Delinquency, i.e. the non-payment of debts, is a problematic reality to which it is impossible to turn a blind eye. It has been a burden on the European economy since the 2008 crisis, mainly affecting banks, but above all it represents a torpedo in the waterline of many companies.
In this article we would like to present an overview of the debt collection industry, in which secure card payment solutions have an important specific weight in the panoply of collection strategies deployed by debt management entities.
Nonperforming loan; when it is difficult to pay
The phenomenon we are talking about is usually known in the financial field under the English term nonperforming loan or NPL, which corresponds to the more traditional term of delinquency; that is, we are talking about unpaid loans with late or very improbable payment. These are usually bills or small consumer credits not exceeding €3,000.
However, this delinquency, based on small debts, has reached alarming figures that have led the European Union to intervene with special plans that anticipate a marked upward trend caused by the post-covid-19 crisis. In other words, the phenomenon of delinquency can be expected to increase in the coming years.
The activity derived from debt collection is scarcely regulated and is carried out by debt collection companies, also known as debt management entities, which undertake the task, normally on account of a part of the debt, to resolve it either by amicable or judicial means.
Debt management entities, investing in technology
To learn more about the problems and characteristics of these collection companies, nothing better than consulting the executive reports of ANGECO, the National Association of Collection Management Companies (download here the 2020 report), which brings together 71 entities and more than 80% of the the sector’s turnover in Spain (and which exceeds one billion euros annually).
With more than 100 million files handled each year and almost 10 billion euros recovered (mainly in the financial, telecommunications and telecommunication sectors), the company has been able to utilities(the usual clients of the collection companies), it should be noted that the telephone continues to be the preferred channel of contact with debtors, with 56% of the total share.
Another insight from the ANGECO 2020 report is the strong investment in technology being made by collection agencies, which year after year exceeds 10% of total spending in the sector. It has to do both with technological evolutions in the strict sense and with recent regulatory changes related to personal data management and payment services.
PAYby CALL, ad hoc solution
It is striking the lack of adequacy between the specific weight of the telephone as a channel of contact with debtors and the appropriate technological mechanisms to make secure telephone collections that comply with current legislation, since less than 25% of European companies comply with the necessary regulatory requirements.
In this context (increase of late payments, lack of “legal” technological resources), the PAYby CALL solution for card payment over the telephone is emerging as a perfect resource to eliminate friction and save headaches while fully complying with PSD2 and RGPD regulations.
PAYby CALL offers a way to secure, efficient and customized telephone billings that complies with the PCI-DSS level 1 security standards and guarantees both the privacy of personal data and the security of the financial transactions of the individuals and entities involved, while optimizing the technical aspects of the process.
Optimizing debt collection processes
If recovering a debt over the phone is the most common and effective way, why not remove barriers with PAYby CALL?