, keeping a record in the most efficient way and sharing it effectively across the entire process, you can revolutionise your business almost instantly and begin to make some huge breakthroughs with regards to your collection processes, success rates and upstream processes.

4 ways data can help the credit, debt and collections industry

1. Greater Accuracy – The more accurate you can be about a person, the places they’ve lived, their possessions, their circumstances, etc. the more intelligence you have upfront to engage in a meaningful conversation. Information (that is correct) can help you understand any limitations when devising payment plans, and enable you to construct the most effective and successful route forward. Many businesses dealing with debt management are struggling to gather and utilise accurate data. Sometimes, even when information is provided, it may not be used. This could be because it hasn’t been verified or deemed accurate. Alternatively, agents may simply lack trust and confidence over the source of information, resulting in poorer communication channels, unproductive conversations and lower success rates.

“The goal is to turn data into information, and information into insight.” – Carly Fiorina, former chief executive of Hewlett-Packard Company or HP.

2. Intelligent Transfer – Transferring data well not only minimises mistakes, it also saves the business time and connects the customer journey. Information about a customer’s case should be end-to-end, from the initial contact, to call records and external recovery. So, when a new agent takes on a case, they have a full picture of the customer’s journey and circumstance. Without all this intelligence, you’re essentially back to square one – no previous case history information means agents need to start the whole customer journey again.

3. Increased Efficiency – If you have accurate data, that’s recorded easily in a debt management system, and the information is carried forward seamlessly, you’ll automatically create some significant efficiency gains. Let’s look at the health industry. If you move from one doctor’s surgery to another, you’d expect all your existing health information and details to be seamlessly passed forward to the new surgery behind the scenes. You wouldn’t expect to go through all of your medical history again. Imagine recalling every visit, injection, tablet. Think of the time you’d both be wasting, instead of understanding problems and resolving issues.

4. Better Customer Experience – Often an oversight. Years of referring to people as “debtors” has made our customers seem like things. Understanding an individual’s problems and tailoring plans for them and their lifestyle is the difference between success and failure. Big data can enable you to make more strategic engagement with each customer, for instance, a recent survey highlighted that the service companies personalising subject lines in emails produced a 41.8% increase in open rates. [ii] Data insights like this can help you to create a more personal experience for your customers and therefore help you yield the best results. Having the right information about that person upfront allows you to tailor your initial contact and suggested solution, rather than solely relying on an individual agent to make their own decisions about the most appropriate action. People shouldn’t need to continuously state their name, address, what happened last time they were contacted. They should be able to say things once and be heard. We’ve all experienced the frustration ourselves when suppliers don’t log information, so you find yourself repeating the same details. Time is people’s most valued thing of all – so you do not want to waste it!

The collection cycle is a continuum, yet we treat every step as a separate phase

From making the first contact with the customer to involving a Debt Collection Agency (DCA) or Debt Purchaser to recover the money, the whole collection cycle is a continuum. Data and analytical information should be intrinsically linked and threaded throughout the end-to-end journey of each customer. Every touch point with that person, detail about what their situation is and outcome of the contact made should be recorded and updated on that person’s case. This ensures the next point of contact can move the case on rather than repeat what’s already been established.

This also begs the question of efficiency. Is there really a need for so many separate operations and processes to take place? Especially if they are just repeating the same processes each time. Are we at the dawn of a new era whereby all of this can be streamlined and handled by one supplier? A single system that will follow a customer’s journey from the start to finish and report in real-time about the latest information gathered. Is there a future for DCAs? Or can they be absorbed by larger businesses entirely?

And, if big data analytics is telling us people are less likely to open letters, why do we always start with this? If data indicates that people are more likely to open an email at 10 am on a Tuesday using their mobile, why aren’t we making contact then and tailoring our messages appropriately? [iii]

Data is growing faster than ever before and by the year 2020, about 1.7 megabytes of new information will be created every second for every human being on the planet.

Getting things out in the open

There is technology that can enable us to do this. Big data analytics is here, so what’s holding us up? Is it a lack of knowledge? Or is it an old habit of secrecy and the unwillingness to share data?

To fully embrace big data and reap the benefits, the industry needs to foster a new level of transparency. Over the years, customer case information hasn’t been fully passed over from one agent to another, leaving new agents to start at the beginning of the customer journey again. This is frustrating for the customer and also an ineffective use of time. For big data to work, maximum information is needed to create an effective and personal engagement with the customer.

At the moment, less than 0.5% of all data is ever analysed and used, just imagine the potential here.

Data sharing should be at the top of the agenda in 2017 for all debt management practices.

The government has already begun to implement better data sharing initiatives to great success. Under the best practice debt collection protocol recently published for local and central Government, it’s noted that local and national debt collection policies should contain the following commitment:

• Actively manage external debt collectors to ensure they are maintaining high standards, and that good practice and client data is shared appropriately between firms and government organisations. [iv]

The industry challenge:

To promote the sharing of data within entire collections processes and for every supplier involved.

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In years past, whenever a business required technology, they would look to the leading providers for a solution. It was a simple decision as all the big ticket, big price, big reputation technology firms had the time, money, staff, and resources to busy themselves producing world-leading platforms.

While on the surface this seems like sound logic, the reality (and the results) have been largely disappointing for many companies – particularly in the world of financial services. In this sector the so-called ‘big IT vendors’ have typically provided woefully under-resourced solutions for their customers. [1] The result has therefore been a level of IT service provision that has indirectly stagnated positive growth potential. [2]

Understanding the old tech problem

Old technology (the rate of change means we typically hear the word ‘antiquated’ applied even if it’s only three years old) within financial services – and within debt recovery – often remains highly expensive and cumbersome kit to maintain. [3] The problem starts with the choice of tech available, and the traditional reliance on an ‘established’ platform to meet customer needs. And it’s this choice – or rather the lack of it – that removes the imperative of the supplier to invest in upgrading their offering. Such a situation helps explain why many businesses are forced to adopt old, out-dated, and inefficient tech solutions.

Now for the good news: times are changing! The on-going problem of out-dated technology has begun impacting business operations to such a degree that it’s been elevated to a core strategic issue – and handled in a far more official capacity. Such a development has led to a total paradigm shift in how FinTech is handled for debt recovery in the UK.

How aged tech stalls business growth

While many of the major tech companies continue to maintain old technology, time as they say waits for no man (or woman) – and many smaller providers continue to push capabilities forward quite dramatically. In fact, today’s tech world contains a myriad of products designed to enable smarter, more user-friendly operations. From a business perspective, these developments help save both time and resources from being lost in terms of development and maintenance – as well as providing a more convenient and intuitive platform for the customer.

That’s not to say the problem’s fixed, and issues with aging tech continue to cause a host of core business issues:

Legacy systems are expensive to maintain

Simply put, the act of implementing old or legacy systems carries with it a much greater expense potential over time. For example, companies deploying old tech must also invest in the components needed to ensure it remains online: take a FinTech solution developed in the 1980s, where IT teams could still be tasked with maintaining the system – without any of the knowledge and understanding available from the original developers. And it gets worse, with these former programmers now being retired and colleges no longer teaching out-dated programming languages – challenges and related costs that will only continue to worsen as time presses forward.

Internal mainframe services are also expensive to install or remove

Another issue, when developing and integrating a mainframe system, is that pursuing such a solution can leave companies feeling far too invested in its success to consider removing or replacing it for a better option – given the logistical complexity and cost involved [4].This difficulty is often what keeps aged technology enduring despite its obvious limitations, and while this is less of a concern for larger companies able to maintain such systems, the out-dated and inefficient technology inevitably eats up budgets and restricts innovation.

Systems lack usability for customers & businesses

Usability is a critical component for any type of technology solution (debt recovery included), and older systems lack the technological innovations that have emerged over the last 10 years. For example, something as common as mobile integration or online payment systems are not always present within these older systems. As startling as this is, it remains part of the problem as long as businesses continue to support obsolete platforms.

Then there’s user adoption. Less usable systems require more time to learn, understand, and operate, which not only consumes excessive resource, but also impacts the overall user experience – leading to far higher levels of customer dissatisfaction.

Old-fashioned systems are also frequently lacking when it comes to integrating with cloud-based backups and data redundancy, because in more ‘established’ firms these daily tape backups are the only method used for this essential process. By comparison, cloud-enabled technologies deliver the accessibility, convenience, and security that’s typically not present within an in-house backup system. This is the realm of business continuity, because what happens when, for instance, if a fire, flood, or other disaster destroys a business and its on-site backup system? These risks are precisely why data redundancy through cloud-enabled solutions has fast become obvious choice for the vast majority of financial institutions.

Security exposures are frequently more common

We can all appreciate how financial systems are ranked among the most vulnerable within the data security world, with cyber criminals targeting the data for its black market value. Such a sustained threat places the emphasis on providing adequate protection, as businesses can soon find themselves liable for damages resulting from customer data breaches, theft of financial information, and related problems. Furthermore, a company can also face fines or suspension of operations for failure to maintain compliance in cases of mishandled security.

Aging FinTech typically increases this security exploitation potential because they lack the on-going updates to new and emerging threats that are common with more contemporary solutions. As a result, criminals have the time they need to infiltrate the firewalls in order to find different areas of weakness to exploit. With large-scale data breaches from major technology companies regularly appearing in the news, there’s no doubt that the outdated security offered by older systems poses a significant strategic risk.

The FCA: disruptive tech towards positive change

While aging FinTech still maintains a large market share across the major debt recovery firms, the days of these outmoded methods are numbered. The Financial Conduct Authority, the UK’s financial regulatory body, is making a strong push towards innovation across all areas of the industry. This level of ‘centralised policy’ will inevitably encourage the top financial firms to make the upgrades they need – or be left behind.

Since the Financial Services Act of 2012 (that ended the former Financial Services Authority and ushered in this new, independent framework for regulation) [5], the FCA has made a highly concerted push towards fostering innovation and promoting a greater level of competition across the sector. In many cases, the specific focus is on overcoming the on-going reliance on out-dated systems and technology. [6]

For example, a recent speech by Christopher Woolard, the Director of Strategy and Competition for the FCA, outlined the organisation’s emphasis on the role of FinTech in pushing the industry forward. Woolard suggested that innovation can be fostered within FinTech through what he calls ‘disruptive innovation.’ These are the type of paradigm-shifting technology breakthroughs that can shake up financial services/debt recovery – with many experts agreeing that such change is needed to overcome a traditional reliance on the obsolete and inefficient systems holding back progress. [7]

As Woolard mentioned, the role of disruptive innovation is to pursue those changes that directly lead to better competition and improve the customer experience. In his words, “ Disruptive innovation drives a number of dynamics in the market. A few firms will emerge as genuine competitors at scale to the existing incumbents. Many will be sufficiently interesting business models that they may find themselves purchased by bigger players and their technologies adopted in the mass market. And both of these developments may drive other incumbents to compete harder to retain or gain customers.” [8]

Woolard’s outline of disruptive innovation showcases the organisational support this new approach to debt collection technology holds in the marketplace. The days of old and antiquated systems are over. Today more than ever before, the focus is directly on delivering new and improved solutions that are better for customers and businesses alike.

Ushering in the SME in technology-driven debt collection

As the FCA’s push towards disruptive tech continues to take hold, the entire business climate is adjusting in order to compensate. In many cases, this is leading financial firms to adopt the services of smaller to medium enterprises (SMEs) to develop and manage their technology platforms. These businesses – frequently start-ups on the cutting-edge of tech development – are laser-focused on delivering solutions that better address the problems posed by older systems. Even better, their push towards efficiency and innovation ensures that the financial services industry will only continue to get better for all concerned.

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The results are in: the cloud is more than just a passing fad. Judging by the level of adoption it’s achieved, and it’s almost permanent position on the priorities list of CIOs and CTOs, the technology is now mainstream and here to stay. Of course that’s hardly surprising news for a delivery model that removes a number of concerns for companies in terms of storage, operations, software deployment, and so on. Makes sense right? I mean why not let someone else handle software and security updates thereby eliminating such tasks from an otherwise overworked internal operation?

That’s not to say it’s all been plain sailing. For example, countless companies have expressed their concerns over security: How can larger-scale companies expect to keep their assets protected by migrating them to an external service provider? How could these companies guarantee effective protection? Would sensitive internal data remain fully secure and private even in these types of enterprise solutions? Etcetera, etcetera…

As most business professionals now recognise, the legitimacy of these concerns – alongside their probability – has certainly diminished over time. Cloud-based services continue to push forward with an agenda of innovation, security, stability, and service. Accordingly, the security concerns once held by larger companies are beginning to diminish. In fact, enterprise-level corporations across the globe are overcoming their initial trepidations, and confidently making the move to cloud services – placing them at the front of the queue for experiencing the full benefits of the cloud. [ i ]

Analysing the Current Trend in Cloud Services

While security concerns were once a major barrier, smarter firms are now recognising the wider value (as well as high-grade security) offered by leading cloud providers. Current trends show that companies across all industries are taking the plunge into cloud-based solutions. For most it is a question of ‘when’ not ‘if’, and while some industries are slower than others, forward-thinking IT departments can benefit greatly from speeding up the transition.

One industry where change can be described as slow-growing is financial services. However, that’s not to say that banks, insurance companies, and other financial institutions are failing to successfully transition to the cloud. For example, one of the largest financial firms in the world, Capital One, revealed their migration to Amazon Web Services in October 2015. Other enterprise-level customers making a similar journey include Adobe, Airbnb, BMW Auto, General Electric, Harvard Medical School, Outback Steakhouse, SoundCloud, and countless others. [ xi ] Yet, many analysts considered this move a ‘tipping point’ that demonstrates the attractiveness of latest generation cloud security and agility. [ ii ] Put another way, if a company as large and as global as Capital One could trust the security and stability of cloud-based services, then it was time for other firms to begin recognising the value these solutions could offer.

Key Takeaways from the ‘early’ adopters

The feedback from those who’ve already adopted a cloud solution typically fall into one of three thought streams:

1. The Cloud is as safe (or safer) than most mainframe systems

Studies have already shown that traditional mainframe systems often hold more security vulnerabilities than their cloud counterparts. [ iii ] At the same time, while cloud-based services employ world-leading security policies and updates, many mainframe systems fail to provide similar up-to-date capabilities. Yet if a mainframe is available for online access, as most are, they remain potentially more at risk than public cloud services. [ iv ]

2. The Public Sector is migrating to the cloud

Even governments have begun a widespread adoption of cloud services to simplify and streamline their often slow moving operations. For instance, the UK continues to implement public cloud infrastructure within its governmental operations – all designed at improving the overall state of operational efficiency. [ v ] In fact, the Minister for Cabinet Office spoke at a 2015 conference about Crown Hosting Services as a solution that merges together HM Government and Ark Data Centres to provide cloud services for accelerated governmental adoption. [ xii ]

3. Most major organisations are heading to the cloud as well

For businesses not already utilising the cloud, data trends show that some form of adoption – be it public, private, or hybrid – is inevitable. Companies like Johnson & Johnson have already paved the way toward full-scale deployment, [ vi ] while across the UK FTSE 100 nearly half of companies (44%) have adopted cloud-based services from Google –including Maps, Apps, Search, and the Cloud Platform.

As Shailesh Rao, Director of Google Enterprise, noted at the 2015 Gartner Symposium ITxpo, ” We thought this was a good checkpoint to say that it’s actually not just small businesses – it’s larger enterprises using Apps too.” [ xiii ]

Making the Move to the Cloud

From a logistics standpoint, migrating to the cloud is often easier said than done for Fortune 100 or FTSE 100 firms. According to a Morgan Stanley survey of 100 CIOs, up to 53% of the respondents had not yet adopted any public cloud infrastructure. [ vi ] While many IT professionals remain sceptical of this statistic, the truth is that the number of cloud adopters within the UK FTSE 100 is anticipated to rise by up to 9% in the next three years. Adoption numbers are slightly higher within the US Fortune 500. As Google’s Senior VP and Chief Business Officer Nikesh Arora reported at the company’s Q1 2016 earnings call, 60% of Fortune 500 companies had already adopted the Google cloud in some capacity – with even more planning to follow suit in the coming years. [ xiv ]

As these organisations prepare for the shift to this business dynamic, successful cloud-based providers are working even harder to accommodate their entry. While Amazon has long been recognised as one of the ‘top dogs’ in the sector, countless other cloud providers are ensuring that the industry remains competitive and focused on delivering the best possible service to businesses.

For example, aerospace leader Boeing as well as agricultural giant Land O’ Lakes were seeking a cloud solution that provided both the transition services and the power to supply everything they needed across their cloud operations. Rather than opting for Amazon or Google, both of these companies opted for a solution through Microsoft Azure. [ vii ]

One of the primary aspects that led these firms to choosing Microsoft was simplicity. Microsoft’s Azure could scale multiple interacting business assets into a much more unified, user-friendly system. For Boeing, this meant that data storage and analysis could be streamlined to make it easier for the company to interact with hardware and equipment through the Internet of Things (IoT) – while optimising overall efficiency. [ viii ]

As these examples show, even large firms are opting for the cloud to improve organisational unity while simplifying their operations. What’s more, as each large-scale business makes the migration, those who remain with mainframe systems are slowly facing obsolescence – and a much steeper uphill battle to remain competitive in the global economy. [ ix ]

Where the cloud is heading

While the cloud as a general model already boasts an impressive number of business users, the momentum continues to move forward toward universal adoption – and even more corporations, enterprises, and related businesses are expected to transition a large majority of their operational systems over to the cloud in the coming years. In fact a growth in cloud usage is expected across the board, according to a survey by disaster recovery firm CloudEndure [ x ], which goes on to identify the following trends:

Cloud-based services, both public and private, are expected to grow 22% within 1 year and another 15% within 2 years. Older virtual machine adoptions are expected to drop in usage by 25% in the first year and 31% within 2 years.43% of those polled already adopt a public cloud-based system.Within 2 years, that number will grow to incorporate up to 64% of users.

What this data reflects is that the positive trend towards cloud usage is well on the way to 100% adoption. While projections vary based on specific research, one conclusion holds true: cloud systems represent the future of enterprise business computing.

Early adopters of cloud tech enjoy the greatest benefits

Companies that remain hesitant to adopt a cloud-based approach are already missing out on a variety of benefits relating directly to their business’s operational performance. By adopting a cloud-based solution now, businesses can still look to gain the upper hand on much of their competition. Not that the good news stops there, because, the cloud will also help improve a business’s potential irrespective of size (from smaller firms to enterprise-level brands), and ensure it remains at the forefront of technology as the world of innovation pushes forward into the future.

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Embracing change

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.

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The power of small and medium

The world of financial technology (FinTech) often moves a little more slowly than other industries, with antiquated and out-dated finance systems still dominating the sector. This is due primarily to a conservative mindset that’s prevalent amidst senior managers, and one that’s deeply averse to any form of change that could potentially introduce risk. All of which means that new tech, and new innovations, can have a hard time becoming established, irrespective of the benefits on offer. Whereas the tolerance of old technology stems from its origin: large-scale, ‘household names’ in the technology space.

Businesses typically choose these types of companies because they’re either unaware of any alternatives, or because they’re untrustworthy of other choices due to the sensitive nature of financial data. Yet such a position masks a critical problem: established companies have no direct incentive to update their infrastructure, or provide more cutting-edge technology solutions for their customers. There is light at the end of the tunnel however, as several forward-thinking companies are beginning to shift their thinking when it comes to adopting newer, more user-friendly FinTech solutions.

Importantly, many of these solutions are emerging from the small and medium enterprise (SME) sector. SMEs reflect the new wave of technology development and results-driven solutions. And because of their commitment to cutting-edge tech, they continue to provide access to the very latest advances – with the highest level of security to keep users’ confidential data secure at all times. And what’s more, SMEs’ smaller-scale approach to business allows them to provide a direct, honest service to their customers, and to achieve a level of personalisation most enterprise level operations can only aspire to.

So does size really matter?

Why SMEs are better for FinTech

What we all know is that financial services cannot afford to be held back by obsolete solutions. This viewpoint sits at the heart of the Financial Conduct Authority’s latest push toward embracing ‘disruptive technology’ within the industry. That’s because such disruption allows for, indeed demands, macro-scale pushes forward in terms of both capabilities and thinking. That’s why the FCA has embraced a climate where developers can actively pursue disruptive technology to improve the state of the industry, and to foster better competition within the industry.

In many cases, the best emerging tech is to be found in the SME sector – with standout solutions that offer the following differentiators:

A commitment to solution-driven tech

As mentioned, SMEs often remain at the forefront of technological innovations. These are the teams that often come together around a core discovery, and as they form into a viable business their customers can expect a high level of dedication to providing the best possible solutions. In most cases, the resulting SME businesses are focused on solving a particular problem. For example, a recent issue for FinTech has been an inability to provide customers with an integrated mobile and web-based platform – a problem ‘fixed’ largely by dynamic new entrants into the market. Such developments highlight the responsiveness and commitment found inside SMEs, rather than larger FinTech firms.

Experience a more dedicated service

Small-to-medium-sized businesses are often comprised of a compact, and highly skilled team dedicated to a modest number of active customers. This holds especially true with the SMEs within start-up firms just beginning to integrate their FinTech solution into the market. This type of smaller-scale approach allows for a far more personalised customer experience, and in many cases customers receive a greater level of account assistance than they could possibly expect with at an enterprise-level firm.

Working with the latest innovations

The sharp focus SMEs offer into FinTech innovation is emphasised by the FCA itself. According to Christopher Woolard, Director of Strategy and Competition for the FCA, FinTech developers should be making a much harder push toward the aforementioned disruptive technology. [ i ] And this push will move everyone toward a much more user-focussed and competitive financial sector.

As most businesses already know, the more established FinTech companies lack a major incentive to upgrade their services and adopt newer tech that reflect the emerging needs of the industry. However, through the new breakthroughs being delivered by SMEs, the latest generation of FinTech is beginning to accept its role as a source of industry transformation. The end result from all this innovation will be a far more powerful and comprehensive set of FinTech resources available to organisations, which in turn will help them both move forward and remain competitive.

Meeting the same compliance standards

Even though they are obviously smaller than enterprise vendors, SMEs must follow the same rigorous compliance and regulatory standards set forth by the FCA. These standards include how to contact and communicate with customers, how to resolve complaints or disputes, protecting customer information/maintaining confidentiality, and adhering to all applicable laws, regulations, and legislation related to this industry. Without this type of compliance, SMEs will soon stop operating, and will therefore undoubtedly place a strong emphasis on ensuring their solutions meet all appropriate compliance standards.

Security you can trust in

The topics of data security and the effective mitigation of risks are frequently to be found in the ‘top ten’ of business concerns listed by companies both large and small. This leads to (indeed is the major contributor to) a major obstacle to deploying SME innovations: trust. Or, put another way, a lack of confidence in the capabilities of the SME to securely store their sensitive customer data, which leads to scepticism in the overall package.

While this type of thinking is understandable, the truth of the matter is much different. SMEs bring together the latest advancements within technology platforms, including integration of much more stringent and frequently updated security protocols. Yes, older legacy systems will come equipped with security, but in many cases this security may not be enough to prevent large-scale data breaches – which can be confirmed by a quick analysis of recent breaches within large technology companies. By keeping their focus on cutting-edge tech and security, SMEs are well positioned to provide the safety many companies need to feel reassured. And their commitment to the latest innovations will only continue to reinforce this focus on security, and ensuring it sits front and centre in all future developments.

New FinTech: A slow but steady process

SMEs are already showcasing the power and potential of innovation to help reappraise what’s possible in the world of FinTech. And as they continue to demonstrate, there’s no reason for companies to remain apprehensive about utilising their services. Almost the complete opposite in fact, as they provide customer-focused solutions that are far more aligned to the current state of the industry – as well as leading the change agenda.

One example of this progress comes with financial powerhouse JPMorgan Chase’s adoption of smaller-scale online lending platform OnDeck. JPMorgan easily had the resources to develop this platform internally or to choose a larger-scale tech firm to develop it. Instead, the company recognised the potential of OnDeck’s straightforward online lending service for small businesses and embraced it – thereby enjoying many benefits as a result. [ ii ]

Of course, for many companies the adoption of new FinTech cannot occur with a simple flip of a switch. In many cases, technology shifts must occur progressively and transitionally over time. Without an effective change management process, there would be no sustainable way for any type of new platform to succeed. This holds especially true within FinTech solutions where highly sensitive customer data must be properly accessed at all times. Accordingly, new platforms must be progressively integrated to ensure the processes it enables operate with both security and usability in mind. [ iii ]

Over time, new technology will continue to take hold and transform all industries – the finance world included. SMEs reflect the current state of the industry in providing the best solutions at the cutting-edge of technology. That means there’s no need for businesses to continue choosing old, out-dated, and obsolete FinTech just because it comes from a larger, more ‘credible’ enterprise. Today, innovation is largely defined by the factors of flexibility, agility, and a nimbleness to embrace new ideas and breakthroughs – qualities that equally define the world’s leading SMEs.

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