Collections Industry Increases Hiring and Technology Investments While Preparing for the “Next Normal”
New report from TransUnion and Aite-Novarica Group explores the latest trends in the collections industry
A new report by TransUnion (NYSE: TRU) and Aite-Novarica Group found that the collections industry is boosting hiring and technology investments as it transitions into a “next normal” stage. Approximately seven in 10 collections professionals (69%) said technology solution spending will modestly or significantly increase in the next two years. About two-thirds of collections professionals (67%) said employee compensation will increase in the same time period.
The report, “A Transition to the Next Normal: The Collections Industry in 2021,” provides the latest annual look at the trends, challenges and opportunities in the U.S. third-party collections industry. The report is informed by a survey of 151 third-party debt collection professionals and interviews with 12 industry thought leaders conducted in Q2 and Q3 2021.
The ramp up in tech and employee investments is occurring against a backdrop of a growing collections employment market. The number of collections employees is expected to increase to 137,928 in 2021 compared to 134,347 in 2020, though it remains below 2018 levels (139,273).
The collections industry is experiencing modest employee growth even as industry activity slowed in recent years. According to the report, in Q3 2021, 77.6 million consumers had at least one collection tradeline, collectively totaling $188 billion in outstanding balances—a 1% and 3% decline, respectively, from year-end 2020.
“After a better than expected pivot to remote work and surprisingly good collection rates in 2020, 2021 has brought greater uncertainty for the collections industry,” said Jason Klotch, vice president of third-party collections in TransUnion’s diversified markets business. “While collections performance continues to be a bright spot, particularly for larger companies, reduced account volumes, a changing regulatory environment and shifts in the consumer credit market are among the challenges the industry is facing today. Companies, though, expect more accounts to be placed in collections in the coming year and investing in new technologies and employees is critical for the anticipated volume increase.”
Technological advancements key for future of industry
While letters and phone calls continue to be nearly universal approaches for collectors communicating with consumers, the use of text messaging has become more common. More than three in 10 respondents (31%) reported that their company uses this channel today compared to 22% in 2020 and 16% in 2019.
The report also found that use of technologies such as online payment portals has multiple benefits: 1) they may be preferable to certain customers who do not want to have a human interaction and want to deal with their debt at a time of their choosing; 2) this service is beneficial due to the limitation on outbound telephone calls that will take effect with the implementation of new regulatory requirements.
While certain technological tools have been adopted somewhat uniformly across the industry, others are far more likely to be in use at larger companies. Medium and large companies have similar adoption rates for online payment portals and predictive scoring tools and at generally much higher rates than smaller companies.
Larger Collections Agencies More Apt Use New or Recent Technologies
Collections Agency Types/Technology Tools
Percent of Large Agencies (1 million or more accounts) Using Technology
Percent of Medium Agencies (100,000 to 999,999 accounts) Using Technology
Percent of Small Agencies (fewer than 100,000 accounts) Using Technology
Online Payment Portals
Predictive Scoring to Prioritize Accounts
Employees will be a major differentiator
Advancements in technology have also allowed more employees in the collections industry to work from home. More importantly, this practice could help companies retain more of their top employees. Since the onset of the pandemic, 87% of larger companies represented in the survey had collection agents shift to remote work compared to 43% for smaller companies.
Companies that shifted to a remote working environment in response to the pandemic largely expect to continue to offer at least some degree of remote work in the future. This most often takes the form of a hybrid arrangement, rather than never going in to the office. As one interviewee in the report noted, “Unless there’s a regulatory or client-driven requirement to be in the office, most companies appear to be okay with some sort of hybrid model.”
Nearly two-thirds (64%) of companies are either considering or already offering remote work arrangements for new hires. This consideration of remote work is distributed among a variety of roles, including collection agents. The main reason companies are considering remote working arrangements? Approximately 71% say it is to attract better applicants and 62% say it is to increase employee retention. One-third (33%) said it was to reduce costs.
“The last two years have proven how resilient the collections industry can be, and as account activity increases it is clear that the agencies that are investing in technology and talent will be best prepared when the market shifts,” concluded Klotch.
To download the full report, please click here.
About the report
Insights on the challenges, trends, and innovations occurring in the third-party collections industry are informed by a quantitative survey of third-party debt collection professionals conducted in Q3 2021. A detailed look at the composition of survey respondents is provided in the appendix. Survey results are representative of the market at a 95% confidence interval with an 8-point margin of error. This is the third annual survey of the third-party collections industry conducted by TransUnion and Aite-Novarica Group. The full report is available here.
About Aite-Novarica Group
Aite-Novarica Group is an advisory firm providing mission-critical insights on technology, regulations, strategy, and operations to hundreds of banks, insurers, payments providers, and investment firms—as well as the technology and service providers that support them. Comprising former senior technology, strategy, and operations executives as well as experienced researchers and consultants, our experts provide actionable advice to our client base, leveraging deep insights developed via our extensive network of clients and other industry contacts. Visit us on the web and connect with us on Twitter and LinkedIn.
About TransUnion (NYSE: TRU)
TransUnion is a global information and insights company that makes trust possible in the modern economy. We do this by providing an actionable picture of each person so they can be reliably represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things. We call this Information for Good.®
A leading presence in more than 30 countries across five continents, TransUnion provides solutions that help create economic opportunity, great experiences and personal empowerment for hundreds of millions of people.