Thursday, 24 November 2016

Partner power: The way to truly optimise your debt recovery

Most large creditors, be it in financial services, energy or the public sector, use external Debt Collection Agencies (DCAs) or Business Process Outsourcers (BPOs) to collect on overdue accounts. There is nothing new about that, but what is interesting is the many different approaches and reasons a Creditor chooses to add a flexible partner into the process and how this decision can vary significantly by organisation.

Some creditors opt for third party support from as early as day one of delinquency for certain product types, whereas others have lengthy periods of internal collection activity up to day 120 and beyond, before deciding to place debt out to an external party.

Why the different approaches?

For many organisations it’s a question of resource, based on the internal capacity of the collections team or that resources may be required elsewhere. For other businesses it’s a question of risk and personally managing that customer relationship for as long as possible, in order to add value and retain control.

What are the benefits of using a partner?

When used correctly there can be significant financial benefits associated with partnering for collections, including increased levels of recovery and reduced operational expenditure. However, organisations must take care to select a partner who provides the right level of control, has the correct oversight frameworks in place to ensure that the best outcomes are being delivered for the end customer, and that risks are minimised for their business.

Technological advancements mean we live in an age where data is readily available and this data allows businesses to better understand their customer base. The unique way in which our organisation is structured, using Equifax data and TDX Group delivery capabilities, means that we know more about the relationships creditors already have with their customers and have a holistic view of their financial circumstances, so we can offer a more positive customer experience and can also provide better returns for creditors.

How does data help?

By applying analytics this data is turned into true customer insight – driving more purposeful segmentation, identifying groups of customers which can be fast-tracked to DCAs and excluding unsuitable accounts to help reduce cost and risk within your organisation.

And because we work across a wide range of industries, we can spot themes emerging and use our knowledge to devise specialist treatment paths targeted at specialist segments and drive the best performance in recoveries. For example, our data can help creditors to identify customers who are in financial difficulties, enabling them to tailor their strategy to improve the customer experience, such as signposting the person to a debt charity for appropriate advice and support. We believe that treating customers fairly not only delivers better outcomes, but can also improve performance as the customers who are unable to pay and therefore not suitable for collections activity, can be removed from that process minimising cost and removing potential brand risk.

Better insight enables companies to treat each customer in the most appropriate manner, which in turn drives increased collections, with lower risk, at lower cost and achieves an enhanced experience for customers.

So, what does the future hold?

As an industry, we need to move away from linear and rigid collections processes which define our recoveries model based on timeframe alone, into a world where a more agile approach is taken at a point where the latest information is used to drive the best-next-action.

Debt collection activity remains an important part of the consumer lending ecosystem and by partnering with the right data and technology provider, creditors can improve recovery rates whilst also retaining oversight and ensuring that the best interests of customers remain front of mind.

Matt Wallis is Solution Designer at TDX Group

Thursday, 10 November 2016

Collaboration and communication: the key to crystallising customer needs

Having managed products in a range of industries from media to finance, there is one thing which I’m always asked: “How can we launch the next big industry changing product?” Which means I’m continuously on the lookout for the next game changing, industry leading innovation which will impress our customers and partners. Product managers are always under pressure to be innovative, it’s part of the job description, but the risk is that innovating for innovation’s sake often results in products that may please the developer because they use the latest technologies and the sales team because they have something new and shiny to present to potential customers, but it won’t do what all products should strive to do – solve a problem for a customer. This should lie at the heart of everything we do.

On a recent training course we were asked what we would do in the following scenario. In one hand we had one orange and in the other hand we had two demanding customers both asking for the orange immediately. This was the only orange in the world, so what could we do in this situation to satisfy both customers? My colleagues and I came up with a whole whiteboard full of options for how we could best use the orange. We could cut it in half and get them to share. We could use the seeds from the orange to grow more oranges. We could even eat the orange ourselves and pretend there was no orange to begin with! However, none of these options would result in a satisfactory outcome for the customers. In the end the answer was simple. What we needed to do was ask the customers what they wanted the orange for. This would have resulted in the first customer saying they wanted the peel of an orange to make candied orange peels and the second customer saying they wanted the juice of an orange to add to a cake recipe. In this scenario knowing the problem that these customers were trying to solve would have resulted in the single orange satisfying both of their needs. Simple!

Product management should be all about problem solving and really getting under the skin of what the needs and frustrations of our customers are (regardless of whether those customers are internal or external). All too often customers ask for a specific solution, and in order to please them we build the requested solution only to find that it doesn’t quite do what the customer really needed. Customers are experts in their business line and we are experts in ours. The best products therefore should be created collaboratively with the customer detailing the problems they are trying to solve, providing us with the full context and our teams proposing creative solutions based on industry knowledge and the right technologies and systems.

Regardless of how well we think we know our clients’ needs or because we have worked in the industry for years, nothing beats “voice of the customer”. At TDX Group, we use voice of the customer ourselves and recent developments to our TIX (The Insolvency Exchange) platform are based on feedback from clients and this has delivered improved functionality for all TIX users.

The simplest way to understand what a customer needs is by asking the right questions. This isn’t necessarily: What do you want? It can be: What is the problem you are trying to solve? How are going to use the product? Who is the end user? What are the impacts of rollout and implementation likely to be?

The key then is not just taking the customers word for it. Findings should be backed up with data so that a real benefits case can be created, with tangible metrics that can be used as measures of success, whether that’s cost saving, time saving, reduced complaint levels or improved liquidation rates.

The customer should also be taken on the product development journey by delivering the product or functionality in prioritised increments so that releases are de-risked, benefits are delivered faster and the customer can provide a continuous feedback loop.

It’s this collaboration and being really clear on what problems the product will solve which will really drive innovation and enable organisations to meet the right goals. When a customer asks what a product can do, it is the value proposition that they care about not the product features, and if we are innovating the right product for our customers’ needs we should be able to demonstrate that value proposition in an instant.

Shivani Mistry is Head of Platform Management at TDX Group

Wednesday, 2 November 2016

Asset Sale: Honing in on non-performing loans

The global asset sale market continues to grow, and within that TDX Group is already an established player in valuation and brokerage services in the unsecured market within the UK, and both the secured and unsecured markets in Spain. As a business we’re expanding this reach into a more globally focussed and structured asset sale function spanning the wider Equifax network and territories.

At a global level one of the greatest challenges, and opportunities, in this space is how to deal with Non-Performing Loans (NPL). In Europe alone, the largest banks hold approximately €1.1 trillion* of NPLs according to recent KPMG analysis.

The NPL problem is now a global one, and what to do about it is challenging Governments across the developed world. In some key countries such as the UK, Ireland and Spain they created organisations dubbed “bad banks” (UKAR, NAMA and SAREB) to manage the problem, whilst Greece and Brazil have changed entire legislative systems to allow the sale of NPLs.

The major difficulty in most countries is the experience and market structure needed to be able to execute NPL sales in a successful manner. NPLs are somewhat of an anomaly in that market conditions are different in all geographies, but that there are also some core similarities which need to be understood locally in order to succeed. At TDX Group, we’ve been operating in this space for 12 years, and have successfully executed more than one thousand transactions with a value of over $20 billion, and this experience will stand us in good stead as we now focus our efforts on a global scale.

How developed is Italy?

With the UK and Spanish markets having already developed, the race is on to find the next market which has the volume and infrastructure to support new growth. Italy has dominated the headlines recently but this market has found it difficult to develop a successful servicing model. Now that the Atlante II fund has been created (the second attempt by the Italian Government to try and bring some liquidity to the market) will this allow the market to establish some of the parameters to function or just add to the issues in an already fragmented market?

The Economist ran with a headline of “Bargain Hunt” in August which suggests that this market may need some support. One of the key areas discussed at a recent summit hosted by Banca IFIS in Venice was that of the Italian legal system and it was claimed that solely by reforming this you can add single digit percentage points to the Italian gross domestic product.

One of the essentials when working with funds and servicers is ensuring that the collections curves are genuinely achievable and the challenge with any new market is the ability to create balance between expected value from the seller and realistic returns from the buyer. The challenge in Italy will be weighing up state backed entities and their returns versus true returns for an investor.

Into Europe or an American adventure?

There has been a lot of talk about other developing markets in Europe and while there are undoubted opportunities to be had in Central and Eastern Europe a number of the markets do not have the large scale volume needed to replicate the UK or Spain. At TDX Group, we’ve taken on projects in Poland and Russia this year and looked at transaction in Greece; where the new regulatory framework for NPLs and the creation of Law 4354/2015 has enabled financial services organisations to consider wider disposal of certain assets.

Finally, another developing market for consideration around NPLs is South America, where we are already actively managing projects in Brazil, Peru, Mexico and Chile. The breadth of opportunity that exists here is very significant as the basic market for NPLs already exists, so bringing in skills and expertise from more developed markets can make a huge difference. In addition, some of the main purchasers are already active in South America (such as PRA and Encore) and we’d expect their presence along with the investment funds to accelerate the expected market growth.

The asset sale market is evolving and we are likely to see a number of exciting developments over the next 12 months – so watch this space.

Nick Ollard is Director of Global Asset Sale Services at TDX Group