Can collection agencies become the next FinTech?
For a long time, business has been as usual for most of the financial services and collection agencies. But over the last year and half, agencies have pivoted and adapted to the new norm of working from home and increased use of technology for operations, compliance, legal, and sales. Everyone agrees that work at home will not disappear after the pandemic. In a brief survey by ACA International, 37% of the CEO’s of collection agencies are offering to have remote work post-pandemic
True Litmus Test The global pandemic was a litmus test for a lot of businesses. The companies who did not move quickly to adapt through establishing work environment/infrastructure for their collectors and non-collection staff, creating necessary communication platform, or ensuring data security and compliance were left out of the competition. The ones who quickly made the necessary arrangements and transitioned well moved ahead. They grew and increased their client acquisition and increased profits even during the pandemic. If we pay close attention to determine the key factors for the success of these agencies, it was their ability to use technology and the right tools.
COVID-19 has taught an important lesson for every organization on how to adapt and stay in business. If organizations don’t put technology first, they will lose at the end. Though everyone understood and appreciated that continuous investments in technology and advanced technological tools is a must for their growth, the focus on technology and its adoption has been particularly high during the pandemic. For many, investing in technology was only an add-on until now, when more and more companies consider it as one of their primary areas of focus and a strategic priority. Some examples are moving from manual dialing to automated dialer, phone calls to texting, physical check payments to online payment portals, and manual call monitoring to automated speech analytics.
Why do collection agencies need to become a FinTech?
Banks, insurance and investment management organizations, and even non-banking financial institutions have transformed themselves into “FinTech companies” by rapidly adapting the latest technology and offering the financial services to consumers and clients. According to KPMG, financial institutions have invested more than $27 billion in FinTech and digital innovation since 2015 resulting in an exponential growth. If third party agencies operating within the accounts receivable and organizations supporting healthcare industry through their revenue cycle management operations are strategically aiming to scale and grow like the banking and insurance industry, they must consider and morph to become a FinTech company. This means transformation of all their operational activities by keeping technological tools at the core. Technology and Regulation Collections and revenue cycle management operations are heavily governed by both state and federal regulations. While business leaders have the drive and motivation to adapt the latest advancements, they also need to vet and validate them before fully deploying them. Most of the statutory norms imposed and followed by the ARM industry are almost 30 years old, so agencies were never given the chance to explore and try innovative technological solutions until CFPB came out with the new rule in October and December 2020. Under the new rule, which will likely go into effect by Nov 2021, there is flexibility for third party service providers to explore new technologies, especially with regards to alternate communication channels. With change at the leadership level within the regulatory agencies, there is hope that there will be more changes and addendums allowing businesses to explore the advanced tools on their journey to become FinTech. Consumer-Centric More than regulatory, it is the consumer who makes the choice of technology that businesses use. If the consumer prefers to connect through text and email, then agencies must choose those channels. This is specifically a factor with the growing population of millennials and Gen Z’s. To meet these changing expectations, organizations need to start looking at digitization and automations. Though there are legacy applications that are still existing within banks and insurance agencies, they have transformed to become the FinTech company by using automation. Using RPA bots, business units can connect their legacy applications even at the database level and automation processes. Without going through any major system conversion, agencies can very well automate their processes using both attended and unattended bots. Differentiating your operations through advanced technology is now at reach.