Debt Collection Industry Embraces AI Amid Rising Account Volumes and Challenges

More Than Half of Debt Collection Companies Saw Increased Volume of Accounts in Past 12 Months By Investing.com

TransUnion (NYSE:TRU) research finds shifting preferences in communication channels and increased investments in AI tools CHICAGO, Jan. 15, 2025 (GLOBE NEWSWIRE) -- More than half (52%) of debt collection companies have experienced an increased or significantly increased volume of accounts placed or acquired over the last 12 months. Sixty-two percent of companies expected to be in a better financial position next year, according to a new report published by TransUnion (NYSE: TRU). However, the volume increase for new accounts has been coupled with a decrease in the collectability"a trend that has been underway since 2020. In addition, there are rising concerns about data security and compliance with government regulations. These challenges are prompting 52% of debt collection agencies to make significant investments in technology, to enhance agent productivity, improve margins, and more efficiently manage compliance risks. These and many more findings are included in Preparing for Opportunity (SO:FTCE11B): Investing in Efficiency to Scale Operations, the sixth annual report sponsored by TransUnion's third-party debt collections business. Growing collections businesses are better positioned to take advantage of new technologies available in the market, said Manny Plasencia, senior director of TransUnion's third-party collections business. Utilizing data to drive the right approach in a rapidly changing environment is becoming more impactful to recovery and collections performance than ever. Those that do will be able to unlock efficiencies in both contacting and collecting their accounts. Investing in AI Among the fastest growing changes for debt collectors is with the use of artificial intelligence (AI) and machine learning (ML). Almost half of companies that had no plans to use AI/ML technology in 2023 are now considering third-party or in-house solutions. The number of debt collectors investing in AI/ML grew from 11% in 2023 to 18% in 2024. The top three applications for AI/ML solutions are predicting and segmenting accounts (57%), predicting payment outcomes (57%), facilitating self-service/virtual negotiations (56%). Comms channels begin to shift Standard methods, like letters (87%) and telephone calls (86%) continue to be the most widely used communication channels for debt collectors, partially driven by legal and regulatory requirements focused on these channels. Email communications (74%) have continued to grow quickly, with 6% more companies responding they've started using email as a channel this year. Use of text/SMS messaging grew 5% between 2023 and 2024. Only 39% of debt collection companies reported using data furnishing to credit bureaus as a communication channel to engage consumers regarding a debt. This represents a steep (24%) decline from 2023 when 51% of respondents were using data furnishing over the previous year. The investment in more digital communications channels is helping to drive a shift in payment processes. SMS/text and email communications generally drive the consumer to the online payment portal to facilitate collecting payments with minimum human friction. The number of debt collection companies using a self-service online portal for consumers increased from 79% last year to 88% in 2024. In addition, a quarter of companies now collect more than 40% of their payments through the online portal channel. TransUnion's TruContact™ Trusted Call Solutions can help debt collectors determine the best time and channel for reaching consumers. In addition, Branded Call Display lets the consumer know that the call is legitimate and can facilitate the collections process by explaining the purpose of the call. Read the full report Preparing for Opportunity: Investing in Efficiency to Scale Operations. About the research To collect the information used to gain the insights in this report, a survey was conducted in Q3 2024 that included 225 debt collection professionals representing different disciplines of receivables management: creditors, debt buyers, collection agencies, collection law firms, BPO firms and other supporting organizations. In addition to the survey, this report also incorporates findings from secondary research pertaining to the debt collection industry's economic indicators, as well as consumer credit trends to provide additional context. Respondents in the 2024 survey represented a slightly different group of debt collection company types, with 300% more debt buyers participating and an increase in the percentage of creditors and law firms. About TransUnion (NYSE: TRU) TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good " and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world. http://www.transunion.com/business

More Than Half of Debt Collection Companies Saw Increased Volume of Accounts in Past 12 Months - TransUnion (NYSE:TRU)

CHICAGO, Jan. 15, 2025 (GLOBE NEWSWIRE) -- More than half (52%) of debt collection companies have experienced an increased or significantly increased volume of accounts placed or acquired over the last 12 months. Sixty-two percent of companies expected to be in a better financial position next year, according to a new report published by TransUnion TRU. However, the volume increase for new accounts has been coupled with a decrease in the collectability -- a trend that has been underway since 2020. In addition, there are rising concerns about data security and compliance with government regulations. These challenges are prompting 52% of debt collection agencies to make significant investments in technology, to enhance agent productivity, improve margins, and more efficiently manage compliance risks. These and many more findings are included in Preparing for Opportunity: Investing in Efficiency to Scale Operations, the sixth annual report sponsored by TransUnion's third-party debt collections business. "Growing collections businesses are better positioned to take advantage of new technologies available in the market," said Manny Plasencia, senior director of TransUnion's third-party collections business. "Utilizing data to drive the right approach in a rapidly changing environment is becoming more impactful to recovery and collections performance than ever. Those that do will be able to unlock efficiencies in both contacting and collecting their accounts." Investing in AI Among the fastest growing changes for debt collectors is with the use of artificial intelligence (AI) and machine learning (ML). Almost half of companies that had no plans to use AI/ML technology in 2023 are now considering third-party or in-house solutions. The number of debt collectors investing in AI/ML grew from 11% in 2023 to 18% in 2024. The top three applications for AI/ML solutions are predicting and segmenting accounts (57%), predicting payment outcomes (57%), facilitating self-service/virtual negotiations (56%). Comms channels begin to shift Standard methods, like letters (87%) and telephone calls (86%) continue to be the most widely used communication channels for debt collectors, partially driven by legal and regulatory requirements focused on these channels. Email communications (74%) have continued to grow quickly, with 6% more companies responding they've started using email as a channel this year. Use of text/SMS messaging grew 5% between 2023 and 2024. Only 39% of debt collection companies reported using data furnishing to credit bureaus as a communication channel to engage consumers regarding a debt. This represents a steep (24%) decline from 2023 when 51% of respondents were using data furnishing over the previous year. The investment in more digital communications channels is helping to drive a shift in payment processes. SMS/text and email communications generally drive the consumer to the online payment portal to facilitate collecting payments with minimum human friction. The number of debt collection companies using a self-service online portal for consumers increased from 79% last year to 88% in 2024. In addition, a quarter of companies now collect more than 40% of their payments through the online portal channel. TransUnion's TruContact™ Trusted Call Solutions can help debt collectors determine the best time and channel for reaching consumers. In addition, Branded Call Display lets the consumer know that the call is legitimate and can facilitate the collections process by explaining the purpose of the call. Read the full report Preparing for Opportunity: Investing in Efficiency to Scale Operations. About the research To collect the information used to gain the insights in this report, a survey was conducted in Q3 2024 that included 225 debt collection professionals representing different disciplines of receivables management: creditors, debt buyers, collection agencies, collection law firms, BPO firms and other supporting organizations. In addition to the survey, this report also incorporates findings from secondary research pertaining to the debt collection industry's economic indicators, as well as consumer credit trends to provide additional context. Respondents in the 2024 survey represented a slightly different group of debt collection company types, with 300% more debt buyers participating and an increase in the percentage of creditors and law firms. About TransUnion TRU TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good® -- and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world. http://www.transunion.com/business Contact Dave Blumberg TransUnion E-mail [email protected] Telephone 312-972-6646 Market News and Data brought to you by Benzinga APIs