Debt Collection Landscape: Insights from TransUnion's Latest Report

Debt Collection Landscape: Insights from TransUnion's Latest Report

Recent findings reveal that over half of debt collection companies, accounting for 52%, have reported a significant uptick in account volumes within the past year. This increase points to a trend where financial recovery agents are optimistic about their future, with 62% of respondents believing they will be in a more robust financial position next year. This data comes from a comprehensive report by TransUnion.

Growing Challenges in Collectability

Despite positive signals in volume growth, there has been a notable decrease in the collectability of these accounts. This decline has been evident since 2020 and raises concerns around compliance with government regulations and data security. These issues compel 52% of debt collection agencies to invest significantly in technology. These advancements aim to bolster agent productivity, enhance profit margins, and efficiently navigate compliance challenges.

Embracing Technology in Debt Collection

Manny Plasencia, a senior director at TransUnion, emphasizes the benefits of these investments: "Growing collections businesses are better positioned to take advantage of new technologies available in the market. By using data to inform strategies in a rapidly evolving landscape, businesses can markedly improve recovery and collections performance. Adopting the right technologies unlocks new efficiencies across operations. "

Artificial Intelligence and Machine Learning Trends

The debt collection industry is increasingly turning to artificial intelligence (AI) and machine learning (ML). Almost half of the companies that had no plans to implement these technologies in 2023 have begun to explore third-party or in-house AI/ML solutions. The percentage of debt collectors utilizing AI/ML rose from 11% in 2023 to 18% in 2024.

Applications of AI and ML in Collections

The primary applications of these technologies include predicting and segmenting accounts (57%), forecasting payment outcomes (57%), and enabling self-service virtual negotiations (56%). These innovations are transforming the way debt accounts are handled, making it essential for firms to stay ahead of technological advancements.

Shift in Communication Channels

Traditional communication methods still play a significant role in debt collection strategies. A large majority of collection agencies still rely on letters (87%) and phone calls (86%); these methods are largely dictated by regulatory requirements. However, there’s an observed shift as companies increasingly adopt email communications, which grew by 6% in this year alone, now being utilized by 74% of firms. SMS messaging has also gained traction, with a 5% increase since last year.

Managing Digital Channels for Better Engagement

Interestingly, only 39% of debt collection firms reported using data furnishing to contact consumers regarding debts, a significant decline from 51% in 2023. This decline reflects a broader strategic shift towards leveraging digital communication channels that facilitate smooth payment processes. Enhanced digital communications lead consumers toward online payment portals, minimizing the need for human intervention.

Boosting Online Payment Processes

TransUnion reveals that the utilization of self-service online consumer portals has increased from 79% in the previous year to 88% in 2024. Currently, a quarter of these agencies report collecting over 40% of payments via these digital channels. This shift illustrates how automation and technology are redefining the financial collections landscape.

Optimizing Calls with TruContact Solutions

For debt collectors, adopting solutions like TransUnion’s TruContact™ can help identify the optimal times and channels to engage consumers. The Branded Call Display feature reassures consumers of call legitimacy, which can play a crucial role in explaining the purpose of their communications effectively.

Research Methodology

The insights captured in this report stem from a survey conducted during the third quarter of 2024 among 225 professionals in the debt collection sector. These professionals represent a variety of disciplines, including creditors, debt buyers, collection agencies, and collection law firms. The findings also include insights from secondary research into economic indicators and consumer credit patterns to provide richer context.

About TransUnion

TransUnion is a global information and insights company with over 13,000 employees across more than 30 countries. They empower businesses and consumers by delivering a comprehensive view of market trends through trustworthy data, facilitating positive economic opportunities and personal growth worldwide. Their commitment to "Information for Good®" ensures that both individuals and companies can engage with confidence.

Contact Information

Contact: Dave Blumberg
Email: david.blumberg@transunion.com
Telephone: 312-972-6646

Frequently Asked Questions

What percentage of debt collection companies saw an increase in cases?

More than half, specifically 52%, reported an increase.

What challenges are affecting collectability in debts?

Challenges include decreasing collectability and compliance concerns related to data security.

How has technology impacted debt collection agencies?

Agencies are investing significantly in technology to enhance productivity and compliance, with many adopting AI and ML.

What communication channels are most effective for debt collectors?

Traditional methods like letters and phone calls are prevalent, but email and SMS communication are increasingly being adopted.

What role does TransUnion play in the debt collection industry?

TransUnion provides valuable insights, technologies, and solutions to help debt collectors optimize their operations and consumer interactions.

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Disclaimer: The content of this article is solely for general informational purposes only; it does not represent legal, financial, or investment advice. Investors Hangout does not offer financial advice; the author is not a licensed financial advisor. Consult a qualified advisor before making any financial or investment decisions based on this article. The author's interpretation of publicly available data presented here; as a result, they should not be taken as advice to purchase, sell, or hold any securities mentioned or any other investments. If any of the material offered here is inaccurate, please contact us for corrections.