The COVID-19 outbreak has impacted businesses all around the world. And the pandemic has certainly placed a heavy burden when it comes to the delicate relationship between debtor and borrower. We are facing an economic “hibernation”; borrowers preserving cashflows, companies propped up by temporary stimulus packages and support, and a slowdown in debt repayments, as we collectively pursue an ethical approach to debt recovery during these unprecedented time. But what exactly does the Covid-19 pandemic mean for the collections process long term?
Looking to Early 2020
It makes sense to begin our assessment by looking back to the start of the year. Even pre-pandemic, household debt has been at an historic high the world over. UK households, for example, owe a record average of £15,385, whilst in the USA, aggregate debt sits at $14.5 trillion ($1.5 trillion higher than in 2008). Looking to Asia, the household debt-GDP ratio in South Korea is rising -- currently equal to about 85% of the country’s GDP. It’s a challenge to speculate on the long term impact of this debt in the wake of the coronavirus, but it will certainly lead to incredibly disruptive and challenging consequences.
The Long Term
Worldwide, governments are taking action in terms of issuing relief packages and keeping businesses afloat in the short term. In the UK, Chancellor Rishi Sunak recently unveiled a package of £330 billion worth of loans and grants, and in addition pledged that all employed individuals would receive 80% of their monthly salary in the event they were furloughed as a result of the pandemic. But looking to the long term, how can the collections process be leveraged to keep cashflow alive and businesses and institutions in tact?
Artificial Intelligence and Machine Learning has the ability to impact this industry dramatically when we move beyond this current crisis. Software applications for debt recovery and debt collection can successfully transform and entirely accelerate the way debt is recovered. Beyond this, chatbots can be leveraged to respond promptly to customer queries. And numerous automated process can reduce the cost of the collections process and improve customer satisfaction through the application of innovative, personalised collection tools.
Business Wire predicts that the debt collection software market is poised to grow by USD 562.21 million during 2020-2024, progressing at a CAGR of almost 4% during the forecast period. This unprecedented growth is in part a result of the market’s increasing requirement for self-service payment models to speed up the collection process and automation in the field, which reduces labour costs dramatically. The coronavirus pandemic will undoubtedly accelerate the spread of automation. As various businesses and organisations ponder how they can resume working amid lockdowns and social distancing. Automation is an obvious response. In fact a March report from EY found that 41% of bosses in 45 countries were investing in accelerating automation as they prepare for a post-coronavirus world.
The power and flexibility of Lateral’s industry-leading debt collection software and debt recovery software is the strongest tool to carry you through these unprecendent times. Get in touch today to learn more.