Feb 01, 2021: Open Banking Debt Collection w/ Lowell

Written by Gertjan De Wilde

We are ready to get started and have a lot in store for all of our followers this year! We have a lot to share this week and hope you're ready for all of our announcements. As part of our passion to continue providing you with industry-leading information on the open banking segment globally. This update will have the Weekly additions to the Open Banking Tracker (Banks, APIs, TPPs, etc.) and how Open Banking will revolutionize the Debt Collection industry!

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Our Current Coverage

  • • We track 2,750 banks providing open banking services! (+8 from last update)
  • • 1,012 APIs currently tracked on our platform! (+4)
  • • 404 TPPs in the ecosystem!
  • • 86 Global markets covered! (+1)
  • • 35+ API Aggregators! (with more coming very soon...)
  • • Track over 60+ data points for all open banking projects!
  • • And we are growing on a continuous basis... 🚀🚀🚀

Weekly Developments (Jan 26th to Feb 9th):

We initiated coverage and provided open banking information for:

We continue to cover over 35 aggregators!


Open Banking Use Case Spotlight: Debt Collection w/ Lowell Business

While some financial institutions' functions may get through the pandemic and return to something approaching normal, this cannot happen in debt collection, and the mortgage sector, in particular, will face some long-term challenges.

Recently released data from UK Finance forecasts that UK mortgage arrears and repossessions will surge after the payment holiday ends on 1 April 2021.

UK Finance forecasts suggest the UK could see home repossessions rise from 2,900 last year to 22,300 by 2022. The industry body also believes mortgage arrears will increase to 142,200 in 2021 from 81,300 in 2020.

Considering all this, debt collection needs a serious overhaul. It lags behind other functions in terms of investment in new technology and improved practices, making the current crisis nearly unmanageable for many institutions.

However, this is not a question of having to come up with new ideas. The current industry leaders employ four best practices adopted by all organisations and implemented as standard practice. And these techniques will support institutions as they find a way through the COVID pandemic.

    1. Identify the most vulnerable customers

It is essential to dig deep to capture the vital data that separates economic victims from “regular” collections and customers from vulnerable customers. Critical questions like how reliant is the customer on credit, a customer's financial morality, overall total credit stress, and financial stability must be answered.

    1. Assess Affordability

It is essential to dig even deeper into household balance sheets and cash flow. Where possible, use Open Banking data to determine accurate affordability assessments. Through integrating directly with the borrower's bank statements, one can have a solid sense of their financial position and day-to-day liquidity

    1. Move to Omnichannel, Responsive Communications

The best customer engagement strategies are led by the customers – so the question becomes: how open can you make your systems to your customers? Research we conducted between lockdowns in 2020 found that nearly a quarter of mortgage customers found it difficult or not easy to make contact with their lender at the start of the pandemic. Being close to your customer is KEY!!

    1. Add Science to Segmentation

Segmentation is a vital dynamic process, and too much of it is done “by hand” today, using very few criteria that create large and crudely defined segments.

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In conclusion

Optimisation in collections can be applied across the different stages of the C&R lifecycle.

In early-stage collections, it is about optimising which channel, channel timing, and channel messaging should be most suitable to which account to achieve the objectives.

In late-stage collections, the focus is more on identifying customers that require related restructure / settlement.

Post charge-off, the objective is to maximize recoveries by determining which accounts to work, which to place, and which to sell.

In third-party placement, optimisation can be used to determine which accounts to assign to which agency to maximize recoveries, based on their performance with different debt types.

So what's the open banking takeaway...

Debt collection is an industry ripe for disruption. Being closer with the customer is directly in line with lower loss rates. By better integrating with customers, should a loss occur, they can better manage it by having a better understanding and control over the borrower's finances to structure a more ethical plan than complete RePo. Players like Lowell, FriendlyScore, and Exus are already looking at applications and trying to embed them in their existing product suite, and we will only see more entering the industry as time goes on.


Feedback

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Have a great week and stay safe!

The Banq team

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