A THOUGHT-PROVOKING START TO 2025!

My name is Mark Namba, and I consider myself one of the veterans in this interesting industry. Ranjan Dharmaraja plays two roles at Quantrax. Having founded Quantrax 30 years ago, he continues to lead the company's efforts to enhance an AI-based platform that has enjoyed three decades of success. In addition, his thought-provoking vision has got the attention of many innovative companies and owners, who now accept that change has to come. Sunk cost fallacies and a lack of vision from the collection software companies in the industry, have arguably hurt an industry that plays a vital role in the US economy. I talked to him as we prepared for each year. Here are some of Ranjan's thoughts and predictions for 2025.

Mark N - Quantrax attributes much of its success to its ability to predict what is coming. What's coming in 2025?

Ranjan D - I don't think this is tough one!

• There's so much that agencies have to try, and so many gaps in processes and collection technology, that lawsuits will spike before they are contained.
• Small, innovative, determined agencies and law firms who are willing to spend, will be big winners. For every winner, there will be losers who fail to adapt quickly.
• Their sheer size will propel larger companies, but many will be forced to invest in new software and make major workflow changes they have refused to make for a long time.
• Thanks to regulatory pressure, creditors increasing their technology spending, and a new generation of thinkers and leaders, the quality of the products offered by the industry will increase by leaps and bounds.
• There will be a great deal of consolidation, as older companies find it more practical and financially viable to sell, than to invest in mandatory changes in their technology stack and internal resources.

Mark N - Other than for increasing operational efficiencies, what major changes could we see in the collection agency and legal collections space?

Ranjan D - The industry will soon realize that like playing the stock market, collections has become a "numbers game" and is now in data science and customer service. That will open new doors in areas like extended business office and early out work. With labor shortages, the industry must seize the moment and offer new and creative services. Traditional operational thinking will not work and it won't be long before the shift to efficient self-service and customer service will probably see the loss of many traditional jobs.

Mark N - The noise from "Conversational Voice AI" proponents is deafening. Is this the silver bullet for the collection industry?

Ranjan D - It's time to be logical. A consumer who is willing to pay a bill, will find a way to pay it. Do we really believe that anyone who has little or no intention of paying, will pay a bill simply because you threw "Conversational Voice AI" at them? As much as things change, some things do not change. Recovery rates have been falling because of call blocking, cautious collection strategies and decreasing efficiencies in collection operations. Digital strategies will make a huge difference, but will they push bad debt recovery rates up to the 20% levels we enjoyed in the 1980's and 1990's, when we only used letters and phone calls? Probably not. So let's stop looking for Waldo. The unique North American credit-driven economy will continue to create bad debt, and in order to be profitable, quickly identifying the people who will not pay will continue to be more important than finding the small percentage who will pay. The industry's love affair with chatbots and Generative AI has inconveniently helped us take our eye off the ball, and that must change.

Mark N - How do we change? What do we change?

Ranjan D - For a start, let's accept that scoring, dialers, Direct Drop voicemail, e-mail, texting and chatbots are not lead actors. There is one lead actor and that is your collection software platform. Unfortunately, we failed to invest in redesigned collection software, in a period of critical change for the industry. I often use this example. A consumer should be able to text an agent and dispute a bill, because they paid the client. When the consumer says they have a cancelled check, you should be able to say "Great. Send me a picture of the front and back of that check." The agent should be able to see that saved image in seconds, from within the collection system. How many companies can do that today? In a recent lawsuit an agency is accused of repeatedly calling a consumer after the plaintiff requested not to contacted by phone. Collection software should have warned agents and masked the consumer's phone numbers so no calls could be made. There are great products available for everything the industry needs to do. The million dollar question is "Who puts it all together?" We believe in choices, but collection software vendors must take most of the responsibility for inter-connectivity, integrating and the support of these wonderful products.

Mark N - Most of the companies we talk to, do not have everything they would like to have. Why, and how does that change?

Ranjan D - If you agree with me that your collection software platform and software vendor should deliver powerful, flexible and well-integrated technology, end users must demand change. Extending the life of aging collection software that was not redesigned for today's requirements is hurting the industry and individual collection operations. Moving house, often to a differentn state, can be a painfully unpleasant experience. Yet, we do it several times. When you work with a software company that knows the industry from an operating perspective, and the conversion of your data and processes are well-planned and executed, a challenging and less-profitable world could rapidly change. After 30 years of automation, commercial off-the-shelf (COTS) collection software should do much more. Expensive internal or third-party IT resources have a place, but should not be required to augment features that should be a standard part of a modern, robust, collection platform.

Mark N - All that is very logical. I know this is not intended to pitch Quantrax's collection software, but there are solutions like ours that could be a game-changer. When do you expect to start seeing major investments in change?

Ranjan D - Unfortunately, I am only mildly optimistic about speedy overall change because this industry initially asks the wrong question when presented with solutions that potentially address some of the greatest challenges it faces. We don't worry about replacing three collectors, but technology-spending discussions often start and stop with, "How much?" Most owners with 50 people will choke on a price tag of $12,000 a month for a new collection software platform. However, that is only what 3 or 4 collectors or admin people cost (If you can find people who want to work!). Consider a company that does not leverage AI, high-levels of automation, fully integrated two-way texting, e-mail, direct drop voice mail and chatbots. The increased revenue and savings could easily exceed the expense of new software. Add the savings on expensive IT resources and managing compliance risk outside the system. I often describe the decision as a "no-brainer." In the coming months, business failures will increase but we will also learn of many success stories. Collections is not going away. Fear of failure, and those success stories will open the flood-gates of change and the industry will begin to enjoy new levels of success and profitability. I think it's already happening!

Mark N - One last question. Most of the industry runs on collection software supported by a few active companies with proven products, regardless of their age or weaknesses. There are new companies offering or building new collection platforms. How do you see these products changing the landscape and helping innovative agencies with better technology?

Ranjan D - Interesting question. Remember 'Google Glass'? The wearable 'smart glasses'? This was 'Moonshot technology', the way to describe an ambitious project to solve challenging problems, and requiring breakthrough innovation and new technology. The product failed and was pulled from the market in a year. Collection software vendors who waited too long to address complex but often predictable changes in the industry, were forced to 'burn and build' a new product. Were any of these major efforts successful? You know. But what really happened?

While modern PC-technology can quickly create beautiful, user-friendly interfaces, and you can leverage digital communication channels, they will not simplify the building of the critical and complex software processes for onboarding new accounts, efficient linking, mail interfaces, integrated dialers, processing payments across multiple accounts, accurate credit reporting, client services, client and management reports, remittance statements, handling compliance, and of course, processes for effectively managing the 87% that do not pay. All of that is required and on Day 1 and it's why I say that building a successful new collection platform is as close to 'moonshot technology' as Google Glass was.

Ranjan Dharmaraja is Chief Technologist and CEO of Quantrax.

Mark M Namba

SVP of Business Development and Operations,

Quantrax Corporation Inc.

Voice : (301) 657-2084 Ext 154 Cell : (801) 419-5916

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