For the second year in a row, Aite Group has partnered with TransUnion to conduct a comprehensive survey of the third-party debt collections industry. The industry was rocked this year by the sudden economic downturn and need to work remotely brought about by the COVID-19 pandemic.
While some companies have done a brilliant job of pivoting to this “new normal” and are reporting strong results, others faced tough choices and even the threat of closure. The varying experiences of individual companies were driven by several factors, including where and what types of debt a company collects, the extent to which it was able to move to a remote work environment, and its ability to transform its collection practices.
Some of the key findings from the full study include the following:
- Industry contraction trends are continuing, in terms of both the number of collection firms and revenue generated by the industry.
- While profit margins were increasing or stable for a majority of companies before the pandemic, this is deteriorating now. The variation between firms of different sizes is stark, however, with larger firms reporting much better outcomes than their smaller counterparts.
- Employee-related expenses continue to be a key cost driver, along with expenses tied to software solutions that facilitate collection activities. Perhaps as a result, many companies are taking a close look at self-service functionality as well as other costs that could be reduced, such as real estate expenses, if a certain level of remote work is maintained.
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