2016, it feels, has been a year of extremes of accomplishment and uncertainty. In the UK we have seen everything from feats of skill, agility and strength at the Olympics, to political turmoil with a vote to leave the EU by the narrowest of margins.
On a wider global scale, we have seen a fractious vote for a new president in the USA, concerns over China’s economy, political/fiscal uncertainty in the Euro zone, the rejection of the Prime Ministers new plan in Italy, and a rise political ‘populism’ around the world.
Rewarding for some, yes, frustrating for others, maybe, however for most of us, unsettling.
Close to home
Closer to home, within the UK collections and recoveries industry, we have seen interesting variables at play too. Some of the key elements in my view include:
- Growth in the rate of rising consumer debt;
- Stagnant earnings for many;
- Welfare reform;
- The FCA’s introduction of the Senior Manager Regime and new focus on culture;
- Increasing coordination across regulatory regimes (by industry and internationally) featuring greater regulatory consistency (FCA, OFGEN, OFWAT, OFCOM) in how customers in arrears should be treated;
- Further struggles and consolidation within the DCA space;
- Expansion of the scale of and partnering with non-for-profit debt advisory services such as National/Business Debtline and Step Change;
- Greater pan-European competition in the debt purchase arena;
- Further drift towards more first party BPO in collections and recoveries; and
- Early signs of major creditors investing in credit, collections and recoveries capability, anticipating harder times ahead.
All this in what had generally been seen as a relatively benign period! Goodness knows what it will feel like when things get busy!
2016 at Arum
For Arum, 2016 was good year. We grew the size, breadth and depth of skills/experience of our team – a team I am very proud of. External feedback suggests we built further on our position and reputation as independent collections and recoveries specialists.
We also finished some great projects for clients, for example on target operating models, collections strategy and optimisation. We are very pleased to have contributed to our clients’ successes; for instance, Thames Water winning ‘Team of the Year’ at the Credit Strategy Utilities and Telecoms Awards. http://www.utilitiesandtelecomsawards.co.uk/winning/winners16. We are proud to have helped shape the future vision that is now being delivered.
We also continued to work for many retail banks, completing projects and working closely as part of the banks’ teams particularly in the debt collections and recoveries systems space. In this area we helped many clients with product selection and major implementation/consolidation/improvement programmes including projects involving products such as FICO’s Debt Manager 9 http://www.fico.com/en/latest-thinking/product-sheet/fico-debt-manager-solution-product-sheet , Experian’s Tallyman http://www.experian.co.uk/decision-analytics/tallyman.html, CGI’s Collections360 https://www.cgi.com/en/solutions/cgi-collections360 and other vendors.
It has been a busy year!
Spreading good practice
In 2016 we saw a raised profile of the need for good collections and recoveries in other sectors. We were increasingly asked to work in a number of other segments, such as central/local government and smaller utilities, an expansion to our traditional work with retail banks, large power/water companies and BPO businesses. The drive to improve collections and recoveries in these organisations is genuine, but budgets/business cases are typically restricted so we have found that innovative solutions are often required. Helping by being creative in applying our expertise is something we have very much enjoyed doing.
Throughout the year we also made good progress sharing our views on collections and recoveries more widely. We published a much greater volume of papers, articles, blogs, that have gained a much wider following. If you are also interested, do feel free to signup for our ‘News and Insight’ at http://www.arum.co.uk/newsandinsight/. You will be notified whenever we publish something new.
… and for 2017?
So, what do I feel is the outlook for 2017 and beyond? What are the important factors?
We all already know that there will be no let up on the Regulatory front requiring compliance and proven good conduct. Current demands are here to stay and will continue to merge amongst the different sectors – and rightly so given the importance to customers.
In addition, organisations will need to respond to new legislation/guidance in 2017, including preparing for GDPR, getting ready for IFRS9, PSD2 and adapting if needed to the new OFCOM persistent misuse policy – released yesterday!
Politics will also play a big part in influencing the environment in 2017. There are key elections in Germany, France and Netherlands and it remains to be seen whether the Brexit/US Presidential trend of ‘bucking the status quo’ will continue. The repercussions of whatever happens in these key countries as well as the reality of the new USA Government’s policies will add to political and economic uncertainty, and most likely affect us all.
More locally there is the small matter of Article 50 – UK-EU negotiations and associated economic implications….
‘Expect the unexpected’ may be wise, and so contingency planning plus good strategic and operational resilience are recommended!
Subject to escape from political shocks, the economic outlook is at least a little more predictable.
The US economy seems likely to grow more strongly, in Euro zone growth will remain slow overall and China’s growth will be slower than in recent years (albeit still enviously impressive by Western standards).
In the UK, whilst growth in recent years has been good in comparison to other leading economies, the OECD is now forecasting that UK Real GDP growth will fall to 1.24% in 2017. This would drop the UK behind France, Germany, Canada and the USA. https://data.oecd.org/gdp/real-gdp-forecast.htm#indicator-chart .
UK inflation is also expected to rise (perhaps to 3%) in 2017 and the FCA is warning about UK consumer debt. http://www.bbc.co.uk/news/business-38155178 With more benefit changes and stagnant incomes also expected to feature, it all leads to the likelihood of choppy waters ahead for collections and recoveries functions and maybe the odd iceberg!
Despite many uncertainties, I feel that in 2017 we can rely upon social and technology trends to broadly continue. Consumer technology will progress and people will still want yet more of it. Fintech business propositions will rise and fail in 2017 but, much like biotech and dotcom booms before, there will be enduring success for some.
…. and in Collections and Recoveries
Continuing with basic, traditional customer communication channels, limited customer data/analysis and legacy collections systems will become more of a ‘millstone’ to achieving goals in 2017 than in 2016.
In 2017 collections and recoveries functions will need to accelerate responses to keep up and adapt to the environment above. The future is about enabling insight and action in advance of customer’s expectations – on-line, on-time and on-customers-agenda.
This means more investment in operations, data, analytics, strategy/workflow tools and better opti-channel communications technology. (All subjects my colleagues at Arum have written various blogs and articles on in 2016.)
So, a year of change?
2017 is undoubtedly going to be a year of change and pressure in collections and recoveries functions. Being prepared to respond will enable success.
The best performing collections functions will need to have the right culture and tools, good people and agile processes to enable all these things to be used to best effect.
I am certainly looking forward to the New Year. Whilst there will undoubtedly be challenges there are also many interesting solutions. It should be exciting and I very much hope fun too. If there is anything you would like to discuss with me or anyone else in the Arum team please do not hesitate to contact us. http://www.arum.co.uk/contact-us/
Best wishes to you for 2017.
Aleks Tomczyk, Founder and Chief Executive, Arum