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August 2, 2024
Upcoming Trends in Debt Collection Software Adoption
Upcoming Trends in Debt Collection Software Adoption
Throughout the years in history, debt collection has earned a negative reputation owing to the methods deployed for recovery. Traditionally, the ways in which debt collectors have reached out to defaulters included strong-arm tactics, poor customer service, and negligible flexibility in terms of methods of payment. This has worked detrimentally and led to a negative rapport between the lender and the borrower, and ended up helping no one in the equation.
To combat the volume of bad debt generation due to this mismanagement, lenders are moving towards a recovery mechanism that uses digital channels as well. This explains the growing adoption of debt collection platforms by financial institutions and collection agencies is seeing massive growth.
Owing to this increasing need for efficient debt recovery solutions, the software debt collection market is expected to undergo significant growth over the next few years. Segmented broadly into the components of software and services, growth in adoption is projected to showcase an annual compound growth rate of 9.04% and 9.90% respectively.
Debt collection software consists of several components that together aim to streamline the recovery process – adding greater convenience by enabling better workflow management, payment utilities, compliance software etc. Institutions are able to
On the other hand, debt collection software services assist the client in terms of ideation and execution by helping in strategy formulation, software deployment and tailor-made implementation, thus catering to the specific needs of the given business. Major applications include
Deployment of debt collection software can either be done on-premise or on cloud. At present, the on-premise segment captures market share worth 64.30% and is expected to reach USD 172.14 million by 2027 – amounting to a 8.88% compound annual growth rate. Cloud, on the other hand, is expected to grow at a CAGR of 9.99%.
While on-premise has been a widely accepted option due to its independence from third parties, the cloud segment is believed to grow faster due to its high scalability and low maintenance costs due to absence of external hardware and easy upgrade and downgrade mechanisms.
Cloud also offers enhanced visibility to reports from anywhere in the world, facilitating real-time financial availability and operational efficiency. Remote tools make it easier for stakeholders to manage data hosted on servers.
Verticals like financial institutions, collection agencies, government etc. are the major disbursers and collectors of loans. The segment registering the highest CAGR when it comes to lending is healthcare – out-of-pocket medical costs driving it up at a rate of 9.9%. Indians meet 63% of their medical expenses through loans, as a majority of the population does not have health insurance coverage.
Factors like expensive corporate hospitals and medical tourism have further increased the cost of healthcare, giving rise to the demand of technologically advanced systems to eliminate bad debt and automate the revenue cycle.
When it comes to market share, financial institutions are the largest, as a majority of loans are processed by these companies. India’s financial sector is diverse and constantly evolving – with new service firms popping up periodically. Moreover, due to the rampant existence of bad loans, there’s a compelling need for a sophisticated loan tracking and recovery process driving the demand for loan collection softwares in financial institutions.
In the case of these companies, debt collection software also helps with cost efficiency, reduced turnaround time, regulatory compliance, and helps propose a customer centric debt collection management system. With remote banking picking up pace with the younger generation, automation of debt recovery processes is expected to observe significant growth over the next few years.
Overall, trends showcase movement towards a digital ecosystem that has wider accessibility and is easy for the newer generations to work with. Thus giving rise to an expansion in the software debt collection market.
New products and enhancements in the industry are looking to explore advanced analytics on multiple data sets – helping financial institutions make informed lending decisions. The industry is also shifting towards a digital wealth management module, with SBI adopting the same. Innovations to enable remote working by providing web-based solutions are also coming, showcasing a steady adoption of debt collection software.
Physical and digital methods of debt collection complement each other and are able to reach out to different segments of the population. While online channels are more suited to the urban population that has access to technology, gadgets and the internet, there exist rural areas with much lesser connectivity in terms of communication channels where a physical reachout is the only way to gain access to the customer.
Along the line, the industry needs to undergo a change where collections aren’t associated with a negative connotation and the focus of the process rests more on relationship building and risk management. Rather than connecting with the borrower only during credit disbursal and grievance redressal, the exchange should be less transactional and more empathetic in nature.
Spocto X (A Yubi Company) is the world’s leading end-to-end debt collection platform focused on digitizing the entire collections process. With Spocto X, your debt collections are made simpler, faster and easier with dignity to the borrower – thus, ‘Simplifying Collections with Superior Customer Experience’. Join us at Spocto as we redefine debt collection through innovation and technology, ensuring that our partners achieve unparalleled success in their recovery efforts while delivering superior customer experiences.
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