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What to expect for 2022

04 February 2022

The first month of 2022 has come to an end, giving us an indication of what we may be able to expect for the rest of the year. The last two years have seen an unprecedented amount of turbulence for most industries, however, the collections and recoveries industries have arguably been some of the most unpredictable with legislative change, a lengthy stop to operations, some cultural shifts and vast changes to the customer landscape. 

So far in 2022, we have seen the largest reduction in COVID regulations and a further return to what ‘normal’ once was, but what can we expect in the collections and recoveries space? In this blog, our senior leadership team has highlighted some of their key expectations for the year to come.

Buy now pay later culture will progress
Victoria Oliver, Director of Client Development

Throughout the pandemic, buy now pay later (BNPL) options in the UK such as Klarna PayPal, Quadpay and Afterpay boomed in popularity, with one in three UK residents making higher use of BNPL in recent years. Klarna alone has over 969,000 monthly active users on their iOS and Android apps. (Via Statista). 

Buy now pay later allows customers more purchase options, letting them buy an item or service while paying in full or installments at a later date, often with little to no interest. This can be helpful to both purchasers and sellers as it allows transactions to take place with greater frequency and affordability, however, a small percentage of customers may find it difficult to manage their payments and control their spending.

This uptake in usage and risk of indebtedness has caught the attention of The Financial Conduct Authority (FCA). In February 2021 the FCA announced that interest-free buy now pay later products would become regulated to protect customers. We expect following the finalisation of the Government’s approach, secondary legislation will be laid in Parliament to bring BNPL into the perimeter. The FCA will subsequently run a consultation on the details of the regime.

The importance of data in debt recovery will continue to grow
Nick Georgiades, Managing Director

Covid has had a massive impact on customers' income with people in and out of furlough, losing and changing jobs. The result is rapidly changing situations, some with a temporary impact, some pushing customers into long-term financial vulnerability. As the economy adjusts and recovers, we will see more and more customers situations changing some for the better some for the worse.

This has driven creditors to rapidly improve internal collections and customer segmentation. With customers struggling to keep up with payment plans they would have accepted pre-pandemic, creditors need to be able to identify vulnerability and assist customers with bespoke collections approaches. 

More data, and importantly, higher quality data gives creditors the tools to improve their collections rates whilst simultaneously improving customer treatment by identifying key information on the customer and their circumstances.  

Digital transformation is set to continue at a rapid pace, particularly in enforcement
Chris Badger, Director of Legal and Compliance

Digital transformation is by no means a new concept. As technology has become more vital to business functions, so has the need to digitise key business processes. The last two years have amplified this need and we don’t see that stopping anytime soon.

Enforcement as a sector has been slow to create new or modify existing business processes to meet modern digital requirements, however, the combination of remote working and collections, improved customer digital competency and the continued takeover of online culture have increased the need for businesses to take advantage of digital transformation.

We expect 2022 to be the year enforcement makes more processes and customer experiences digital, as Just continue to do with Virtual Enforcement and online customer tools and portals. Customer digitisation is improving and so should that of judgement and enforcement. Fewer phone calls, more chatbots.

Greater outsourcing
Natalie Tate, Director of Operations

A recent trend has seen businesses taking advantage of outsourcing with greater frequency. Outsourcing allows organisations greater flexibility and scalability, with more options and competitive pricing. 

By outsourcing, organisations can also take advantage of specialists, with vastly superior expertise and experience in specific areas. Additionally, outsourcing allows businesses to reduce costs and risk, a more important consideration than ever in the current climate. 

We expect outsourcing to increase, from common departmental outsourcing such as I.T to entire collections and recoveries departments. 

Later payments to SMEs
Charlotte Smith, Financial Controller

A recent exclusive survey conducted by YouGov to better understand the current standing of business-to-business SMEs across the UK confirmed that they are regularly experiencing late payments. Out of a sample of 500 businesses with up to 49 employees, 68% said that they regularly receive payment late. 

This trend of not meeting payment deadlines not only increases the need for enforcement on customers of SMEs, but also increases the need for enforcement on SMEs themselves, as their liquidity and therefore ability to make their own payments falls.

With increased financial instability among customers, increased inflation and higher expenses we expect this trend to increase rather than get better.

High inflation mixed with low-interest rates will cause problems for savers and debtors
Andrew Prichard, Group CEO

Inflation is on the rise and as a consequence consumer buying power and disposable income will be lower than ever. We have seen two, all be it small, increases in interest rates that will surely be the first two of many to come in the year ahead,  this will possibly cause issues for some, particularly those struggling to make ends meet. 

High inflation and rising costs will make it harder for customers to meet their current debt obligations. Equally, for savers, the value of their savings will decrease, meaning the likelihood of them accruing debt goes up.

We are unlikely to see these problems go away for customers in 2022.

Energy prices will continue to rise, causing further utility-vulnerability
Nick Georgiades, Managing Director

2021 saw one of the biggest shakeups in the UK utilities sector in history. In 2021 alone, around 30 energy companies stopped trading for good, leaving over two million customers in need of protection from Ofgem. Consolidation increased greatly with just 22 suppliers remaining. 

The Office for National Statistics has confirmed that the seven-day average price for energy in the UK was up by over 800% in December 2021 over the previous year. 

This massive price increase has put millions of UK residents at risk of being unable to pay their energy bills or missing payments on their other commitments. 

This problem is not going to go away in 2022. The sector continues to see turbulence and may take some time to stabilise. 

Returning to the office will increase spending, but decrease savings
Victoria Oliver, Director of Client Development

With inflation and the rise and prices going up all around, it may be difficult for customers to stomach even less disposable income, but with the dropping of COVID regulations in February 2022 and a renewed uptake in return to office working, they may have to. 

Worker's monthly costs will go up, people were far better off when not spending on commuting, lunch, coffees etc. and a push for in-person attendance may catch some people out on their increased daily spend.

This may impact creditor businesses as customers have fewer means to meet their credit obligations.

We expect this could be an issue and would encourage businesses to assess this risk before making changes to current working arrangements.

Conclusion 

A varied mixture of positive and negative predictions. With positivity comes the ability to take advantage of renewed optimism, and with negativity come opportunities for organisations to improve.

Better insight into people’s true financial status needs to be sought and whilst creditor organisations try to attain a ‘customer-view’ this is usually limited to their organisation or aggregated data from a bureau. Collating this and helping people out of debt is a lengthy process and so better use of technology should be encouraged to fast-track this process.

2022 has a feeling of a fresh start and renewed optimism but will have some challenges that businesses must face head-on to help serve themselves and their customers. 

 

Senior Leadership Team
Just