A post script: US debt buyers eye 'attractive' UK market

On 25 January, I posted on this blog that I thought US debt buyers were ‘eyeing’ the UK market. My view became even more resolute in March after attending the 17th National Collections and Credit Risk conference in New Orleans, so it was with no great surprise that I noted the news yesterday that Cabot had been bought by American private equity investment fund, JC Flowers. This deal means, as predicted, there is now a UK-based purchaser set to benefit from the funding advantage of its new US parent. I believe this will be the first step in an increased internationalisation of US debt purchasers as their domestic market becomes increasingly challenging. This, in turn, is going to significantly impact pricing over here in the UK. Watch this space.

By Stuart Bungay, Managing Director - Strategy, Marketing and International, TDX Group.

5 Tips to get the most out of your Management Information

It’s Monday morning. Your report has lots of data and charts, but is there only one number you look at? Then your Management Information (MI) is not doing its job.

In a data-driven industry MI should be the first indicator for opportunities and the first warning sign of threats to your business. Whether through highlighting exceptional performance in certain segments, or accentuating operational inefficiencies, MI should be giving the Management team the Information they need to steer the business in the right direction and spark up the right conversations, not just provide an unrelated set of numbers.

Here at TDX we, as Analytical Consultants, have reviewed MI capabilities within multiple sectors. Often it is simply a set of numbers and chart which don’t provide the full story -  is the line on chart 4 going the right way? What does it mean? How does it correlate? MI should answer these questions by being:

1. Accurate – it goes without saying, but MI is worthless if it’s not accurate. Discrepancies between MI and data are not uncommon, but I have seen massive amounts of time focused on chasing red herrings in MI. When MI looks wrong it’s usually one of three issues: bad data, incorrect analysis or a poor assumption. Data should be swept often for erroneous entries, looking for outliers will keep your MI in good order. Incorrect analysis may not seem wrong until someone points it out, so keeping an active communication between MI developers, analysts and end users is essential to maintain quality. Sometimes the assumption being made by the end user is misguided and a widely held belief within an organisation can be disproved with accurate data.
MI should drive assumptions within the business, not be driven by them.

2. Relevant – Your analyst team loves making charts. Not all of them are needed. I don’t think I have been in an MI review without someone saying ‘just skip that one’ about a chart with nothing on, or showing a figure that doesn’t make sense. MI should show you what you need to know, if you are asking for the same piece of information on a regular basis, then it should be part of your MI. If you never look at it, or it’s known to be a flawed metric, it shouldn’t be there.
Keeping your MI focused is crucial, with the ability to drill down for those who really need to understand a specific area.

3. Accessible – How easy is it to access your MI? Is it stored centrally? Can you access it out of the office? With today’s technology it has become more commonplace for MI to be hosted online, even using mobile apps to display your company’s MI. By removing it from simply being a spread sheet on the shared drive, to being able to access it when and where you need it, can transform an ignored report into a powerful management tool.
MI shouldn’t be a secret, and needs to be available to those who can use it to enhance the day to day performance of the business.

4. Refreshable – it may be obvious, but MI needs to be kept up to date, sometimes even directly linked to a live system. If you can stop problems as close to the point of origin as possible you can save a lot of headaches later on, especially for operational managers and colleagues. Having daily MI can be a real benefit in the debt industry.
Seeing the performance of a campaign right away can enable focus to be shifted to maximise returns or minimise losses.

5. Maintained – Ideally, MI should be reviewed every 6-12 months and questions asked such as: have the business goals changed? Is performance viewed differently? Is overall cash now more important than liquidation rates?  MI can become stagnant and irrelevant if left to run in the background as an after-thought. It is often the case that analysis projects that start as a one off piece of work become relied upon , in preference to the automated MI, this can create real bottlenecks to your analysis resource, with analysts replicating work rather than investigating new opportunities.
Take the time to review your MI metrics and you can free up resource in the long run for your analyst team to deliver real insight.

By considering these 5 general principles, you can transform a humdrum MI report into a powerful and reliable tool. Take time to develop your MI and keep it in good order, and it will quickly become your first port of call for answering questions and assessing business performance. So, next time you look at MI, think about if it is delivering, if not, maybe it’s time to rethink those tired old tables and charts.

By Stephen Hallam, Value Analyst, TDX

The hidden value in consumers who don’t pay - one man’s trash is another man’s treasure

When it comes to collections and recoveries we see the full range of reactions - from those who actively engage, right through to those who never make a payment. To date, much has been made of maximising the returns from consumers who do pay, but what about reaching out to those who currently do not? The short answer is that, for a creditor working in isolation, these consumers represent a significant challenge and cost for which no return is generated. So what opportunities do exist for a creditor determined to make more of their non-paying consumers?

They key is to seek a greater understanding of the individual and why they’re not paying.

1. Understanding customer behaviour 
By accessing additional data sources creditors can begin to more effectively split ‘won’t pay’ from ‘might pay’.  Simple examples such as insolvency suppressions are already widely used in our industry, but many more sources of profiling data are readily available but less widely used.  For instance, how many creditors are able to look at first placement DCA activity when recycling their consumers on to a second placement or indeed how the consumer has behaved in recoveries for other creditors?  I would suggest that consumers who paid or, in some circumstances, even just engaged with a DCA or another creditor are much more likely to pay at the next DCA placement than those who did not.

2. Reaching out by email
Often the root cause of non-payment is inability to contact the consumer using the data currently held by the creditor.  Telephone and address appends are widely used in our industry and their benefits are well proven.  In my view, the emerging opportunity is email contact data.  So often a consumer in financial difficulty will see significant changes in their personal circumstances which will result in changes to addresses and telephone numbers, but an email address, which is usually free to maintain will often stay with the consumer and, with the right execution capability, represents a genuine opportunity for creditors to re-engage consumers who have previously been non payers.

3. Breathing life into a portfolio
Just because a consumer isn’t paying you, it doesn’t necessarily mean that they aren’t paying someone else – or that they are not able to pay.  With the emergence of data sources dedicated to sharing information about consumers who are in arrears, it is increasingly possible gain a fuller picture of their financial circumstances and to differentiate between those in genuine financial difficulty, and those who are paying elsewhere due to a prioritisation decision.  This presents an excellent opportunity to proactively target those who genuinely can pay. This can prove an extremely effective tool on later stage portfolios that would otherwise be extremely expensive and unwieldy to work.  Going one step further and considering the debt purchase market, this can also present an interesting opportunity to sell specific accounts to another organisation which may have reason to value them at a premium as compared to the in-house valuation.

Organisations that implement even just one of these activities may find that they can radically improve performance on what otherwise appeared to be a portfolio ready for write-off. That being said, it is still important to know when it’s time to call it quits. As technology and data improves, the point at which the effort required to pursue payment outstrips the benefit has changed. However, as unpalatable as it may be, that point does still exist. Depending on internal capabilities, access to technology and specialist suppliers, this point will be different for each organisation. It’s time to take a fresh look at all the options available with an open mind – and you, too, may find that you can mine gold from what otherwise appeared to be trash while enhancing your understanding and therefore treatment of those who are in genuine financial distress.


By Elliot Jackson, Director of HeliX, TDX Group

The Future of Payments Part Two: Digital Cash

What is money? The coins and notes in your wallet or purse? The numbers on your bank statement? What currency? GBP, euros or US dollars perhaps? Computer numbers? Digital currency?

Take Bitcoin for example, which since 2009 has grown to become the largest alternative currency and has the monetary base in excess of $1bn (as at April 2013) and already thousands of merchants accepting Bitcoins instead of regular currency. Unlike currencies Bitcoin doesn’t rely on a nation’s government or central bank, rather Bitcoins are “mined” by computers in a digital version of gold mining.

Early security issues and also concerns about the way in which Bitcoins are created has made it difficult for the average consumer to put their trust in the currency. But Bitcoin is gaining momentum and nascent integration with traditional banking methods is helping. Recently French regulators gave approval to Bitcoin-Central, a payment service where customers will be able to deposit their funds into the service in either euros or Bitcoins and convert the funds easily between the two currencies. How long before you can take out a Bitcoin loan?

Amazon are set to launch their own Amazon Coins virtual currency in Q2 2013, for use in purchasing games, apps, content, and in-app purchases on its Kindle Fire platform. How long before you can buy a book with Amazon Coins? Even the Canadian government is getting in on the act with Mintchip which, unlike other digital currencies, is backed by real money, in this case the Canadian dollar. Mintchip allows secure transactions to be performed without an intermediary - that’s right, no bank, no payment processor. Some might argue Mintchip isn’t really digital money, it’s simply about making official money easier to use online.

Right now there’s a lot of public debate about digital money, especially Bitcoin. Is it a fad or something more serious? Only time will tell. But whether it’s Bitcoin or another option, you can bet that digital money is here to stay and very soon a good proportion of consumers will be likely to be transacting in digital currencies in one way or the other. For businesses the question is how and when to join this revolution? Creditors and the debt industry participants should watch this space carefully – the ability to purchase mainstream goods or services and pay bills with some form of digital currency is likely to be just round the corner.

By Carlos Osorio - Director, e-collections and payment services, 
TDX Group 

How Great Teamwork Overcomes Obstacles

“Routine”

What comes to mind when you hear that word?

Predictable, Regular, Procedural?

or maybe,

Monotonous, Mundane, Tedious?

I’ll confess, for me it is the latter. I’m an IT guy but most definitely a projects guy. So I need my challenges to have a start, middle and most importantly an end. I need closure, a result, an outcome, something to look back on, hopefully with a proud sense of achievement, but at the very least to feel that I’ve learned something.

So when I took on running our IT Operations and Service Management team I was a little nervous about how well I could cope with shifting my mind set. Running an operations team requires one to value the positive side of routines, recognising the importance of stability and repetition, rejoicing in the bliss of calm normality.

Three years on and I’m still in awe at the professionalism and passion that I see from my team every day in tackling numerous challenges in the knowledge that there will be more of the same the very next day. They work tirelessly, often at unsociable hours, with the only measure of success being that no one really notices anything different. Then on one cold Tuesday morning in January my new life of successful normality was shattered. Clicking through my regular news feeds I came across an article that ruined my customary bowl of muesli. Our data centre provider had entered into administration. This was not predictable, certainly not normal, and far from maintaining any sense of stability.

During the week that followed a bad situation developed into and increasingly worse one as it became clear that the administrators were struggling to find a buyer for the business. This culminated in a demand for their top 20 clients to each pay a substantial fee to keep the data centre running for just one week. Clearly an unsustainable position, and so a plan was required - this was certainly not going to be routine.
Rather than bore you with the technical details, impressive that they are, I will save that for another day and for another blogger to articulate the complexity of what we achieved.

Instead, I would like to focus on the phenomenal teamwork that I observed over an intense 48 hours. I saw everything from utter despair through to complete joy. Individuals often diametrically opposed on pretty much everything working tirelessly to help each other into the small hours.

Tensions rose, patience wore thin, moods plummeted, but never for long. Such was the enormity of the task at hand that no one was under any illusion that in order to succeed an extraordinary effort was required. Individual brilliance had to be coupled with selfless support of others in order for the goal to be achieved. There was a plan, in fact there were many plans, but these were constantly re-written as the complexity of the task required quick thinking to adapt to emerging challenges, regroup and then move forwards.

The team, which was spread across several sites, became united by a common goal, and demonstrated that, given the right resources, good communication and a positive attitude, anything is possible.

What I personally learned that weekend is this:  I know routines are absolutely necessary to get through life. They provide structure and certainty to an otherwise chaotic world. But they are largely over-looked. The teams that deliver the flagship projects are in the spotlight, living or dying by their results which are there for all to see. I know. I’ve built a career on it.

However in a crisis, when all seems lost, when plans are constantly being torn up, it’s not the project guy that you need, it’s the operational one. They know that nothing is routine, nothing is quite what it seems. Plans are good but rarely last beyond the time it takes to write them down. Expertise, teamwork, speed of thought, perseverance and determination, these are all qualities that help you in the small hours to pick yourself up, dust yourself down and try and find another way forward.

To succeed a great company needs great products and services, created by talented, innovative individuals. But equally it needs these to be delivered on a daily basis without fail by exceptional, assiduous but most of all reliable teams.

TDX Group has both, in abundance.

By Martin Shaw, Director of IT, TDX Group

The Demise of Debt Sale? Under the US Influence

The latest US trends in debt sale should give us all pause for thought. Last month the Federal Trade Commission (FTC) published The Structure and Practices of The Debt Buying Industry, a report it describes as “the first of its kind” empirical study of debt purchasers.

The FTC already receives more complaints about the debt collection industry than any other and, as the industry has expanded, so has the number of complaints. What the study seeks to do is explore if there is a link between debt buying and consumer protection problems.

We could debate why the US market is not reflective of the UK market, but that really does not matter. What matters is that, in the eyes of regulators and legislators in the US, there is a perception that, at all stages of the collection process, there are serious concerns about the quantity and quality of information that debt buyers have and ultimately how American consumers are treated. At the recent Debt Buyers Association Annual Conference in Las Vegas, the mood in the coffee shops and bars (where the real debate is held!) was decidedly downbeat. The view was expressed that the secondary debt sale market is all but over. As for the primary market, the hypersensitivity to negative media exposure fuelled rumours that the larger, high-profile lenders may withdraw entirely from the market in order to address the perceived risk to brand value and reputation.

I know the political and regulatory environments are different in the UK, but there are enough historical parallels in debt sale to suggest that, in this case, it is reasonable to hypothesise that ‘what goes on over there will ultimately come over here’. As an industry, I think we have a choice: await the reputation-driven withdrawal of key players and the slow but sure demise of the debt sale industry in the UK as we know it, or be proactive and provide an alternative method of ‘de-risking’ by putting in place systems and processes to provide detailed information to all parties about every single interaction with every single individual we deal with and that ultimately put the debtor at the heart of what we do.

By Mark Wright, Director of Debt Sale, TDX Group



Read the full article, originally published in the March edition of CCR, here.

Will Debt Management Plans continue to fail consumers in 2013?

Much fanfare has surrounded the new debt management protocol especially how it will significantly impact the position of many of the most disadvantaged debtors in the market, but could this new protocol actually have a negative impact on those most at risk?

At present, there are over 100,000 new Debt Management Plans (DMPs) created every year and with the exception of the free sector, these DMPs typically attract a fee to the debtor of around 30-35% of their repayments. Whilst most Debt Management Companies (DMCs) will quote fees in the 10-15% range, there are often minimum fee levels applied that increase the percentage significantly.

This new voluntary protocol will forbid the charging of upfront fees and will make the process more transparent for debtors which, on the face of it, should be good for the sector.

Our challenge as an industry, is that the code is voluntary. We know that competition amongst the key DMCs tends to be played out on the online forums, Google and generic online advertising. Unfortunately for the debtor, over the last three years competition has increased the price for some keywords on Google Adwords to unsustainable levels. So DMCs have sought to recoup this through greater upfront fees and attaching other products around DMPs to retrieve a greater slice of the repayment.

For those DMCs who volunteer for the new code of practice, there will be a significant issue around generating new leads. They are likely to be comprehensively ‘out-marketed’ by those providers who do not volunteer for the code, and will therefore be able to charge upfront fees and afford the best advertising slots. In short, the larger, more reputable DMCs will be out-promoted by those providers who do not sign up to the protocol, potentially making things worse for the consumer.. As a result there is a view that non-protocol compliant DMCs may acquire new accounts in a non-compliant fashion only to ultimately sell their portfolio or business to the compliant operators once the accounts have matured and up front fees paid.

Given this it is not surprising that the free sector has not endorsed the protocol and remains focused on providing quality debt management services for individuals in genuine need of impartial debt advice.

One final major underlying issue is that the current DMP product serves many different types of debtors (from token payers to short term rehabilitators), with many different needs, and, as a result will continue to fail most of people who take them up.

By Stuart Bungay, Managing Director - Strategy, Marketing and International, TDX Group.