Whether we see economic growth or a recession, companies in the ARM industry must rely on technology to scale their operations accordingly. What should collections and recovery leaders focus on when investing in technology?
Ray Peloso, Chief Customer Officer at Finvi, says compliance and self-service must be high on your agenda in 2023 and beyond. In this interview with Peloso you will learn:
- Where, in his opinion, the greatest challenges for collections and recycling lie ahead
- Which of these challenges lead to the greatest opportunities in the ARM industry,
- Why omnichannel should be on your technology roadmap ASAP
Watch the interview here or read the full transcript below.
Erin Kerr: Hi everyone, and thank you for joining me for this episode of Executive Q&A. I’m here today with Ray Peloso from Finvi. Ray, why don’t you tell me a little bit about yourself and a little bit about Finvi?
Ray Peloso: Big Erin. thank you for being here It’s great to spend time with you. My brief background is that I had a full career in consumer lending. I’ve worked in places like Citibank Capital One, World Bank of Scotland where I’ve held various positions in credit and collections. In 2014 I moved into the technology side of collection and recycling and joined a company called Katabat, where I was CEO for about seven years, and about a year ago, in August 2021, Ontario Systems, now called Finvi, acquired it. For the last 14 months I have been part of the Finvi team which is essentially the old Ontario Systems Company combined with several key acquisitions coming together.
[EK]: All right Ray, thanks for that background. Today we will have a discussion on the economic and regulatory environment and some of the challenges facing the collections industry. Let’s jump in. Why don’t you set the table and describe the economic and regulatory environment for me?
[RP]: Secure. We’ve had the phrase for the last few years that you have to be a patient angler in this business. My interpretation is that the credit and default performance in consumer lending has honestly been at an intergenerational low since the 2008 crisis. So there’s been a long period of relatively low inventories and really strong economic performance that we think is essentially coming to an end. There was a big Covid spike for a quarter or two but if you look at the longer term patterns I think the economy is obviously headed for a recession heading into next year which is actually quite a change from the 12 13, 14 years well below the long-term average of arrears and write-offs. That’s actually an opportunity, when you think about it, for this industry where inventories should likely reverse and start to rise again. I would of course combine that with a really challenging regulatory environment that never changes. I think the industry is fully aware of the complexities and compliance requirements and as such we obviously see the CFPB and other regulators remaining active within the industry framework. That doesn’t change.
[EK]: Certainly. I think as we see an increase in arrears and write-offs, we’re going to see an even more active regulator.
[RP]: [And the] Elections likely…
[EK]: TRUE. But kinda like what we saw after 2008 with the CFPB. With all that said, can you describe to me the top three challenges your customers are currently facing?
[RP]: Secure. I think for a number of years the first big challenge that the industry is not only grappling with, but I think is tackling is this idea of omnichannel, going beyond dialers and using technology in a very different way. I think over a period of several years there has been a big focus for the industry, and it’s at a simple level: customers are generally not answering the phone as much as they used to. Customers prefer to interact on their own terms through digital channels. I think this pattern has been around for a number of years and continues to be a high priority. There are also emerging technologies such as RPA (Robotic Process Automation). All of these tools and techniques and segmentation have continued to impact the industry and are a major focus for the industry. This is bucket number one.
I think bucket number two is always the regulatory agenda. To the extent that there are fluctuations in relation to the regulations of the CFPB, such as current court decision, does that change the agenda? I think the industry always has regulatory (concerns) at the top of the list, and I think the third is growth. I think our customers are all interested in growing. It has been a difficult environment and I suspect there is optimism that the industry will face growth challenges versus other challenges going forward.
[EK]: Thanks for outlining these challenges, Ray. They definitely align with what I hear everyday from the people we speak to here. How is Finvi helping to solve or alleviate some of these current challenges?
[RP]: We’re a technology company, so I suspect the angle here will be more on the technology side. The first thing I want to say before I jump into the technology is that Ontario Systems has actually invested quite a bit with its third-party agency business over the past year to bring a CFPB-compliant version of its products to market. Indeed, as I look back on 2021, it has been quite significant work for Finvi to address priority number two, which is ensuring the industry and our customers are compliant with CFPB regulations. That’s in the rearview mirror.
What we’re doing more recently in the Omnichannel Digital space is that in recent years, including the acquisition of Katabat, Finvi has invested very heavily in building an essentially integrated omnichannel payments experience to help our customers to meet the requirements of their customers. We made acquisitions in payment functionality. There’s an acquisition of Katabat, which had a whole range of omnichannel digital capabilities. There was an acquisition in the area of advanced segmentation and measurement. If you zoom out, I believe Finvi has invested quite significantly in building or buying assets to help our customers deliver an omnichannel digital experience.
[EK]: Thank you Ray It sounds like you really have the pulse of what your customers need at this point in time. We talked about what’s going on right now. What do you think will be the biggest challenge for your customers in 2023 and beyond?
[RP]: I’m a bit of a pessimist about the economy, so I’m shaped by that bias. I suspect that the recession will be a little steeper than some forecasts. I think the conditions for success have absolutely shifted. I believe that first-party lenders will demand and expect a high level of sophistication and omnichannel expertise from the industry. I think there are a lot of industry players who are willing to do this, who are likely to thrive and thrive, but I think maybe customer expectations will be higher than they have been in the past because their customers expect it. I think that how to grow with the right technologies and solutions will be the challenge that the industry will have to contend with over the next year.
[EK]: Good. Many Thanks. Right. So how does Finvi plan to guide your customers through these challenges?
[RP]: Think about the product roadmap. Over the past year we have spent a great deal of time and energy ensuring that the basis for compliance with the CFPB is in place. We continue to tune and optimize this module and service suite. Our roadmap now focuses directly on the customer payment experience, including integration with dialers and non-dialer channels to ensure we have a positive consumer experience that makes sense for our customers. If you think of the product roadmap, that’s where our investments are and will remain so for the foreseeable future.
[EK]: That makes perfect sense to me. We were a little pessimistic about some of these questions. I want to ask you a slightly more optimistic question, which is: what will be the biggest opportunity for accounts receivable clerks in 2023?
[RP]: I’ve been in and around the industry for a very long time and I love the narration and the way the industry insiders describe how they are actually a really important part of a functioning economy. The industry helps consumers make their repayments, helps debtors resolve their delinquent status, and helps banks achieve successful operational performance. I do believe that the industry plays an important role, although it is often misunderstood in general conversation at cocktail parties. It actually gets amplified in a recessionary environment, right? So I think that with the right tools and the right technology, there is a really experienced industry that understands the role that credit plays in a functioning economy. I’ve been in this industry for a while. The approach, the tools and the techniques today are completely different than 10, 15, 25 years ago. The optimist in me says that having this kind of expertise and skill set in the industry is actually important for a functioning economy when struggling through a recession.
[EK]: I think that makes a lot of sense. Thank you for closing us on a slightly upbeat note. Do you have any final thoughts for viewers?
[RP]: It’s going to be an exciting time. It remains a really interesting industry. One fact I’m happy to share with you is that American consumers repay approximately $84 billion each year when they are past due or have withdrawn accounts. It’s really important. Very often it is [a scenario like] Ray fell, he may have lost his job, now he has a job and he’s getting back on his feet. It remains a really important part of the consumer experience and the US economy. I’m proud to be part of the industry and I think a lot of the industry players are too. It’s an exciting time to be in the industry.
[EK]: Well, thank you Ray. I agree with you one hundred percent. It’s an exciting time. We’ve got to be really, really good at what we’re doing to get through the next few years. Thank you for taking the time to answer my questions today. Thank you to everyone who participated in this Executive Q&A. I’m Erin Kerr, Director of Content for Collections and Recovery, and I’ll see next time.