About AMCC AMCC s mission is to represent its members at national and international level, to promote the concept of credit services management and support it in the national legislation. AMCC wants to be a national representative association for collection agencies in Romania and to implement a high standard of quality in the management of receivables. The main purpose of AMCC is to regulate the profession and to set professional ethical principles to be followed by collection companies in relation to retail and corporate ors. Since it s establishment, AMCC is a full member of FENCA Federation of European National Collection Associations. Through AMCC, Romania became the 15th Member of FENCA.
AMCC Members AMCC was founded in 2007 at the initiative of Coface, EOS KSI and Creditreform. Currently brings together 15 members. Along with the founding members, the following important players in the collection market joined AMCC: CREDITEXPRESS, CYCLE EUROPEAN, DEBT COLLECTION AGENCY, FIRE CREDIT, GETBACK RECOVERY, KOLCZE, ILIUTA & ASOCIATII, KREDYT INKASO, KRUK ROMANIA, MELLON, OTP FACTORING, RE COLLECTION AND TOP FACTORING. 3
Agenda Survey Statistics and Executive Summary Debt Collection Market Size and Evolution in 2016 Regulatory and Sector Environment Continuous Operational Improvement 4
Survey statistics Total number of respondents: 12, covering a representative estimate of 70% of the total collection market ( servicing and purchasing) and 90% in terms of servicing market. The Survey was commissioned by AMCC to Ensight Management Consulting and was prepared in accordance to data submitted by each participating AMCC member. Debts Referred 2016 (EUR) Debts Recovered 2016 (EUR) Revenues 2016 (EUR) B2C 58% B2B -23% Total 45% 2,263,331,237 205,377,386 2,468,708,623 B2C B2B Total 20% 136% 29% 391,825,875 65,450,901 457,276,777 B2C Collection B2B Collection Debt Purchase 6% 197% 43% 14,554,592 6,447,401 34,509,883 Total 39% 55,511,876 International serviced B2C -73% 2,379,556,871 B2B -41% 53,686,442 International serviced B2C 86% 1,193,965,607 B2B 2% 28,181,396 Companies that include in their portfolio of services Debt Collection: Companies that include, besides Debt Collection, Debt Purchasing: Creditreform Romania Coface Romania Re Collection NB: Market dynamics concerning referred, recovered and revenues were based on data provided in 2016 ¹Performs only Debt Purchasing Debt Collection Agency¹ Creditexpress Romania EOS KSI Romania KRUK Romania Top Factoring Cycle European Fire Credit Kredyt Inkaso Getback Recovery 5
Executive Summary Debt Collection Market 2016 Debt Referred 2016. in 2016 increased by 45% compared to 2015, surpassing the maximum value registered in 2015 of overall referred, mainly due to B2C domestic purchased. As for the number of domestic referred cases, it also increased by 2% compared to 2015, reaching ~5.2 mil cases, mainly due to B2C purchased cases in the Banking and Telecom industry. The domestic Telecom sector has been one of the most busiest sector with the number of cases over the year representing 68% of the total number of domestic referred cases. Debt Recovered 2016. recovery volume collected has registered an increase of 29% in 2016 compared to 2015, mainly due to an increase (31%) of values collected on the B2C segment, reaching ~233 mill EUR in 2016. Regarding domestic number of cases, the trend in 2016 was downwards (-10% compared to 2015), mainly due to B2C serviced cases. While the average number of domestic recovered increased in 2016 with 43 EUR/case to reach 140 EUR/case. Resulting as an effort to improve client portfolio performed by the majority of AMCC members. Debt Collection Revenues. Debt collecting revenues have increased by 39% in 2016, as compared to 2015, mainly due to all business lines that have registered an increase in revenue, B2C collection (6% increase), B2B collection (197% increase), purchased volumes handled (43% increase). 2017 Sector Expectations Operational Performance Types of Services provided. Written correspondence, E- mail, SMS, Skip tracing and Call-Center activities remain the most utilized means for collecting in Romania in 2016 for both B2C and B2B, as the Email is starting to be used by every member, more than in 2015. Employee structure. The biggest share of collection activities targets B2C collection which is the most employee intensive activity involving almost 55% of current employees, while some members operate on a need basis, where direct productive employees are shifted from one segment to another, depending on size of project and resource allocation. The employee turnover rate consolidated at AMCC level (12 members) reached 28% overall in 2016. Operational improvement. More initiatives are developing inside member companies to enhance process effectiveness through automation and to improve customer experience with the help of customer focused initiatives (e.g. improve customer service level, customer segmentation etc.) Market Regulation Debt recovering market regulations. A series of market regulations have been approved (e.g. EGO no.52/2016), and await enforcement, thus management players will have to emphasize on developing new processes in order to maintain business level. Expectations for 2017 are rather prudent in terms of collection due to market regulations that will require time to adapt to new policies from both management companies and ors. Major players will seek to improve their portfolio mix, in order to reduce risk and thus a decrease in number of cases purchased or serviced is expected. 6
Agenda Survey Statistics and Executive Summary Debt Collection Market Size and Evolution in 2016 Regulatory and Sector Environment Continuous Operational Improvement 7
service referred represents roughly 49% of the total B2C referred values registered in 2016 B2C - Debts Referred Debts Referred () Number of cases Value in EUR Avg. Value in EUR/Case 2015 2016 2015 2016 2015 2016 Serviced 4,494,539 4,138,164 675,029,078 962,397,243 150 233 Purchased 550,469 1,026,930 761,948,695 1,300,933,994 1,384 1,267 TOTAL 5,045,008 5,165,094 1,436,977,773 2,263,331,237 Debts Referred (International) Number of cases Value in EUR Avg. Value in EUR/Case 2015 2016 2015 2016 2015 2016 Serviced 826,496 1,143,520 8,830,463,133 2,379,556,871 10,684 2,081 B2C by category split. In terms of domestic number of cases, serviced represents in 2016 roughly 80% of the domestic B2C collection market, while in the same period of 2015 the market share was 89%. The domestic purchased number of cases accounts for approx. 20% in 2016, an increase from 11% in 2015, mainly due to acquisition of large telecom and banking portfolios in 2016. B2C market volume. The overall B2C referred in 2016 reached ~4,642 mill EUR with ~6.3 mill cases for the Romanian market, mainly due to high volumes registered of both domestic and international serviced. B2C market dynamics. The number of domestic B2C referred cases has decreased moderately in 2016 by 4%, as compared to 2015 due to a decrease by 14% in number of cases serviced, as result of portfolio cleansing initiatives. While the number of B2C purchased cases has increased in 2016 by 87%, compared to 2015, the average value of purchased has decreased from 1,384 EUR/case in 2015 to 1,267 EUR/case in 2016. 8
telecom serviced represents approx. 73% of the total domestic B2C referred cases registered in 2016 B2C - Debts Referred per Sector of Activity Values (EUR) Number of cases Avg. Value in EUR/Case Debt Referred Sectors serviced purchased International serviced Banks 507,901,904 1,036,296,131 2,252,701,925 Telecom 311,545,986 202,860,312 69,217,820 Leasing 477,419-2,102,563 IFN 96,021,663 61,197,870 - Insurance 1,516,025 - - Utilities 28,222,585-54,692,267 Other 16,711,662 579,682 842,296 Total 962,397,243 1,300,933,994 2,379,556,871 serviced purchased International serviced 634,608 397,110 717,404 3,010,548 541,711 262,857 428-228 254,920 78,525-1,058 - - 179,665-161,957 56,937 9,584-1,074 4,138,164 1,026,930 1,143,520 Dom. serv. Debt Dom. purch. Debt Int. 800 2,610 3,140 103 374 263 1,115-9,222 377 779-1,433 - - 157-338 294 60 784 233 1,267 2,081 Guaranteed/Non Guaranteed. Guaranteed B2C serviced in 2016 has reached 0.7% (3.5 mill EUR) out of the total domestic banking serviced in terms of value, while guaranteed purchased accounts for 9,7% (100.9 mill EUR) of the domestic banking acquired. Sector split. The most active sector in terms of number of cases is the telecom sector with 68.7% of the total number of B2C domestic commercial. In terms of value, domestic purchased registered the highest share (68.2%) among domestic referred with a value of approx. 1.544 mill EUR in 2016.banking 9
B2B referred represented 79% of total domestic referred in terms of value B2B - Debts Referred Debts Referred () Number of cases Value in EUR Avg. Value in EUR/Case 2015 2016 2015 2016 2015 2016 Serviced 107,653 73,958 103,037,393 72,600,139 957 982 Purchased 23,097 24,478 164,431,668 132,777,247 7,119 5,424 TOTAL 130,750 98,436 267,469,061 205,377,386 Debts Referred (International) Avg. Value in Number of cases Value in EUR EUR/Case 2015 2016 2015 2016 2015 2016 Serviced 60,622 43,269 90,486,796 53,686,442 1,493 1,241 B2B market volume. The overall value of B2B referred (including international referred) in 2016 reached ~259 mill EUR for the Romanian market, accounting for a total of ~141k number of cases. B2B market dynamics. The overall number of cases of B2B referred in 2016 decreased by approx. 26% as compared to 2015. The decrease is mainly due to a big drop overall in the number of cases handled, especially purchased and international during the second half of 2016 compared to the similar period in 2015. B2B average values. For the domestic B2B referred cases, in 2016, the average value per case is 2,086 EUR/case, as opposed to 438 EUR/case for domestic B2C referred. In 2016 average value of domestic serviced /case has remained relatively constant at approx. 1,000 EUR/case compared to 2015, as both number and value of cases have decreased by approx. 30%. 10
B2B banking purchased represents approx. 79% of the value of B2B domestic purchased in 2016 B2B - Debts Referred per Sector of Activity Values (EUR) Number of cases Avg. Value in EUR/Case Debt Referred Sectors serviced purchased International serviced Banks 93,064 104,666,478 529,207 Telecom 23,253,476 23,249,471 6,082,374 Leasing 667,510-14,971,825 IFN - 473,685 - Insurance - - - Utilities 783,681-21,668,774 Other 47,802,407 4,387,613 10,434,262 Total 72,600,139 132,777,247 53,686,442 serviced purchased International serviced 46 4,337 2,275 23,580 19,972 9,989 538-1,335-117 - - - - 140-28,565 49,654 52 1,105 73,958 24,478 43,269 Dom. serv. Dom. purch. Int. Debt 2,023 24,135 233 986 1,164 609 1,241-11,215-4,049 - - - - 5,598-759 963 84,377 9,443 982 5,424 1,241 Guaranteed/Non Guaranteed. In 2016, the guaranteed serviced or purchased represents 18% (18.9 mill EUR) of the total value of B2B banking referred in Romania. Sector split. The most important sector for domestic B2B referred, in terms of number of cases, is the telecom sector, which accounts for 44% of the total number of B2B domestic cases and owns a healthy average value per case of 1068 EUR. While other sectors (pharma, constructions, agriculture, FMCG, etc.) have registered a high number of cases (50%) of the total B2B domestic cases and a solid average value of 1,050 EUR per case. 11
The value of domestic B2C recovered shows an increase in 2016 vs. 2015, mainly due to serviced B2C - Debts Recovered Debts Recovered () Number of cases Value in EUR Avg. Value in EUR/Case 2015 2016 2015 2016 2015 2016 Serviced 2,388,208 1,973,441 178,055,082 232,631,423 75 118 Purchased 1,168,370 1,228,923 148,104,504 159,194,452 127 130 TOTAL 3,556,578 3,202,364 326,159,586 391,825,875 Debts Recovered (International) Number of cases Value in EUR Avg. Value in EUR/Case 2015 2016 2015 2016 2015 2016 Serviced 399,808 417,097 643,305,708 1,193,965,607 1,609 2,863 B2C volume. In terms of domestic serviced B2C in 2016 the number of successful cases has decreased but the value has increased, compared to 2015, reaching ~3.2 mill cases with ~392 mill EUR value. The international serviced total amount recovered reached ~1,193 mill EUR representing ~12% of the total number of B2C cases recovered in 2016. B2C market dynamics. The value of B2C domestic recovered in 2016 has increased by 2o% compared to 2015 as B2C serviced registered a 31% increase in terms of value recovered. A major influence factor for this increase is related to the recent improvement of the Romanian economic environment according to market players expectation. B2C average values. Average EUR values per case in 2016 for serviced increased by ~38 EUR/case compared to 2015 due to an increase in value of cases serviced and a decrease in number of cases serviced. 12
Telecom and Banks were the star sectors for collectors in 2016, in both terms of cases and values B2C - Debts Recovered per Sector of Activity Values (EUR) Number of cases Avg. Value in EUR/Case Debt Recovered serviced Sectors purchased International serviced Banks 104,337,840 141,065,265 1,163,489,747 Telecom 84,451,893 7,743,803 10,688,603 Leasing 229,504 16 1,541,619 IFN 23,196,921 6,401,213 540,432 Insurance 669,532 4,131,877 - Utilities 15,144,593-17,666,155 Other 4,601,141 37,225 39,052 Total 232,631,423 159,194,452 1,193,965,607 serviced purchased International serviced 466,860 1,017,090 248,280 1,253,325 126,303 80,057 216 2 164 105,288 41,214 1,846 4,210 42,285-121,935-86,545 21,607 2,029 205 1,973,441 1,228,923 417,097 Dom. serv. Dom. Purch. Dom. Int. 223 139 4,686 67 61 134 1,063 8 9,400 220 155 293 159 98-124 - 204 213 18 190 118 130 2,863 Guaranteed/Non Guaranteed. Guaranteed serviced in 2016 has reached 2.5% (2.6 mill EUR) out of the total B2C domestic banking serviced in terms of value, while guaranteed purchased is under 1% (0.89% or 1.2 mill EUR) of the total domestic banking purchased. Sector split. After telecom and banking sector, the IFN industry has reached a relatively high number of cases successfully closed domestically, 5% out of total domestic cases which account for ~30 mill EUR in terms of value. Utilities sector is also important for B2C recovered, as usually a high number of cases are arriving from this stream regularly. In terms of international B2C serviced, the banking sector accounts for over 97% of the total B2C international recovered. 13
B2B total recovered in 2016 registered a 69% increase as compared to 2015 in terms of value B2B - Debts Recovered Debts Recovered () Number of cases Value in EUR Avg. Value in EUR/Case 2015 2016 2015 2016 2015 2016 Serviced 73,485 59,145 25,281,789 21,875,650 344 370 Purchased 7,475 2,035 2,476,180 43,575,251 331 21,413 TOTAL 80,960 61,180 27,757,969 65,450,901 Debts Recovered (International) Number of cases Value in EUR Avg. Value in EUR/Case 2015 2016 2015 2016 2015 2016 Serviced 37,975 23,388 27,739,652 28,181,396 730 1205 B2B market volume. The overall B2B recovered in 2016 reached the value of ~93.6 mill EUR for the Romanian market representing ~84,500 cases. B2B market dynamics. The number of domestic B2B recovered cases in 2016 registered a 24% decrease compared to the same period of 2015, mainly due to a lower rate of success among all types of cases. While in terms of value for domestic commercial recovered, a big increase (136%) was registered in 2016 compared to 2015, mainly due to purchased cases recovered in the second semester of 2016. B2B average values. In 2016 the average EUR value per case recovered has increased with 641 EUR/case compared to 2015, mainly due to an increase in value of purchased recovered. Also, the average value for domestic (+8%) and international (+65%) serviced has increased. 14
Other sectors (health, FMCG, etc.) represent 19% of the domestic value and 42% of domestic cases recovered B2B - Debts Recovered per Sector of Activity Values (EUR) Number of cases Avg. Value in EUR/Case Debt Recovered serviced Sectors purchased International serviced Banks 1,259,126 43,216,736 1,061,808 Telecom 3,157,902 314,706 404,526 Leasing 453,425 40,005 11,317,432 IFN - 3,436 - Insurance - - - Utilities 17,245-14,395,717 Other 16,987,952 368 1,001,912 Total 21,875,650 43,575,251 28,181,396 serviced purchased International serviced 8,490 541 1,009 20,799 1,452 2,055 390 20 1,002-21 - - - - 140-19,089 39,666 1 233 69,485 2,035 23,388 Cons. Purch. Int. 148 79,883 1,052 152 217 197 1,163 2,000 11,295 123 754 428 368 4,300 315 21,413 1,205 Guaranteed/Non Guaranteed. Guaranteed recovered in 2016 was registered for purchased (86% or 39 mill EUR in the banks sector) and for international (0.1% or 0.93k EUR in the banks sector), both having a relatively high average value per case, 161,381 EUR/case for purchased and 15,539 EUR/case for international. Sector split. In terms of value and number of cases, serviced belonging to other sectors (health, FMCG, constructions, etc.) represent 19% of the total domestic B2B value of recovered in 2016 and 42% of the total domestic B2B number of cases. 15
The total number of active clients increased in 2016 compared to 2015, mainly for the B2B segment Active Clients Active client number. Debt collection in Romania was serviced in the second semester of 2016 by 682 active clients compared to 789 for the same period of 2015. Around 66% of the active client number is represented by B2B clients. B2C clients. B2C client has remained stable during S2 2016 compared to S2 2015. Approx. 55% of clients are represented by the banking and telecom industries. B2B clients. B2B client number has decreased in S2 2016 with 19% compared to S2 2015. In terms of client industries 86% of B2B clients are originating from different business sectors, the industry repartition being heterogeneous. A current trend is developing, as more clients from the banking industry, domestic and international, are required by European regulations to reduce risk on NPLs. Other industries covered are: FMCG, Pharma, IT, Distribution, Professional services, etc. * Active client number was added as AMCC member level and does not represent a unique market player 16
The Romanian collection industry employs over 2,500 people for various specific activities Employee structure 12 13 participants participants 12 2,578 2,673 2,746 participants 2,433 2,604 2,547 The biggest share of collection activities targets B2C collection which is the most employee intensive activity involving more than 55% of current employees, while the dedicated B2B collection employees account for 4%. Out of the total 2,547 employees, 12% are part-time employees that work mostly for the B2C department, but also support B2B collection, Legal collection and other departments. For the previous year, 2016, the turnover rate was 28%, with the highest turnover rates registered by B2C, B2B and field collection.. 17
In the current setup of employee salary scheme, the fixed wage represents 85% of total income of an employee Employee salaries Employee benefits. Most utilized employee benefits include meal tickets, medical insurance and transport discounts Other benefits come in form of trainings, performance bonuses, fitness subscriptions, etc. Employee salaries. The weighted average monthly fixed salary has registered a moderate increase from S2 2015 at all levels this is mostly due to a change in the Comp. & Ben. system used by AMCC members where fixed salary has a more important role according to AMCC members. * Values represent the weighted average between salaries from all 13 companies per position; ** A weighted average resulted from the percentages provided by each company, ranging from 60/40 % to 100/0 % ( fixed salary/commission) ***Other benefits include transport discounts, mobile phones, gym, trainings 18
Revenue in 2016 registered an increase of 38% compared to 2015, mainly due to revenue generated by purchased Revenues 2015/ 2016 Growth Revenues (EUR) rate 2015-2015 2016 >2016 B2C Collection 14,303,070 14,554,592 6% B2B Collection 2,173,171 6,447,401 197% Debt Purchased 23,634,128 34,509,883 43% Total 40,110,368 55,511,876 39% Revenue volume. The reported revenue for the second semester of 2016 reached ~34 mill EUR. 56% 17% 27% 60% 6% 34% 62% 12% 26% Revenue dynamics. The overall revenue increased in 2016 by 38% as compared to the similar period from 2015, mostly due to the good economical environment and a higher rate of collection for purchased and diversification of services offered. When comparing 2016 to 2015, revenues coming from purchased volumes increased by 46%, B2B collection revenues registered an increase also by ~196% and for B2C collection, revenue increased by ~2%. Revenue split. ~62% of the total revenues registered in 2016 originated from purchase in the second semester of 2016. B2C collection accounts now for 26% of the total revenue registered by AMCC members, while B2B collection accounts for 12%. 19
The sector evolution for 2016 was rather positive in both terms of referred and recovered Sector evolution in 2016 23% 136% 58% 20% Sector evolution. There will be several lines of development for 2017: Maintain market share by acquisition of new portfolios (e.g. NPL), optimizing client portfolio and expand service offerings. Banks will continue to offer NPL portfolios for sale, also international banks are looking into Romania for management solutions. Debt servicing companies will try to re-balance their client portfolio mix, in their effort to mitigate risk coming from certain sectors. Development until the end of year. Big influence on the sector will have the outcomes from all the regulations which were implemented lately (e.g. EGO no. 52/2016 on banking sector), as collecting companies and clients are in the accommodation phase. The number of people which will have difficulties to pay their loans will remain rather constant as the average net income is expected to increase in the next months. 20
Agenda Survey Statistics and Executive Summary Debt Collection Market Size and Evolution in 2016 Regulatory and Sector Environment Continuous Operational Improvement 21
Regulations policy still brings significant impact over the current collection market Regulatory and Policy implications on collection Regulatory changes: 1 EGO no. 52/2016 regarding credit agreements 2 The ordinance rules the rights and obligations of the parties concerning credit contracts and can directly affect collecting in aspects like commissions, credit conversion and communication with ors. Regarding the relationship between the collector and the or, the creditor has to find convenient solutions in order to reduce burden. The request for enforcement procedure should be taken into consideration only after the creditor proposes to the or a reduction of the monthly rate over a period that can last up to 12 months. The collectors are no longer allowed to charge commissions except from the ones stipulated in the law and the cost concerning enforcement procedures. Effects of the EGO no. 52/2016 on banking sector With EGO no.52/2016, commissions can no longer be increased during credit contracts or charged for anticipated reimbursement. The interest margin and fixed interest rate cannot be increased. The or can, at any given time, fully or partially reimburse the credit and the creditor is not allowed to charge penalties or compensations. It is forbidden to sell portfolios to an entity that has no legal presence in Romania. 3 Decision nr. 9 2016 of the High Court of Cassation and Justice regarding legal representation in court, published in the Official Gazette of Romania, no. 400/26.05.2016 A ruling by the Court of Cassation establishes that a legal person cannot represent another legal person in court. This has a high impact on collectors who can no longer legally represent their clients in court. 22
The population degree of inedness was higher in S2 2016 due to the increasing real estate loans Population inedness and reimbursement behavior Debt & past due evolution. While has registered an increase during the past two years, on all type of loans, the level of past due decreased constantly during the same period. NPL rate by loan type is registering an overall decrease on all loan types, as personal loans account for up to 26% of all the NPL loans. Household loan structure accounts for 111 billion RON in total loans given, half of which was used on real estate. Loan type which is slowly increasing during the past two years, due to the favorable interest rates and good economic outlook. NPL rate by loan type Jun.15 Sep.16 Jun.16 Real estate loan 6,3 5,3 5,3 Personal loan (with guarantee) 22,2 19,1 20,1 Personal loan (without guarantee) 11,25 8,7 6,5 Credit cards and overdraft 7,5 5,9 2,6 300,000 250,000 200,000 150,000 100,000 50,000 0 Debt & past due evolution (million RON) 267,771 275,954 275,563 284,505 11.68% 11.39 9.34 8.87 31,282 31,428 25,724 25,227 Jun.15 Dec.15 Jun.16 Dec.16 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 100% 80% 60% 40% 20% 0% Household loan structure 51.9% 50.7% 49.2% 48.3% 48.1% 49.3% 50.8% 51.7% Dec.15 Apr. 16 Aug. 16 Dec.16 Total Total Total past due Real estate Personal loan Source: European Commission forecast, MFP, CRC, BNR calculation, Ensight Analysis, April 2016 23
The non performing loans evolution has registered a decreasing trend during 2016 Population inedness and reimbursement behavior Credit contracting behavior. The effort of the National Bank of Romania to support the RON based lending has finally paid off, with foreign currency based lending, mostly EUR, representing at the end of 2016 less than 50% of total loans. Number of past due borrowers diminishes. In the past couple of years, the total number of ors has increased gradually, 2016 being no exception, while the number of past due borrowers has been registering a constant decrease, the trend recovering after a slight deviation in 2015. Credit quality levels registered in Romania show a steady increase for the past two years, accounting for all type of loans. This is also based on the decreasing rate of the banking NPL from the peak value of 21.5% in 2013 to 9.5% in Dec. 2016. Source: BNR, April 2015 *Sources of data from previous years were unavailable as the indicator was previously calculated by other standards (NBR) 24
The expectations for the second half of 2016 are rather reserved due to regulatory stability Debt collection sector expectations for 2017 Social Major drivers of the B2C Debt Collection market Technology Debt collection specific software/technology Patterns related to the consumption basket Cultural openness to collection procedures Population level of inedness 12 10 8 6 4 2 0 Unemployment Impact on EUR and other currency exchange rate Average net salary evolution Economy NPL strategy elaborated by NBR Regulatory Specific regulations to keep in mind Social Technology Major drivers of the B2B Debt Collection market 12 10 Debt collection specific 8 software/technology 6 Patterns related to the consumption basket Cultural openness to collection procedures Financial leverage degree in B2B 4 2 0 Impact on EUR and other currency exchange rate NPL strategy elaborated by NBR Regulatory GDP evolution Bankruptcy/ insolvency cases Economy Specific regulations to keep in mind Major growth drivers B2C. Growth drivers for B2C in 2017 are focused on the economic situation (population inedness levels, average net salary evolution) and regulatory aspects with the specific regulations that are currently in discussion. Population inedness, specific regulations and NPL strategy have been classified as top 3 factors by AMCC members while cultural openness to collection procedures has also been considered an important factor, as it is essential for ors to be correctly and fully informed in order for the process to fully meet it s objectives. Major growth drivers B2B. For B2B the economic growth drivers show more significance with focus on bankruptcy procedures and financial leverage, as NPL strategy will present a less important role in 2017 for the B2B segment. Similar with B2C, specific regulations are among the top 3 factors most selected by members, meaning that even though the focus was to protect more the natural person, B2B specific collection activities will be affected also. Future expectations. For 2017, expectations are reserved, but inclined towards being slightly positive in terms of B2C and B2B collection due to a positive economical environment. Still the market evolution will depend on how well market players will react to both regulation changes and increased resilience of ors. 25
From the members perspective, the number of customers that will have difficulties in repayment will remain constant Market trends for the first semester of 2017 Ined population. For the next 6 months expectations regarding ined population are rather on a high trend, since it is a period when loans are accessible to everybody, based also on the economic environment which is generally positive. Number of customers with repayment difficulties. The general perspective is that the number of customers having difficulties to repay loans will remain constant, due to the a positive economic environment and to a certain level of maturity which the market has reached, and many bad credits from previous rough stretches have been mostly paid or are in the process of been paid. 26
Agenda Survey Statistics and Executive Summary Debt Collection Market Size and Evolution in 2016 Regulatory and Sector Environment Continuous Operational Improvement 27
Written correspondence, E-mail remain the most utilized means for collecting as Field collection is also growing Debt collection services Services for B2C. Top four services utilized for B2C are E-mail (100%), written correspondence (100%), call center (100%) and SMS (100%), as field collection has begun to be utilized by more members in S2 2016 compared to S2 2015. Services for B2B. Top five services utilized for B2B are Written correspondence (92%), E-mail (92%), call center (92%), skip tracing (92%) and also SMS (92%) has returned as one of the most utilized service in S2 2016. Two more members have added field collection activities in their service portfolio. *Only 11 members out of the total of 13 service the B2B sector 28
In S2 2016 implementing automation activities represents a success factor according to the majority of members Key Success Factors and Process maturity Key Success Factors. The most important KSFs for 2016 according to AMCC members is IT integration, followed closely by maturity of collection processes and product portfolio mix. The most selected key success factor was Automation of activity with 9 of the respondents consider it key for operating a healthy business model. Also maturity of collection processes is considered one of the most important factors, most of the members selecting it with high priority. Employee bonus schemes are perceived as less relevant to the success of the process in S2 2016 than in S2 2015. 29
Business improvement is slowly shifting it s attention towards the client-focus initiatives 2016 Business improvement initiatives B2C business improvement. In S2 2016 the focus was on employee performance (58%), preparing the company for future development (54%) and client-focus initiatives (54%) have been chosen the most by members. Also an increase in preparing the company for future development has been registered while initiatives have been launched in 2016 by multiple members. B2B business improvement. The main three initiatives used were improving monitoring of company activity (45%), employee performance (73%) and client-focus initiatives. As more opportunities show themselves, members have expressed their desire to prepare by developing certain departments and training people in order to be competitive. 30
The most utilized segmentation criteria are end-use market and client segment (used by 92% and 83% of members) Market segmentation criteria Product End-use market Client segment Segmentation criteria. Most utilized criteria is the end-use market (92% of players are using this criteria in managing their client portfolio), tied with client segment (83% of collection players) as this holds also impact on operational activities. Risk level has emerged as an important criteria for market segmentation purpose, as it was selected by most members. All players are using at least one segmentation criteria. Generally, the regional factor was not selected by many members, as currently it is not perceived as a significant benefit booster. Number of criteria used One criteria 1% Two criteria 18% Three criteria 36% More than three criteria 46% 31
Most frequent KPIs are set together with the client and represent the main focus on the level of collected cash KPI methodology & IT areas covered B2C KPI. In S2 2016 collected cash is still king in terms of utilized KPIs, as the average number of KPI used by a member has maintained it s number of ~4 KPI. B2B KPI. Similar to B2C, collected cash is the most utilized KPI, with 82% collected cash, as % of referred being the most frequent. The average number of KPI used by a member increased to ~3 KPI/member. IT support and automation. More IT solutions have been used regularly, mainly for client relationship management (used by all members) and support functions, but also for automation and constant improvement of activities, altogether assisted to improve the overall collection rate. 32
Thank You! 33
AMCC - Asociaţia de Management al Creanţelor Comerciale Website: www.amcc.ro E-mail: office@amcc.ro; ana.donea@amcc.ro Marketing & Communication: Ana Donea, 0722 214 920 The survey was commissioned to Ensight Management Consulting Website: www.ensight.ro E-mail: Flavia.Matei@ensight.ro Ensight Manager: Flavia Matei, 0743 856736 34