In the interview:
From the latest news, we see AsiaCollect has acquired your first consumer NPL portfolio in Vietnam. What does this deal mean to your company? Are there other portfolios your company has acquired in other countries in Southeast Asia?
This is our very first portfolio acquisition as a company where we purchase deeply delinquent loans and use technologically advanced proprietary collections solutions to help our clients maintain healthy balance sheet NPL ratios. This enables our clients, typically banks and consumer lenders, to focus on their core task of lending and offering banking solutions to consumers. This means a great deal to the company as we are now offering the whole suite of tech-driven credit management services (CMS): advisory, outsourcing, our proprietary SaaS solution, and debt purchasing. The collections industry in Southeast Asia is still very much traditional in its ways, relying heavily on fieldbased collection which presents a reputational risk to lenders and often an embarrassing, hostile experience for consumers. We want to change this by using digitalisation, automation and AI to increase the likelihood of reaching the customer (the debtor) as well as the recovery rates for each targeted customer.
AsiaCollect is currently managing over USD 45 million debt, what type of debt is this? Is it the unsecured consumer NPL or other type?
We are growing rapidly and currently managing over USD 65 million in unsecured consumer NPLs that consists of cash loans, credit cards, payday loans, personal loans and motorcycle loans.
What are the differences in terms of debt collection between countries in Southeast Asia?
Let’s talk about the three largest markets in Southeast Asia. Vietnam, Indonesia and the Philippines which constitute 60 per cent of the population in the region, have double digit yearly growth in the consumer finance market, but very low penetration of consumer lending to GDP per capita (single digit compared to developing markets). In these countries, debt collections is done by small, provincial collection agencies. Operationally, this is a nightmare to manage as the local agencies don’t have adequate resources to invest in infrastructure; relying heavily on manual phone calls and traditional field collection where unqualified agents use hostile methods to recover debt. This poses a huge reputational risk to the banks and non-bank lenders that use these agencies. In some instances, banks have had to allocate time and resources to contacting their clients as well, as they have no confidence in the quality of their outsourcing collection agencies. This increases the operational cost and can often result in confusion to the debtor.
Over 60% of AsiaCollect’s collections processes are automated, and your company’s target is full automation, what is the advantages and disadvantages of a fully automated collection system compared to traditional collection?
As far as we see, there really are no disadvantages of a fully automated collections system. Our business is all about maximising recovery from outsourced portfolios through sophisticated technology and expertise. Over 60% of our collection actions are delivered by bots, without any human operator involvement. Our digital technologies include predictive autodialing, automated SMS campaigns, IVMR (interactive voice & message response) and behavioral scoring, which increase not only the likelihood of reaching the customer, but also the recovery rates for each targeted customer. This high level of automation delivers high efficiency on mass, small-ticketsize unsecured portfolios which significantly decreases the reputational risk to our clients (bank and other consumer lenders). Ultimately, we want to change the Southeast Asian collections market by transforming the collections business from one that is focused on local, field-collections with low efficiency and high risk, to one where digitalisation and AI are used to improve debt recovery.
According to the portfolio you acquired in Vietnam, what’s the successful collection rate you estimate that will achieve?
Tomasz : The key to successful debt purchasing is the ability to accurately evaluate the portfolio. The more accurate the model, the better the price we can offer to the lender. In Vietnam, we have been working with local digital lender ‘DoctorDong’ for almost two years now. We understand their portfolio well, the profile of their clients and thus, we can project future potential recoveries. Our partnership with DoctorDong has been very beneficial for both parties, and the recent portfolio acquisition was a key milestone in our partnership.
As consumer loan is usually a headache for the banks and institutions, how do you evaluate and bid your NPL portfolio?
Tomasz : You are right, banks and other originators should focus on responsible lending and leave debt collection to companies who have the right knowledge, expertise and technology. In evaluating a portfolio, we need examine the figures. These millions of figures include months of historical data such as past recoveries on portfolios with similar characteristics on debtors behaviour, instruments used in the past, and portfolio characteristics. All of this can be seen through a sophisticated mathematic model that enables an experienced analyst to calculate the price. The more data a risk department possesses, the more accurate their prediction and the lower the risk for the portfolio purchaser. The loan originator eceives a good price as well.
About your CMS outsourcing service, do you provide other services such as giving analytical feedback and advices to improve the banks and institutions’ risk control model? If yes, how do you charge for these services?
Setting up proper relationships with customers is a priority for us. When we first take on a client, we agree to the frequency of data and updates between the companies. At the end of each month or quarter (depending on the portfolio outsourcing cycle), we prepare a monthly report for our client with detailed analysis of the portfolio and the results. This is a very important component of our partnership as all changes to the credit products have an impact on the level of future delinquencies and recoveries. We monitor the trends in each portfolio, track the changes in a customer (debtor)’s profile and other characteristics that influence their payments. This is part of our standard process and we do not charge our clients for this. In addition to offering typical CMS services such as outsourcing and debt purchasing, we also offer SaaS (Software as a Service) and CMS advisory/consulting services. Some of our clients are asking us to redesign their collections process, review their underwriting procedures or other risk processes to improve their portfolio performance. This advisory/consulting service is charged according to the seniority of our team of experts involved in the project and time needed to fulfill their objectives.
As Southeast Asia’s governments are still very reluctant to outsource NPL to foreign companies, so how does AsiaCollect convince the governors? Can you estimate the total amount of debt that will be managed by AsiaCollect in the next 3 years? What is the main vision of AsiaCollect in a time frame of 10 years?
The amount of debt in the emerging markets is high, as you can see in the 3 markets of Indonesia, Vietnam and the Philippines, we are looking at an approximate $45 billion growth opportunity in consumer NPLs that will be generated in the next 5 years. The key to working with regulatory bodies is to be proactive in creating multilateral partnerships among financial institutions, fintech companies, collections agencies and the regulators, aimed at demonstrating our focus on responsible risk management, responsible lending practices and ethical collections practices. This can be done through proactive engagement in collections agencies associations and industry
conferences where we work with all stakeholders to promote ethical collections and responsible lending
to change society’s perception of the business. Our main vision for the next 10 years is to drive further efficiency and innovation in the CMS business in Southeast Asia to the point where AI and bots completely replace human collection agents, both in the call center as well as in the field.
Read the Chinese version here