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Software will End Collections as we Know it

There is a major shift in software and it has been accelerating in the past couple of years. There has been a move from on-premise software to multi-tenant cloud and this has changed everything. Specifically, when it comes to industries like collections, which are stuck at least ten years in the past, it’s high time for change. 

The current stack of technology used in collections is stuck with systems cobbled together over years. It was an afterthought and definitely wasn’t developed with the processes and channels necessary today in mind. It can at best be referred to as claims management software and it isn’t in any way modular nor designed for the end-user.

You have legacy systems which may be ten to fifteen years old at this point. Over the years, additional software has been layered on top and if the company grew, usually via M&A, other systems were glued on. In the worst case, you have multiple systems, in multiple geographies with no centralised best practices when it comes to how the software really should work. Add a little bit of in-house development on top to plug technology holes over time and you have a mess on your hands.

These systems were sold top-down. Senior management was pitched a system and pushed it down on the folks in operations. Trends came and went but those most affected by the technology were stuck with it. Further, add in managers who didn’t want the work of ripping out technology which didn’t work to the equation.

Enterprises, whether they like it or not, are dealing with systems which allow for zero innovation. Even if the users wanted to pick and use their own software, they would have no way to plug it into the legacy systems, so basically everyone makes do with what they have. It’s no surprise that when you look from outside into this industry you can only shake your head about how far behind the technology curve lies.

Pricing for what enterprises have was surely premium. Due to the expansive nature of these systems and the long implementation cycles, one has projects which may have cost millions. Add to this the consultants who have been telling you about problems you didn't know you had and selling you solutions for them and it’s understandable that your ROI has been disastrous. With the sunk cost fallacy rearing its ugly head, you are most likely not interested in getting anything changed.

Approval processes are also a disaster. As the implementation of this software tends to be project based, you have multiple stakeholders, who by the nature of enterprises, have to be involved. Not only do you have to include the IT department, but in large enterprises, legal and compliance will always be involved. As you are ultimately interacting with the end customer, you may also have marketing on your back. If you are truly out of luck, you also have multiple parts of the organisation dispersed throughout various geographies where you have to get buy-in from regional managers for minutiae in the core processes. It’s not difficult to understand why these projects can easily take 12 to 18 months to get approval and at times at least another 12 months to get implemented. You are in the typical situation of starting to use technology two years at a bare minimum after it has been developed. This is not how you become innovative in collections.

API’s are most likely something everyone has heard about but good luck finding them. As mentioned above, these are systems cobbled together. No one ever really thought about future-proofing them. Nor were any of these systems architected to be modular and easily plug in features and functionality. If you as an enterprise want to easily bring in partner technology, you aren’t doing so with any ease. You are stuck with what you have, on premise and you need to rip it out. This brings you right back to the previous paragraph and the approval processes which negate any movement forward.

These “Frankensuites” are everywhere when it comes to collections. You have no underlying platform which allows for a claim to be addressed from start to finish in the value chain. Each player, from enterprise via debt collection agency to legal proceedings, is using their own systems if they have modern technology at all. There needs to be a re-thinking of how all this works. We have written multiple times about how the end-customer and their profile has changed. They are demanding digital channels and processes with simplicity of use at their core.

Why should it be any different for the operators in the collections industry? Software has to be made available for the humans that use it to be comfortable. Employees need software that is well designed. They tend to sit in front of it for quite some time during the day and it needs to be easy to use, intuitive and designed for the users themselves. Specifically, it cannot be designed by and implemented via committees. This is a paradigm shift in thinking when it comes to collections software.

If you plan on adapting your software for the customer, you first have to make sure that the users of that software are going to use it. You need to have rapid release cycles to stay ahead of the curve. When you see that something is missing or new innovation has appeared, it needs to be easy to get it out to your users. You have to also make sure that the entry point into the enterprise is with the user. Salesforce brilliantly did this in their early days. Salespeople were buying licenses for their software privately as they abhorred using the tools given to them by their employers. This drove adoption of Salesforce bottom up in the organisation as employees were helping themselves to available technology to excel at their jobs.

Pricing of the software also needs to be aligned. The enterprise needs to be able to make a fast decision to get on board. Usually, hurdles for technology decision makers tend to be quite low when it comes to budget. You can scale into far larger tickets with additional features down the road but your core technology has to come up far cheaper than the legacy systems. This isn’t that hard though as those players have immense sunk costs and their development teams are nowhere near as efficient as modern day players.

Finally you have to think of a platform. Partners need to be able to plug into the systems via APIs. You need to create a flow from start to finish which is addressed by the underlying software. Specifically in collections you will have parts of the value chain which can’t be addressed by software, although this is also changing fast. Nevertheless, you need to have software to interact with partners to truly address collections with innovation. The industry will change. It is going to be painful for many players as they will not be able to adapt. Regulations will ultimately come and destroy the underlying business model of those dependent on fees for survival. The only way forward is to adapt rapidly to the new wave of software available and rip off the band-aid fast. There is short-term pain involved but long-term survival and viability is at stake.

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