Teams dealing with consumer finance repayment are the canary in the coal mine when it comes to changes in the economy.
When things start to get tight for folks with outstanding debt, those accounts are one of the first places to draw back, even if it means defaulting. That’s a major concern for anyone who works in receivables, whether you’re in loan servicing, healthcare revenue cycle management, auto finance, or collections.
We’ve been hearing talk about a recession for at least a year, so we brought together three industry leaders to hear their thoughts about where things are headed financially and how to keep up.
Read on for the highlights, and catch the whole conversation here:
While all our panelists left the true determination of the economy’s status to the experts, Kenny Johnston, President of Bill Gosling Outsourcing, pointed out that from the perspective of repayments and receivables management, a dip in those is actually a normalization, not necessarily a sign of coming calamity.
“2020 to 2021 was a ‘false economy,’” Johnston argued. “The US consumer was flooded with funds.”
The better comparison, he said, is delinquency numbers from 2018 to 2019, so if we do see an increase in delinquencies now, it’s a normalization. That said, Johnston explained, “That normalization typically - not exclusively, but typically - leads to a deeper softening of the economy.”
Anand Joshi, Former VP of Global Collections at American Express, agreed that there will be a softening ahead - it just depends on what kind. Joshi thinks the economic slowdown could still be what he labeled a “soft landing” with up to a 50% increase in delinquencies and charge-off volume compared to late 2022.
If unemployment were to rise sharply, though, coupled with rising interest rates, delinquencies and charge-offs could also increase wildly.
So getting in front of repayments is key, Joshi said.
“The one thing that always works is to be the first in line, the first one to connect with them. Most of the people have multiple loans, multiple credit cards. And if you're delinquent on one probably you're delinquent on other things as well. So be as efficient and effective in reaching out to the borrower as soon as possible.”
And in order to achieve that efficiency, our last panelist had one big tip - lean in to technology.
Whatever happens economically, it’s a good prediction that hiring and retention will remain tight.
Pran Navanandan, Founder of Halsted Financial Services, explained that outside of reducing costs by using offshore labor, “The most deflationary tool that all of our companies have is technology.”
That means coming at labor shortages from multiple angles, he said. “Sending emails, sending SMS text messages, having a dynamic payment portal that allows consumers to self-service the debt without having to speak to an agent, those are all things we all have at our disposal.”
Navanandan also explained that he uses technology partners to support quality assurance and slash call wrap-up time. Halstead has AI-powered software to monitor every call, allowing him to repurpose his QA agents, and another solution “automatically notates the account for the agent so they’re able to move onto the next call and answer more calls in general.”
The extended are-we-or-aren’t-we conversation about a recession tells us the future always remains uncertain.
Whatever economic changes come, consumer finance teams will be on the front edge. Our panel recommends the best practices of planning for staffing shortages and delinquencies by finding the right software solution now.
Prodigal’s consumer finance intelligence helps your team do more with less by slashing call wrap-up time, cutting compliance risk and QA effort, and decreasing agent ramp time.
Lenders, collections agencies, and revenue cycle management teams rely on Prodigal to make every agent your top agent. Get started now.
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