A recent TransUnion report found that while digital communication innovations are top of mind for collection firms, smaller companies lag in adoption of advanced tools and analytics.
01/15/2025 12:55 P.M.
5 minute read
TransUnion’s sixth annual report, “Preparing for Opportunity: Investing in Efficiency to Scale Operations,” reveals that technology adoption is accelerating across the collections industry, while data security has emerged as the top concern among agencies of all sizes. The report examines accounts receivable management (ARM) industry trends, highlighting how technology, data, and advanced analytics are playing an increasingly critical role in helping collection agencies operate more efficiently in a competitive market.
The report showed that more than half of debt collection companies have experienced an increase in account volume over the last year, coupled with “a decrease in the collectability,” according to a press release.
Here are some additional highlights from the report, with insights from Manny Plasencia, senior director of TransUnion’s third-party collections business.
Data Security Concerns
Debt collection companies said they are most concerned about data security. According to the survey, 48% of companies were very or extremely concerned about data security, a 40% increase from 2023.
“Almost three fourths (73%) of debt collection companies were expecting an increase in their technology costs over the next two years,” TransUnion found. “These technology costs are partially driven by the expansion into new technology tools, including AI/ML, and investing in additional data security.”
Technology Adoption
The report showed that 52% of collection agencies were investing in technology, with 18% of those investing in AI or machine learning technologies. This represents a significant increase from 2023. The top investments in artificial intelligence (AI) and machine learning (ML) were cited as account segmentation, payment outcome prediction, and facilitating self-service/virtual negotiations.
“Debt collection companies are aggressively investing in new technologies, including artificial intelligence and machine learning, to enhance agent productivity and more efficiently manage the compliance risks associated with the rise in account volumes,” according to the report.
Digital Communication Trends
Communication channels continue to evolve, with more companies adopting digital methods:
- Email adoption increased 6% year-over-year
- Text/SMS usage grew by 5%
- Self-service options saw significant growth
“It’s exciting to see that shift in collection agencies and how they communicate, prioritizing better experiences for their customers,” Plasencia said.
Artificial Intelligence
TransUnion found that debt collection companies are focusing their AI/ML efforts on three main areas:
- Account prediction and segmentation (57%)
- Payment outcome prediction (57%)
- Self-service/virtual negotiations (56%)
“Our industry is really moving towards persona-based message personalization rather than segmentation, and technology is meeting that need,” Plasencia said. “Data is the new goal, and the utilization of data is no longer just ‘take all the data and figure it out.’ Now you really have to be intelligent about how you segment your accounts, what decisions you’re making and how you are implementing them so that you can manage and skim through that volume, especially third-party agencies. The 80-person agencies, the 150-person agencies, the 500-person agencies, and the 6,000-person agencies—they all operate [on] different levels with different account volumes. And I’d say everybody in that chain has a higher need to segment their accounts differently and use technology to identify the highest valued account to work.”
Hiring & Retention
Debt collection companies face significant challenges in hiring and retaining agents. According to the report, 88% of companies found it at least somewhat challenging to hire collection agents over the last two years, and 81% noted some difficulty in retaining agents during the same period.
These challenges are driven by the rising costs of recruiting and retaining human capital, which has led companies to invest in technology to enhance agent performance and explore remote workers and BPO services to expand the labor pool beyond the local market.
Outlook for Smaller Agencies
Plasencia said that clients have high demands today, and technology-driven solutions with the right data can create the right opportunities for small agencies to perform in spaces that they never performed before.
“So, my hope is that the smaller, 20-person agencies will become much more nimble, much more technologically advanced, and take advantage of those opportunities to become major players and help drive innovation in the marketplace,” he said. “Because it’s often those smaller agencies that, through need, create innovation that we are utilizing today.”
How to Use This Report
The TransUnion survey results can help agencies identify industry trends, assess gaps in their technology and capabilities, and make more informed investment decisions.
“Operators [tend to] live in silos,” Plasencia said. “This information can help you really broaden your approach to strategies and figure out what the industry is looking at, where it’s heading, and what gaps you have in your strategy.”
The report highlights that while larger agencies continue to lead in technology adoption, opportunities exist for agencies of all sizes to modernize their operations and improve efficiency through strategic technology investments.
“I love the competition in our industry, coupled with mature, safe regulation, which I think ACA has really done an amazing job helping manage,” Plasencia said. “We’ve been able to really grow as an industry to what we’ve become today. I love it.”
Read the report, “Preparing for Opportunity: Investing in Efficiency to Scale Operations.”
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