Traditional Debt Collection is Dead… Long live Traditional Debt Collection

Rapid Digital adoption and globalization of products, services, and markets are constantly creating new consumption and payment habits. This leads to complex mesh and chains that cannot function without the utilization of advanced technologies. The transaction volume, and therefore the number of outstanding claims, is continuously growing, especially in the areas of eCommerce, online?and?subscription-based services more recently – BNPL products. Providers of goods and services often need to operate with flexible payment options and contract terms?in order to?stay competitive. In this environment, adequate recovery management becomes an integral part of the business process and can have a critical impact on the liquidity of companies.?

Studies on the common payment practices in Europe showed a worrying tendency:

• On average, 42% of the total value of B2B receivables in Switzerland hadn’t been paid by the due date.?
• According to an EU-wide survey issued by the EOS Group, 19% of all invoices (B2B + B2C) in 2017 were paid too late or not paid at all.?
• 42% of 3,200 interviewed companies in 16 European countries do not use receivables management techniques to settle outstanding invoices.?
• 77% of the companies do not expect any further upswing, which means payment practices will remain the same or get worse.?
• Only 18% of European companies have already completely digitalized their dunning processes.?

These studies indicate 5 main problems of the traditional debt collection model?are:

1. Analog communication: The communication with debtors as well as with creditors takes place via outdated channels (mainly by phone) and often uses incomprehensible jargon, which highly extends the processing time.?

2. Location-based business processes: Traditional collection practices can barely keep pace with the boom of transnational eCommerce and the digitalization and globalization of services. Most of the collection service providers are still highly dependent on their location and offer?consultancy?over the phone, or?on-site at limited office?hours.?

3. Manual processing: Manual data processing often leads to errors that are?difficult?to control and?fix. The responsible debt collection?agents?are overwhelmed with the increasing amount of receivables and can hardly offer individual support to the debtors. The case processing can even come to a standstill once the debtor is?out of their base location?and the information and processes need to be adjusted to the local requirements.?

4. Outdated software and complicated data exchange: More than 80% of all debt collection companies still use software tools that were developed in the 90s and can hardly be integrated into complex technical infrastructures and multichannel processes of modern business models. The result is performance issues and a lack of integration, especially for businesses with international sales markets.

5. Unprofessional business practices: Legally incorrect practices are widely used, like disregard?for the number of?collection fees set by law or non-compliance with consumer rights such as notice periods, cancellation and revocation rights, etc. Furthermore, morally questionable practices are sometimes used in the operation process itself, such as threatening phone calls, constant?harassment,?or regular violations of data protection regulations. Under these circumstances, debtors feel intimidated and even “cheated” by debt collection actions, which on the other hand diminish the success of customer recovery efforts of the creditor.?

The way out:?collect.ezee?and chat.ezee?

A successful receivables management strategy should consider the specifics of the underlying business and the users’ ordering and payment habits. It should additionally provide opportunities for rapid and easy communication through digital channels.?

The way of doing collections in the digital world builds on the classical virtues…?

• Professional expertise and legal know-how?
• Compliance with governance and regulatory requirements??
• Cross-border coverage?

… and enhances them through technology:?

• Consistent data on claim progress?
• Implementation of web-based or mobile software solutions??
• Digital customer-oriented multi-channel communication?
• Optimization of processing steps through Artificial Intelligence and Machine Learning?

Conclusion:?

Despite the obvious advantages, many conventional collection agencies still struggle with the adoption of the newly available technological advances.?Switching from analog and manual processing to digital infrastructures, automation, and digital communication has proven to be a slow, tedious, and expensive process for many companies.?

Quite different, on the other hand, are the?flexible, cloud-based SaaS and PaaS solutions?offered by innovators like Epik with solutions like?collect.ezee?and chat.ezee?, which are increasingly gaining popularity among customers thanks to their fast and cost-effective implementation and quality of services.?

So, say goodbye to traditional debt collectors —?welcome the?debt?management?which is?now fully?digital.?

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