New collections technology sophistication

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In this full interview with Michael Melachrinidis, Deputy CEO, Product Management and Digital transformation at EXUS, we chatted about how the collections software business has fundamentally changed over the few couple of years resulting from the pandemic, and how this has then evolved since.

There have has been slightly different flavours in different markets, but also a convergence now towards using technology to improve customer experience – it appears a global trend.

Lastly Michael talks about where he thinks we are going and his vision for the future of collections technology.

Find out more about Exus-> Here.

Interview Transcript

0:00
Hi, everyone, I’m here with Michael Melachrinidis, who’s the Deputy CEO of product management and digital transformation service, access her in the thick collections software business. Michael, thanks very much for joining me today. I really appreciate it.

0:16
Thank you very much for having me increase

0:19
success. First off, I suppose I want to talk a bit about, we can’t ignore what’s happened over the last 1218 months with a pandemic. I mean, what what’s been your kind of experience of that particularly with with clients? And like, have you sort of seen them sort of React react to it?

0:34
It’s been quite a year in 2020, and 2021. There were two different things happening in these two years. In in 2020, it was obvious that priorities shifted abruptly, violently, maybe maybe all projects were put in hold. Collection manages had to be, you know, singularly focused on what’s going on? How is it going to pan out with MPLS. And then you had all the side effects from physical presence, so no face to face interactions, branches closed, and so on and so forth. And talking to customers, there’s a theme that a it seems like we have the rise, we had we saw the rise of the circumstantial before the recurring defaulter. So that it seems like the nature of the business changed, more focused on rescheduling rather than collections, because you had a lot of people who were abruptly put out of the patterns, and they had to fall into arrears. At the same time, obviously, call centres had to deal with a lot of new inbound activity. People had to work from home. And it also seemed that people at the call centres, they the agents, now having to work from home, I had to cope with increased stressed stress, feeling a lot more isolated. And at the same time, the business had to shift from outbound into inbound. We had, we had some customers take, needing to take measures very quickly, for example, we had a customer a large customer in, in Southeast Asia. And within a single weekend, they switched more than 800 agents from working in, you know, in on premise to work in at home with whatever that entailed. And thankfully, they were able to do that on their own. In the span of a weekend. That was stuff they had to do.

3:01
Your sense around how much were shocked that was for for clients, I mean, clients, or maybe maybe other people that you talk to in the industry in terms of like, how ready Do you think we were to be able to do that, and how much of a shock was it to be able to turn that off and sort of, you know, change patterns of working as an example, or change change collection strategies as well,

3:21
I think especially in 2020, no one was that well prepared, I think it was a wake up call in many respects. And the reason I say this is because at the back of 2020 now coming into 2021 whereas in the first year of the pandemic, everything was kind of at a standstill. Then some things started moving then more but now going into 2021 Very caring thing that I see from my existing customers, as well as from new prospects is a need to clearly ramp up their collection systems, their collection infrastructure with a very, very, very high focus on flexibility. And being able to I mean on the system side, to be able to flexibly cope with whatever comes in from from the pandemic, and at the same time on a more strategic business level to actually gauge what’s coming in in the next few years and actually, you know, change their strategies as well. So 2020 was an abrupt wake up call 2021 better and more coping. I think now to the effect that with with the recurring way leaves of COVID. In 2021, we have seen a new kind of normal, when projects are coming back, but are coming back a lot more vigorously. So there’s a sense of urgency, there is a clear focus on on, okay, we need to be more flexible. All solutions do not necessarily fit. And it is the probably the pandemic that drove this about, especially with our new prospects. There is a shift towards, okay, how can we automate things better, and this has brought about, especially in Europe, a very interesting increase of interest in self service and more digital communication. So there is a shift there. And things are actually going on a lot more rapidly. Having said that, as we saw in 2020, from a Nexus perspective, now, we had to completely stop on site delivery of projects. So that was a very challenging thing. So we have to adapt very quickly. And this hasn’t changed, we are still getting zero to very lukewarm reception of a proposal to actually on site to go on site and deliver, you know, projects to the customers. And so we’re working with that, and we’re making some good progress with that.

6:40
And just talking about on site delivery, in particular from from, you know, from a from a software business essentially mean, how much of it? How much of an impact is that had on speed of delivery versus versus versus not? I mean, obviously, we find ways to work around around working around it. But has it impacted it? And do you think this is now the new way of working? And it’s going to be much more like this going forward? I mean, I mean, it has it fundamentally changed.

7:03
I think it has, in the first months, I would say that, it was a very challenging situation, simply because even if we wanted to, we had customers that said, guys, everything is on hold, that’s it. Okay, we respect that. We see how we can go about that. And then we had other customers that said, Okay, let’s go Go on, we need to finish this. But obviously, there was an issue with availability of the customer experts themselves, they had a lot of other things on their plates, we had time differences. We had availability on both sides, that included a bit of flexibility, because you know, okay, whereas before, you had to be there for four or five days. And that’s it. Now, you could be more flexible, but that introduced delays. I think now, about 12 months in the making of that I think we as as a company, we miss the face to face interaction, because that indeed will resolve invariably, we’ll resolve problems in an easier way in the fastest way. However, if we look at our KPIs, we I think we are almost back to delivering projects remotely with you know, minor or minor impact

8:37
seems almost like, you know, whereas before, you’d have a really sort of intense sort of work week or two weeks sort of getting things done, and it was like super intense, and everyone’s dedicated for that. You know, it’s, it’s tiring, and I suppose there’s some, some some inbuilt inefficiencies within that, but it’s sort of intense. And so you got that two weeks, and then it’s done, it’s delivered. And we sort of cut it the other way now. So now you can do multiple projects at the same time, but it’s spread out over six weeks. So you probably get the same product at the same, the same number that go going through, but it’s just spread out over multiple times. And then you get the inefficiencies around having multiple projects going on at the same time, I guess.

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9:10
So that’s definitely the case. That’s definitely the case. In some areas, it’s also in some, in some respects, it’s a cultural thing as well. But you know, okay, face to face, versus a zoom call. There are some customers that do not want to do use their cameras, and that’s okay, understandable. But obviously, then you miss interaction. Or the audio might not be so good. Or they may not all be at the same table at the same time, or you may be distracted and so on and so forth. So you get these, and you have to live with this. And you have to account for these in your planning. So I think I think we’ve got it now. I think we’re okay. But I would still say that the face to face interaction, maybe not necessarily as intense as two weeks, you know, straight on site and that it would help.

10:13
Yeah. I mean, do you sort of how do you sort of see it evolving, though? Do you think we’re sort of going to be largely remote? And then a little bit on site? So from a relationship point of view, or, I mean, what do you think was sort of like LAN, and it feels like it was sort of like, we’ve been going remote, we went very remote, and then we’re sort of trending back a little bit from being permanently sort of face to face. I mean, what do you think? Do you think we’re gonna have new infrastructure that’s going to set up as a result of that?

10:37
Yes, absolutely. I might my talking to our delivery guys, and looking at how projects go. I think remote delivery seems to stay for sure. From the access perspective, and there is no way we’re going to lose, you know, face to face interaction with our customers. So what I see coming in is the majority of the product being delivered remotely, but some key interactions happening, like, you know, Statement of Work, kickoff meetings, and so on. Taking place, face to face, actually happy enough. Only last week, we’ve got we’ve had, you know, two projects running currently from one from year one from Southeast Asia and the both clients said, Okay, guys, do you think we might be able to do some face to face workshops? So I think, yeah, it’s a small sample. It’s too early to tell. But I think that the customers are also kind of feeling that way, too.

11:54
Yeah. I think from a customer point of view, it certainly opens up new opportunities and sort of talking with more people. I mean, we’re getting responsiveness as well. So people don’t have to get on a plane to do things, which I think some definitely some advantages. Yes, it’s digital seems to be sort of, like, death, definitely sort of coming through from a pandemic point of view, like, this year, in particular seems like everyone’s really busy. I mean, what what, what are some of the flavours that that you’re kind of seeing, I suppose with, with your clients, and I suppose I’m particularly interested in you know, obviously, we’ve got the European perspective, but then you also do work, you know, all around the world and, you know, in, in Asia and etc, you know, what are you seeing in other markets, you know? Uh huh.

12:33
So, I think the most marked change of I have seen, okay, so a bit of background with respect to digital. In the previous years, like 2019, or maybe early 2010, just before the pandemic setting, I think it was a rising trend. But with no urgency was interest, there was interest around tangible interest, not just academic, but that was it now comes the pandemic. And it became more of an urgent issue to see what’s going to happen. And at the back of this, whereas before in our interactions with customers, and that was the same both in Europe and in Southeast Asia, not so in the Middle East. But let’s say it was predominantly these two areas, Europe and Southeast Asia, we had the switch from, let’s see how this pans out to, we are going to make this work. So especially in Europe, there’s a determination that I see that, especially for the early stages of delinquency, and with a focus on self service. The customers seem to be determined to make it work. They’re deployed. As a matter of fact, we deployed a self service portal earlier this week with a customer in Europe, and we’re deploying the next one are going live in January with the next one. And that happened as a matter of, you know, a few months within a few months now in Asia, I see the same, that a bit more real or not reluctant, a bit more hesitant. But other than that, there is a clear sign that Okay, guys, show us the way so we’re leveraging the the the best practices and the learnings from our customers in Europe to actually help our customers in in Southeast Asia. In the Middle East, I think they are still one step before that. They’re still a bit more relaxed about this, I don’t see this urgency coming from that area of the world just yet.

15:09
Sounds like there’s a bit of sort of, like, build it, and they will come sort of cool sort of sort of thinking going on, which is like, well, I’m going to build the best. And do you think? Do you think that? Do you think it’s possible for markets? Maybe they’ve got less of an evolved digital infrastructure historically, that they can leapfrog it? I mean, is there a sense of like, we’re gonna try and leapfrog and get to, you know, a point of arrival best in class, rather than this sort of incremental that some of the markets have been going on?

15:37
I think I think that’s a matter of, technologically, that’s okay. I mean, that’s, that’s not a problem. Certainly, I don’t see any problem with that in in how we service our customers. But in terms of acceptance by the debtors and cultural issues, if there may, you know, if there are any cultural issues, I’m not sure about that. So I would actually wait and see, let me give you an example. If you go, for example, to Indonesia, talking about cultural differences. In Indonesia, obscene examples, where it’s okay, actually, both the the institution and the depths are okay, with the bank, let’s say, proactively calling you up and saying, Hey, your payment is due, before you even go into areas at all, okay, and if they don’t call you, maybe you go into arrears, and that’s okay, both sides. So it’s both sides, it’s okay. But at the same time, they’re very, very careful about not to create any bad customer experience. So they are very careful not to be, you know, seen in social media by adapter saying they did this, and they did that, and so on and so forth. So, so, and they’re testing the waters, how much acceptance is, we’re gonna have as to you know, previously, it was the old old school collections. And now it’s a totally digital collection. Technically, yes. Easy, culturally. Question, Mark.

17:29
I suppose that’s where the flexibility comes in. And you talk a bit about flexibility is like, when even now things might change, right. So it’s not a static system even today. So what is happening yesterday is being replaced by what’s happening today. But that might be replaced by something else tomorrow. And I suppose just having the flexibility to change. And quickly as well, I mean,

17:50
I’ll give you I’ll give an example. Okay, so Europese is, I think, more advanced. I’ll give you an example. So we, when it comes to digital. We have we have rollouts. Now, where the initial and only focus of the customer was okay, how can I just get, you know, run a campaign, invite the debtor into our portal? Simple as that and then just get a promise to pay from them. Okay, as simple as it possibly gets. And then very quickly, we moved on to Okay, that’s not enough, I would like to be able to do some information capture some form of feeling like an incoming income and expense expenditure form. Okay, then beyond that, very quickly, we moved on to a handgun, I would like to be able to service inbound requests as well. So it’s not like you know, I do an outbound campaign, and then that has come in, but I would like to be able to have that portal there for anyone who instead of having to call my call centre, go into the portal, and you know, say, I’ve got trouble, I need help, and so on and so forth. So now, which is I think it’s more down the road. I’m not so clear about that. But there is already talk about introducing more complex facilities to cell service, like restructuring. So okay, this is early to tell yet but we are already discussing about how to support things like restructuring, and even the refinance through the portal. There is a question mark as to the uptake of that from the debtors. But with respect to the early stages, I think it’s combination of that flexibility along with the determination of the customer’s to make it work will actually make it work. Yeah.

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20:03
And you think finding that the driver for that change in the drive to digital is, is almost like there’s been customer need, I suppose there’s also taking cost out. And then there’s also gathering additional data to then build better relationships or find better solutions. I mean, it’s almost like thinking those are almost like the three areas. I mean, is there is that which, which, which do you think is sort of dominant? In terms of the conversations that driving it today? Yes.

20:30
I think that there are two, two dominant factors. The first one is cost cutting. So reduction of cost. I mean, you know, we’re talking about several orders of magnitude of increased interactions that you can have, if you can make the digital channel work. So that’s, that’s very clear. But what I also see is, and this is, I guess, an experiment, a very specific need to improve customer experience to be less intrusive, but still be able to make your targets for collection. And from the interactions I have with the customers and how they are planning to deploy systems like, you know, what we call CSS collection. So servicing in actual stock, is a move from, how can I collect to how can I help help my data? Now, so So this is a this is a mind shift, which is important, I think. And if the digital channel is a key enabler of that, you know, if that is a catalyst, a positive catalyst, then we have a winner, that’s gonna drive cost for the institutions considerably down as well.

22:13
I suppose one of the things that comes up often with digital is you design a digital experience, and it’s great if you’re digitally savvy, or if you’re, you’re plugged in, and you’re sort of used to it used to using that. But then, in a lot of banks, in particular, a lot of the large financial institutions might have people who aren’t actually say, like that. And so it’s like, how do you build in in terms of process design? The flexibility to be able to handle all cases? Or is it or people very much thinking, well, oh, we’re gonna have a digital process, we’re gonna put everyone down there. Is that a sensor? And you’ve got to build it for everyone? I mean, what have you got? How do you think about that?

22:47
Yeah, I mean, that’s, that’s a problem that we, we think, actually, that we have solved, I’m pretty positive that we we address very nicely because, for example, with with the collection, self service portal that we’ve deployed, we we’ve developed, you, we built in the flexibility to change very, very easily and very, very quickly, and to try new things like almost instantly. And we do that in a way that first of all, there is no coding. And it can be done by anybody who’s just got a an understanding of the business process. No, it’s not, doesn’t need to be technically savvy. Now, of course, that then means when we couple that actually, with the obvious champion and challenger strategies that we deploy at every single step, so we can go as low down as deploying a champion in the Challenger dialogue to the deck and see which one like a B testing best so so we still live it to obviously to our customers to decide the best strategy that works for their customers, but we enable them to be able to very quickly very rapidly try out new things and then quickly converge to whatever seems to be working best

24:30
case the measurement mounted to the comparison piece, I mean, yes. Yeah. Yeah, really understanding how do you measure a process as well as actually just design it and as well?

24:42
So we’ve got Yeah, so we’ve got a lot of metrics that help them understand it of course. Okay, maybe four collections of service that’s too early but we we have seen a very good traction in in our customers even you between different areas of the world, in how to best share best practices, and they, they all seem to be very good to see how things are done at different areas or different companies, and so on and so forth. So obviously, we put a lot of that into the product. But we’ve also instigated our what we call the AFS community, where we have regular roundtables, and we bring together customer, our customers, from all sorts of all areas of where we are active. And we facilitate the exchange of ideas and best practices. So I guessed that digital and how to best deploy that is going to be a very hot topic in our community pretty soon.

25:52
Especially with with KPIs, and digital and one of the things that comes up is there’s a lot of data, right? And it’s almost like we’re gathering lots of data around how to understand customers better. What do you think the role is of that? And those those before even the pandemic started, there’s a lot of discussion around machine learning, and really like statistical data techniques to understand things. I mean, what what do you think the role is of data? And sort of what’s the trajectory we’re on? Do you think particularly protecting from a collection sort of software?

26:19
is? So if if I can take the risk to make a prediction? Yeah. I think pretty soon we will see, we will come to a point where old collection, the existing let’s say, collection strategies become more and more obsolete, to be replaced by data driven strategies. Yeah. That’s my prediction. Now, of course, there is a big, big bet, on how we are going to leverage and to what extent, you know, machine learning and artificial intelligence are going to facilitate collections in that direction. There is a lot of activity everywhere, of course, and there are companies left, right and centre springing up and doing new stuff, we’re doing new stuff. For example, okay, with our customers, we are discussing all sorts of flavours of different things that you can do with ML and AI, from simple, simpler ones, like, you know, best time to call base channel to call, then going into more intricate ones like prediction of a promise to pay prediction of a lazy payer, that, you know, once you don’t need to do anything about and then you save money on that, or prediction of default strategic defaulters, and so on, and then going all the way to what I consider the holy grail of collections, next best action where you actually it’s only the strategy, it’s decided, on, on on on the fly by day, but now, we are currently piloting some of these without customers. In terms of preliminary results, I’m very excited because I see very good numbers coming up. However, I like to be a bit more cautious and see, let’s wait and see where this leads. So in a nutshell, a lot of activity, some very promising results. But you know, it’s it’s never over until the fat lady sings. I mean, we to see that over a relatively longer period of time, in real in real context of collection to see how much of help we get.

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28:53
So I replay that has almost cautious, realistic optimism around it around doing it, but because he’s got it, you got to have practical steps rather than sort of like it. This is the future. It’s like practical steps and sort of taking it step by step and just looking like it’s almost on the right, right.

29:09
My vision, let’s say, Okay, if we can get up the car, do you? Right, okay. I think we’ll be looking in the longer term or mid to longer term, we would be looking at personalised collections. Okay, that’s, that’s my vision. So it’s, it’s a strategy on the level of a single debtor.

29:29
It’s very specialised collections in terms of collection rate, I suppose getting repaid but it’s also personalised collections in terms of customer treatment as well. Probably.

29:37
Absolutely. Yeah, absolutely. Yeah. And making sure that along the way you maximise your, your collection amount, and at the same time, you do deliver a customer experience that is, you know, actually good for your data. And it helps you build the relationship that You know, past the more traumatic experience of of debt collection, will then hopefully go back into a very good collaboration with your customer going forward. So yeah, that’s the vision.

30:14
And I suppose with lots of data comes, comes to storage of that data. And I suppose one of the enablers, I think it’s probably the happened has been sort of like, I suppose, you know, network technology, the cloud, it used to be called, I suppose those kind of things. I mean, how much how much do you think that sort of drives the industry in terms of, I suppose, the barrier to create a new services, storing data, those kind of things and sort of driving almost like the dynamism in the market. I mean, what, what, how much, how much a game changer think that’s been, and we’ve seen it fully finished.

30:44
I think cloud as we call it, is here to stay. I see, again, Europe seems to be the front runner in this, but the other territories are moving fast, they’re following suit, but they’re not lagging behind is definitely not. But in any case, I think there is a clear shift from on premise installations with whatever that entails. Like I increased IT people at the at the institution sites, looking after the systems and so on to cloud and not just cloud, but Software as a Service, which also has impact on the economic side. And then the budget side of this, where we, we seem now to be past the days of the perpetual software, licencing scheme, and more into, you know, leasing of the software. Now, with that, when you go into cloud native technologies, like we’ve done, for example, with our collection, so service, products product, I think the financials work nicely. So that you seem to have for the both of us both the best of both worlds. So you have the flexibility and skill ability to grow without any concern. And at the same time, the cost model is such that you can do so without, you know, having to really think about very hard what you want to do. So it is a pay as you grow. But it’s not extortionate is not huge. And coupled with the leasing part of this often as a broker perpetual licence, it helps organisation, I see, I have seen that it definitely helps our customers to actually be able to get new features, obviously, the technology even facilitate them, because you can roll out features to everyone a lot faster, you don’t need to go on premise and to delivery projects again and again. So I think cloud is here to stay. I think it’s facilitating a lot. The technology, I don’t think that everybody is just ready yet. But everybody’s looking that direction. Absolutely. And as far as we are concerned, in Exodus, that that is our strategy.

33:15
Yeah, I just wonder if particularly in in markets, maybe who haven’t had the investment historically, if it just if it actually presents this opportunity for, say, to leapfrog technology, so So I’m setting a market that doesn’t actually have it, if I have fast internet, I can I can access these services now subject to foreign exchange rates, but I can access access the services now and get access to some of the latest thinking and have it in quickly. Right. So does it almost like that? Is it? I mean, everyone’s getting supercharged, not just those in the large markets, everyone can get supercharges in terms of like process development. And does that open a new opportunity?

33:54
To the look at looking at the markets we are active in I think this is the case. Okay. Obviously, there are some territories, which are more advanced, there are some countries with I mean, you know, I see different speeds within Southeast Asia, I don’t think different speeds within Europe. But the environment is a whereas like five years ago, you would they would not consider at all anything that has to do with cloud and all the associated issues with data residency and, you know, location of where your data is stored, and so on and so forth. Now I see a specific shift. And I think I don’t see any customers that outright rule that out. It’s been like that, whereas for other customers and a lot of them that’s the only way i Yeah, Guys, come on, you can’t watch a cloud offering. It’s as simple as that, you know?

35:05
Yeah. Yeah. It’s been, it’s been an interesting journey. Thanks very much. Thanks very much for the, for the insights and the and the explanations around certainly what you see across, across across your clients and what you’re hearing. I think it’s fascinating. I say, it’s been a, it’s been a it’s been a fascinating sort of couple of years. And, you know, although it’s been it’s been tough for most of us, but it does feel like things are changing a little bit. And, you know, it’s, it’s definitely gonna, it’s gonna, it’s gonna be interesting going forward no matter what, no matter what happens. That’s, that’s for sure. So,

35:33
yes, yes, it’s, I think we’re gonna say new normal. Yeah. That’s I don’t think we’re going back to life as we knew pre COVID. Yeah. And that’s gonna be reflected also in the collections business. But I think now that maybe the worst is not maybe the worst is over and we have a new normality come about when we learn to cope. It’s going to be more exciting than frightening going forward.

36:05
Yeah. Yeah. Well, it’s something we all look forward with to with anticipation. So Michael, thank you very much. A really appreciate the time today.

36:14
Thank you very much as well, Chris. Very nice talking to you.


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