3.1.2007 / Michael Flock
Receivables Management:
The Best of Times / The Worst of Times

A number of basic factors are driving growth in the receivables management industry. Gross charge-offs continue to grow, albeit at single digits, while debt purchasing is expanding to new segments including healthcare, utilities and student loans. The complexity of healthcare collections is driving more outsourcing, which is facilitated by increased automation. Internet technology continues to facilitate systems integration, driving ease of use and reducing cost of systems ownership. Business Process Outsourcing is growing at 20% a year and driving customers to outsource collections. Large customers and debt purchasers are increasingly comfortable with offshore operations, especially for first party accounts. Finally, we expect the IRS collections contracts to open up a large new market.

Offsetting these positive trends are a series of challenges, including consolidation in the credit card and telecom industries, resulting in severe margin pressure on that paper. Because of new entrants, prices for purchased credit card paper remain at historic highs, putting traditional ROI on these portfolios at risk. Meanwhile, most of the benefit from offshoring is going to the large customers who demand it, not to the agencies. And competition in BPO is keeping prices low for first party services.