StayAhead Editorial Team
The Great Resignation: What Does This Means for Collections?
When the novel coronavirus COVID-19 was spreading rapidly across the world in early 2020, the job loss in the U.S. reached its peak and the unemployment rate was at 14.7%, which was higher than the great recession in 2007-2009. Pre-pandemic, the unemployment rate in the U.S. was as low as 3.5%. Many lost their jobs due to the pandemic. Industries that suffered the most were transportation, entertainment, travel, and retail. Dow Jones had its biggest drop on March 16 by 3000 points, indicating the largest single day drop. While large corporations suffered major loss, small and medium business operators were equally affected leading to laying off their employees. Both federal and state government stepped in to do their part to balance and revive the economy in order to avoid another economic recession.
In August 2021, almost 4.3 million people quit jobs seeking more advanced and better paying jobs. It is important to mention that a lot of these people are reconsidering and reevaluating their career since they did not like their old jobs and are now looking out for new avenues. With ‘The Great Resignation’ accelerating globally, employers are worried about running their operations successfully. This behavior across the globe is a clear indication of an overhaul and employers need to understand the preference of their employees and accordingly manage their operations. Going forward it will hard and even impossible for employers to find employees who can take up tasks that are repetitive, boring and mundane that will lead them to burnout.
On the other-hand, despite the necessary measures taken at both federal and state level, the consumer debt continues to increase across every area. According to Experian, the total U.S. consumer debt grew by 800 billion in 2019-20. Due to this raising debt, the overall credit ecosystem continues to suffer. If no action is taken on time, analysts are expecting the economy to slip into a huge recession again, similar to the one we faced back in 2008.
According to Debt.org [https://www.debt.org/faqs/americans-in-debt/demographics], the top three areas where the debt percentage is on the rise are:
1. Student loans by 12%
2. Mortgage loans by 7%
3. Personal loans by 6%
Additionally, the average amount of debt by generation in 2020 is as follows:
Gen Z (ages 18 to 23): 67%
Millennials (ages 24 to 39): 11.5%
Gen X (ages 40 to 55): 3.5%
Baby boomers (ages 56 to 74): 0.3%
Creditors are working hard and fast on a global scale to avoid further unhealthy debt growth. One of the key industries that comes to the rescue is the third-party collection agencies who get in and do all the needed hard work to stop the damage and increase the recovery. Here, the underlining statement about recovery is, “It’s not about just recovering, but recovering fast.”
One of the biggest challenges that managers operating in credit and collections face is the shortage of labor. According to the economic report published by Market Watch,the ones that are struggling with the current labor shortage is the small and medium businesses. Two-thirds of the collection agencies in America fall under the small and medium enterprises going through this challenge to fill positions to serve their clients.
It’s promising to see the economy traversing through the recovering path as the percentage of the vaccinated population increases. We are expecting the unemployment rate to go down to pre-pandemic stage in the next few months. Interestingly, managers are still finding it hard to attract and retain young talent for their AR operations.
With clients demanding, agencies are pressed against time to handle the surging volume of accounts. Both for the early-out and bad-debt operations, business unit leaders are seriously considering ways to manage this growing challenge and mitigate so they can take advantage of the current situation and achieve growth.
By leveraging technology advancements and digitization, one could maximize the benefits of the opportunity that the market has presented to both large and smaller agencies. Here are a few to consider and analyze based on one’s business needs:
1. Implement Omnichannel Communication
a. Do not rely solely on the voice communication.
b. Diversify to others, i.e., text/email. By creating communications through multiple channels, one could reduce the burden to handle call volumes, meaning they could operate and handle high volumes even with limited employees.
2. Streamline Engagement Through Self-Servicing Portals
a. Reduce the volume of interaction with a live agent by directing consumers to self-servicing channels like consumer-portals for reviewing accounts, editing payment information, establish payment plans, and making payments.
b. Implement IVR’s for handling payments over the phone.
3. Reduce Manual Work through:
a. Electronic Data Interchange (by automating account loading and reconciliation)
b. Reporting (all reporting including internal and external)
c. Payment Processing
d. Credit Reporting
e. Data Enrichment and Scrubbing
Some of these could be implemented both as a short-term solution or as a long-term strategy in order to handle the current challenges around labor shortage and to become a “Digital-first” agency. Analysts say it is time the accounts receivable and revenue cycle managers consider ways to transform their operations to more of a “FinTech operations” to sustain, grow, attract, and retain talent.