It could be reasonably argued that the collection industry could have made more significant technological progress in the last two decades. Groundbreaking technology, better collection results and higher service levels have not successfully challenged nagging negative perceptions, the impact of the financial crisis, complex compliance requirements, frivolous lawsuits and rising costs against a backdrop of lower fees. Most of the industry finds itself poorly-equipped to change its messaging or leverage the great power of modern computing and mobile technology as most industries have successfully done. Every industry can point to visionaries who shaped or positively changed their path. What happened in the collection industry? It is 2020 but most collection platforms do not have integrated e-mail or text messaging solutions. We have failed to broadly deploy AI and intelligent chatbots when these technologies are proven and accepted in every other industry. Why did the visionaries fail to see this coming? This is an objective paper that logically analyzes this question. It is meant to be objective, without offering legal advice.
By Ranjan Dharmaraja, CEO, Quantrax Corporation
Around 1962, Frederick Smith wrote a paper for an economics class, outlining overnight delivery service in a computer information age. One story is that his professor was not impressed and told him that in order for him to even get a C, the idea had to be feasible. In spite of that disappointment, Fred Smith went on to found and build Federal Express. The PC industry had Bill Gates and Steve Jobs. Sergey Brin and Larry Page (Google) and more recently, Elon Musk, have changed the world and how we live. At different levels, new processes and innovations have had a major impact in many industries. What about collections? What was our last great innovation? Who were our visionaries?
Collections were “computerized” in the early 1980’s, when cards were replaced by automated systems. For most of the industry, these were the major changes as technology expanded and evolved :
- The predictive dialer was introduced in the 1980’s.
- The features of collection software were enhanced quickly and were very mature by the mid 1990’s. There were several collection software products, with a few high-end products catering to the needs of the larger agencies.
- Ontario Systems, Columbia Ultimate, CR Software and Latitude were the major players, while there was plenty of business for the other companies too, as agencies converted from manual systems to automated systems.
- There is a great differences between enhancements and major technology innovation. Collection software companies were largely guided by staff who had some collections knowledge, and their clients who provided input on “what they wanted to see”. Collection software companies would provide these enhancements as a part of a “maintenance contract”, and it seemed like a win-win. As computer hardware and software became more powerful, collection software seemed to get faster and better, as vendors adapted to new versions of operating systems like Microsoft’s Windows.
- Some of the major players had products that ran on proprietary hardware, or, as technology evolved, “more likely to be obsolete” operating systems or databases. It is probably accurate to say that there were many new sales to be made and software vendors did not focus on a long-term strategy and true innovation. Many years having passed since their first versions, it was time for most companies to take on major redesign, because computer technology had changed and the collection industry and our processes had also evolved rapidly. Good examples were the power of graphical interfaces, managing cell phone numbers, and more recently, compliance requirements, mobile technology and digital communication channels. While programming changes and third party”bolt-on’s” can provide additional functionality, software and databases must often be redesigned to optimally and effectively address major new requirements. The validity of this theory is clearly demonstrated by the way the industry has struggled to address many compliance requirements quickly and efficiently for many years.
- It is much easier to make major database and design changes every 2 – 3 years, compared to undertake them after 10 to 15 years. After 15 years, the change is so difficult and expensive, that it is sometimes easier to build a new product. That was the great decision that the major software companies had to consider around 2005.
- This is the time to mention an important company in the collection space and its history. A collection technology company called Quantrax Corporation was founded in 1988. It was different because it’s background was technology and engineering. It did also have a great deal of collection industry knowledge. Predicting that the next evolution of collection software would involved very high levels of automation and machine thinking, they designed and built an AI-based collection system by the end of 1990. The initial version of system was able to clone a collection manager and look at millions of accounts each day, making decisions and taking the same next steps as a collection expert would.
- By 2000, the Quantrax system had been licensed in about 25 states and Canada. Quantrax’s clients at that time included CBC Companies in Columbus (the largest owner of privately-held credit bureaus), Collectcorp in Canada, HCA Healthcare and Capital Management Services in Buffalo, New York. In spite of their initial success and the additional sales that followed, Quantrax strategically chose to stay under the radar, with no salespeople and minimal advertising. While they did not sell many systems and many companies had not heard of Quantrax or its product, the advantage was that their competition knew little about their product or the intelligent technology that was gaining traction within the industry.
- Around 2005, almost everyone had converted to a computerized collection system. New software sales were harder to make and vendors were now forced to convince users to “switch” systems. Because most of the available systems offered similar end results with their aging products, the major vendors found themselves caught between the proverbial “rock and a hard place”. Because they had waited too long, making programming changes would not produce the desired results. Redesign was expensive and time-consuming. Creating a new product seemed the most viable option, but rewriting areas that had taken years to build and test was no simple task. The major vendors all made the decision to create new products. What happened? It was either too difficult to convert to the new product or the new products lacked many important features that existed in their existing product. The result was that most agencies did not convert to the new product. With the great challenges of supporting multiple version of their software, it was the clients who suffered.
- There was another significant corporate development. After 15 years of automation efforts and diminishing sales, but significant maintenance and custom modification revenues, collection software vendors now had valuable and marketable companies. In spite of aging products (and many companies unaware of Quantrax’s intelligent technology) Ontario Systems, CR Software and Latitude were all sold or acquired by entities that were not collection software companies. Columbia Ultimate was finally acquired by Ontario Systems in 2016.
- As at this writing, Quantrax remains a debt-free, privately-held company with no outside financial investors. Because they made major design changes every 2 – 3 years, they never had to address the large technology gaps that had forced their competitors to burn and build new products.
We started this article by asking “Where were the visionaries in the collection industry”? Visionary thinking thrives in an environment of innovation and entrepreneurial spirit. With a primary focus on sales and “keeping existing clients happy with basic enhancements”, collection technology companies other than for Quantrax, lost track of the bigger prize, which was to address the important question, “What would the industry need in the next decade”? In the first decade of 2000, it was not difficult to predict that the industry would need new answers to many new challenges ;
- Security and compliance requirements
- Cell phone management
- Managing very large data volumes efficiently
- Significantly lowering the cost of operations to combat increasing agent costs and lower fees
- Systemic call and message counting (for client, state and city-level compliance)
- Leveraging mobile technology for consumer contact and management information distribution
- Understanding and using digital communication channels, including compliant text messaging
- Replacing aging IVR’s, payment portals and website options with intelligent chatbots that could provide 24/7 self service, negotiate and take payments, and also handle disputes, “I can’t pay”, attorneys, bankruptcies, deceased, wrong parties, insurance etc. Basically, we should have invested in technology to provide high quality self-service at the level of a mid-level agent.
It is 30 years since collections were first automated. That is an entire generation of a workforce. Tremendous changes in computer technology and within the collection industry, make it impractical for us to even consider meeting today’s requirements with software that was substantially designed 30 years ago. We have allowed the fear of litigation to be our standard excuse for not utilizing e-mail or text messages that are compliantly and widely used from pizza delivery to banking, credit card services and travel reservations. We receive text messages from many businesses as a part of a quality customer service process. Why can’t the collection industry compliantly use e-mail and text messaging? The answer is, “They can”. Did the collection industry simply fail to act at the right time? When our collection platforms do not have the ability to compliantly send a text message, how can we expect to win the support of government and state regulators, provide great service to our consumers and build sensible digital contact strategies into our workflows?
The vision for futuristic changes had to be created by those who had the potential and ability to innovate. That was the responsibility of leadership of the collection technology industry, and sadly, it could be argued that we were let down by a lack of visionary thinking. It is unlikely that the collection industry will ever see a product that does not currently exist. High-end collections has too many moving parts and building a new product will take many years and very significant investments in financial and technical resources. Several popular collection platforms are no longer supported by the companies that created them. As long as you support their policies, there will be many companies who are happy to charge expensive maintenance fees to provide operational support and bug fixes for aging products, without any major investment in your future. This is 2020 and a product that is not optimally supported and enhanced, or lacks the core design to support you into the future, will require much larger staffing and will not help you to be productive, profitable or competitive.
Nokia’s fall from being the world’s best mobile phone company to losing it all by 2013 is often studied in business management classes. As it could very well happen with individual companies within the collection industry, the lack of technology vision is considered one of the major reasons for Nokia’s rapid fall.
- Nokia was the best-selling mobile phone brand in the world, with the best-selling mobile phone of all time, the Nokia 1100, created in 2003;
- In 2007, Apple introduced the iPhone;
- By the end of 2007, half of all smartphones sold in the world were Nokias, while Apple’s iPhone had a mere 5 per cent share of the global market;
- In just six years, the market value of Nokia declined by about 90%
Why is this important? Visionary thinking is critical in any technology-driven industry. Collections is a technology-driven industry and justifying the continued use of dated software because it is paid for, or because a conversion may be challenging, will probably cost significantly more than what you waste on very expensive labor costs, or give up in lower collections. Your collection software costs are a small fraction of your people costs, but your software drives your operations, your service levels, collection results and your largest expense – your labor cost. Better software will give you better results and have a significant impact on your bottom line. In addition to being more efficient with core processes, you need a system that can address tomorrow’s contact strategy which has to rely on digital communications. While these requirements can be met by third-party products, fully compliant solutions will require true and tight integration with your collection software. Anything short of that is a partial solution. It is unfortunate that there are no results to share outside the Quantrax client base, but the results from the use of artificial intelligence have ranged from great, to spectacular. Traditionally, the industry is labor-intensive, measuring success based on the number of collectors we have, as opposed to our profitability or revenue per employee! We have seen what technology can do to traditional operations in other industries. AI is changing traditional processes and the way we work, killing huge numbers of jobs that can now be done by computers. We have seen it – Clients who collect significantly more with less than half staff they had a few years ago. That is spectacular.
Think about change.
Quantrax Corporation is a technology company that created an intelligent collection platform over 25 years ago. They believe that the ARM industry has been poorly served by collection technology that has not evolved or kept up with the great potential of computing power, or challenging industry changes. Self-funded, Quantrax has continued to successfully develop and deploy technology that offers modern solutions to old problems.
www.quantrax.com – (301) 657-2084