Exus Blog Article
Debt collections systems: 5 questions for procurement teams assessing tenders
The last decade has seen procurement evolve into a vital strategic function in the banking sector.
These days, procurement is about more than simple cost-cutting. Economic tumult, tight budgets, demanding customers and increased competition require a procurement team more involved in up-front, strategic conversations. The days of simply getting a plan together and sending it to procurement are over.
As John Goyanes, Deutsche Bank’s former head of procurement, says: “Whoever has control of vendor management should be sitting together with suppliers to talk about strategic and tactical issues, and that should cover everything – commercial appropriateness, service-level attainment and candid discussions about the roadmap for that supplier in that organization.”
Cost (or, more accurately value) is still crucial, of course, but procurement teams are concerned with the big questions of efficiency, productivity, and quality. This is felt no more keenly than when assessing third-party SaaS suppliers.
So how can you assess what’s right for you? Here are five things to consider when going through the list of vendors your head of collections has supplied.
1. How long will it take to deploy?
You’ve already made the right step in looking to third parties to improve the debt collections function. When you’re dealing with accounts that are in the red and customers that are in distress, however, you want a system that can be up and running in weeks, not years. You don’t have the luxury of a long implementation timeline. The budget has been earmarked for this financial year, and the head of collections wants it done before priorities change and the money is suddenly reassigned elsewhere.
Debt collection software should be as out-of-the-box as possible while meeting every requirement your institution has. A modern collections system will (or should) use an agile delivery method, which is a tech industry standard emphasizing speed, as well as constant testing from an early stage.
That means fewer nasty surprises down the road and fewer delays. Agile development also caters to any changes that you want to make. Whatever system you’re assessing should be up, running, and integrated with operations as soon as possible.
The sooner it gets going, the sooner you can start recovering debts. And the right vendor, with the right product, could guarantee deployment by the end of the financial year.
2. Suite or best-of-breed?
You’re already familiar with the suites, CRM, and core banking modules that have dominated the collections landscape for years. They're undoubtedly powerful tools, but many are unwieldy and not fit for purpose in the modern banking landscape.
But in the last few years, newer, more specialized systems have emerged. These softwares are laser-focused on the collections process. So what’s a procurement team to make of these two competing methodologies?
It depends on your collection philosophy. Increasingly, financial institutions have begun to view collections as a step in the customer life cycle, not just a loss mitigation activity. In other words, it’s an opportunity to win new business.
A general CRM or core banking module can struggle compared to specialist solutions. Debt collection has its own nuances, and applying one-size-fits-all banking processes is not the best solution for such an important and customer-focused banking function.
As the world’s economic picture remains difficult, collections and recovery are now specialist pursuits. It’s horses for courses, as the old cliché goes. And a best-of-breed system can be easily modified to handle your diverse debt portfolio.
3. Can it adapt to your needs?
The days of community banks are long gone. Your bank operates across borders with millions of customers and vast sums of money at stake.
Each market comes with unique challenges, and whatever software you choose should adapt to meet them. In countries like the UAE and Saudi Arabia for instance, collections are notoriously difficult thanks to payment terms, court practices, and insolvency regulations.
The power of a more general system wilts in the face of these many unique challenges. The question is: can the software we choose to adapt to our circumstances and the different markets in which our institution operates?
The proof is in the pudding, and the different suppliers you assess should be able to easily illustrate their international pedigree. Gartner’s technology adoption and investment report, for instance, specifically analyze loan collections systems, assessing 22 attributes that define a “best-in-class” system.
If difficulties mount and NPL ratios rise, ask yourself: can your bank afford anything less than best in class?
4. Is your collections system future-proof?
It’s easy to just look at the price tag and just choose the more affordable option. But with complex systems like these, just choosing the cheapest can actually cost more money down the road.
A collections system is an investment. So it’s not only a question of cost but also long-term value. Debt collections and credit risk assessment have a huge impact on the business’s performance.
Regulations, laws, and customer's needs change all the time in the banking sector. A recent survey of US and UK procurement professionals found that over half of respondents said regulations prevent them from doing their jobs effectively. It isn’t only about existing regulations, but also how those regulations might change in the future. The ability to quickly update your system can save you a lot of strife.
Just like that, the initial affordability of your collections system can evaporate, while simultaneously damaging your collections team’s ability to do their job.
This value extends to procurement professionals, too. The burden of regulation rests heavily on procurement teams.
Banks are at the mercy of consumer demands, too. As customer sentiment changes, your collections operation needs to adapt. Incorporating these changes needs to be quick and easy.
A future-proof system can cope with regulatory and customer changes in the long term. The rise of online-only challenger banks shows the power of regular, customer-led tinkering: in the UK, challengers’ lending assets have increased by 31.5% compared to a decline of 4.9% for the big five banks.
Digitization has created a new wave of market entrants into the banking sector. Can the collections software you’re assessing fit into that crowded frame?
5. Is it secure?
This banking industry’s digital future comes with an increased security risk. We’ve seen a notable increase in the volume and creativity of hacks, whether it’s Yahoo or the Winter Olympics. Cybersecurity experts predict criminals will continue to think big when it comes to targets, specifically organizations that hold sensitive customer information.
The best way to insulate yourself from cyber attacks is by investing in software that incorporates predictive analytics, helping to determine the probability of cyber attacks and prepare before cybercriminals reach your perimeter.
There are many steps towards improving your bank’s debt collection and recovery - and central among them is the technology you choose. In essence, excellence in debt collection starts at procurement.
The pressure is on to make the right choice. But by carefully assessing the tenders before you, it’s possible to make an excellent, strategic choice, while also satisfying customer needs.