Only four in 10 banks make extensive use of automation in their collection departments, according to a recently released report on bank debt collection trends and standards.
The report, based on data from senior collection officers at 237 institutions of varying size, was compiled by Cyberresources Corp., a firm that manufactures collection software. There are approximately 45 other firms currently selling collection software in the United States, according to the report.
"Despite the inroads technology has made in virtually every aspect of bank operations, 62% of the banks we surveyed still rely on a system of manual card files in the collection department," said Ulric Clasen, general manager of Cyber Financial Systems, a subsidiary of Mountainside, N.J.-based Cyberresources.
Meeting Objectives
The dearth of automation in the collection area would be surprising but for another statistic in the benchmark report: about two-thirds of the survey respondents said they were satisfied with their current collection practices.
In addition, using credit delinquency rates as the measure of productivity in the collection area, banks are generally meeting their operational objectives. The mean delinquency rate for the surveyed banks came in at 1.9%, which is under the 2% rate that most banks set as a goal for their credit operations.
Yet despite these figures, there are still indications that an increase in collections automation will be necessary in the future, the report said.
|Something Has to Give'
About 65% of the responding banks indicated their portfolios had increased in size over the last year. While a growing portfolio does not necessarily translate into more delinquent credit accounts, experts said it is not uncommon for the traffic in the collections department to rise in concert with the bank's loan volume.
"The loan officers need to be aggressive to make money for the bank, but that aggressiveness will almost always increase the work in the collections department," said Thomas H. Levers, director of marketing at Cyberresources. "Something has to give here."
Nonetheless, collection staffing growth has been flat and is expected to remain that way for the next few years.
By introducing automation to the collections area, bankers in the survey indicated that they are better able to easily expand their current operations to accommodate increased traffic.
About 90% of institutions with automated systems said they could expand easily to handle new loan portfolios, while only 65% of institutions with manual systems indicated such expansions could easily be accomplished.
A Clearer Picture
Most of the benefits afforded by collections software come from improvements in reporting. Through the systems, managers are typically given a clearer picture of the productivity of individual workers, which allows employees to be placed in the jobs for which they are best suited.
"Credit card collections are vastly different from contacting a business customer about a loan," said Mr. Levers. "It's important to have the right people doing the right job."
In addition to giving information on worker productivity, most collection software packages allow the department managers to accurately track statistics such as promises to pay and comparisons of promised dollars to actual dollars collected.
"Automating the collection function is a way to better identify the areas that deserve the largest share of limited operational resources," said Mr. Levers.
