Retail Banking in CEE – Debt collection in times of crisis
A new study by the European Financial Marketing Association (Efma) and Roland Berger Strategy Consultants entitled "Retail Banking in CEE – Debt collection in times of crisis" reveals key findings and areas for improvement in debt collection practices across Europe.
"Debt collection is becoming an extremely important area of banks’ operations, with regard to both cost and profitability, and yet it is one which is little discussed in this market", comments Patrick Desmarès, Secretary General of Efma. Comparing CEE banks with regards to their collection processes, organisational set up, performance measurement practice and support infrastructure, we see some noticeable differences. "This survey makes interesting reading, indicating as it does some room for improvement for many CEE banks to catch up with best practices elsewhere."
Outsourcing of collection and debt sale
The share of banks considering debt sale has considerably increased since the crisis and today 79 percent of the surveyed banks sell or plan to sell delinquent debt, albeit sold volumes currently still remain rather low. "Selling debt for most CEE banks is mainly used to reduce risk, to manage the balance sheet, as a measure of last resort if economic recovery remains weak or alternatively as strategy to free up resources fast", notes Hendrik Bremer, Financial Services Partner at Roland Berger Strategy Consultants. Early collections, containing most of the easy-to-solve cases, are mostly handled in-house – only 35 percent of banks use or plan to use collection agencies for these. In late collection, more than two thirds of banks however outsource at least partially. While banks try to avoid legal collection (due to long procedures and usually limited success in recoveries) more than 50 percent handle legal collection in-house.
Collection processes
The level of sophistication of collection strategies differs highly across CEE banks. Most commonly, CEE banks differentiate processes according to easily assessable criteria such as product and client segment. Advanced approaches like behavioral analytics are only in by approximately one third of the banks. The most common means of communication are still phone or letter. There are growing trends to use cost-effective new tools like SMS and e-mail and two-thirds of the banks are using these, mostly in addition to letter communications. "Surprisingly, while heavily relying on phone contacts, advanced call center technology is only in place with approximately one third of the surveyed CEE banks. This leaves significant efficiency improvement potentials untapped", says Patrick Desmarès.
Organizational set up and capacity
Almost all CEE banks surveyed steer and perform most of their retail collection activities from their head office. Roughly one third of the banks additionally have collection units either on regional or branch level – mostly used for field collection, collection from specific customer segments or exposure levels. "Within CEE banks the level of specialization of collection units varies. Many banks have units dedicated to specific client segments, with more than two thirds of CEE banks using collection units dedicated to individual clients", notes Hendrik Bremer, Partner at Roland Berger Strategy Consultants.
Depending on level of automation and outsourcing, staff capacity differs strongly between banks. The majority of CEE banks these days however has a 2.7 percent to 6.0 percent share of their staff in collections. With urgent need for additional collection capacity most banks have increased their collection staff throughout the crisis, often while running staff cost reduction programs in other areas. To boost their collection capacity not just in terms of numbers but also experience some banks used unorthodox methods: Some Romanian banks for example recruited experienced staff from the leading mobile phone operators, being known for their strong collection practice.
"Debt collection is becoming an extremely important area of banks’ operations, with regard to both cost and profitability, and yet it is one which is little discussed in this market", comments Patrick Desmarès, Secretary General of Efma. Comparing CEE banks with regards to their collection processes, organisational set up, performance measurement practice and support infrastructure, we see some noticeable differences. "This survey makes interesting reading, indicating as it does some room for improvement for many CEE banks to catch up with best practices elsewhere."
Outsourcing of collection and debt sale
The share of banks considering debt sale has considerably increased since the crisis and today 79 percent of the surveyed banks sell or plan to sell delinquent debt, albeit sold volumes currently still remain rather low. "Selling debt for most CEE banks is mainly used to reduce risk, to manage the balance sheet, as a measure of last resort if economic recovery remains weak or alternatively as strategy to free up resources fast", notes Hendrik Bremer, Financial Services Partner at Roland Berger Strategy Consultants. Early collections, containing most of the easy-to-solve cases, are mostly handled in-house – only 35 percent of banks use or plan to use collection agencies for these. In late collection, more than two thirds of banks however outsource at least partially. While banks try to avoid legal collection (due to long procedures and usually limited success in recoveries) more than 50 percent handle legal collection in-house.
Collection processes
The level of sophistication of collection strategies differs highly across CEE banks. Most commonly, CEE banks differentiate processes according to easily assessable criteria such as product and client segment. Advanced approaches like behavioral analytics are only in by approximately one third of the banks. The most common means of communication are still phone or letter. There are growing trends to use cost-effective new tools like SMS and e-mail and two-thirds of the banks are using these, mostly in addition to letter communications. "Surprisingly, while heavily relying on phone contacts, advanced call center technology is only in place with approximately one third of the surveyed CEE banks. This leaves significant efficiency improvement potentials untapped", says Patrick Desmarès.
Organizational set up and capacity
Almost all CEE banks surveyed steer and perform most of their retail collection activities from their head office. Roughly one third of the banks additionally have collection units either on regional or branch level – mostly used for field collection, collection from specific customer segments or exposure levels. "Within CEE banks the level of specialization of collection units varies. Many banks have units dedicated to specific client segments, with more than two thirds of CEE banks using collection units dedicated to individual clients", notes Hendrik Bremer, Partner at Roland Berger Strategy Consultants.
Depending on level of automation and outsourcing, staff capacity differs strongly between banks. The majority of CEE banks these days however has a 2.7 percent to 6.0 percent share of their staff in collections. With urgent need for additional collection capacity most banks have increased their collection staff throughout the crisis, often while running staff cost reduction programs in other areas. To boost their collection capacity not just in terms of numbers but also experience some banks used unorthodox methods: Some Romanian banks for example recruited experienced staff from the leading mobile phone operators, being known for their strong collection practice.
More news
- up ↑
- Shared Service and Competence Centers for Insurers
- Europe's companies grow faster and more persistently than their international rivals. They are also more profitable and have a larger global footprint
- Retail Banking in CEE – Debt collection in times of crisis
- Do more beds bring in more guests?
- E-mobility in the US: Success depends on cities
- down ↓