This article was originally published in Spanish by El Economista.
They recognise technology is crucial for refining collection strategies, but their primary focus is extending credit.
Understanding the Financial Landscape
The current economic uncertainty is prompting families, especially the most vulnerable, to seek additional work or turn to consumer financing. According to the Bank of Spain, financing saw a 20% growth in January, a trend not observed since 2016, while delinquency rates increased from 5.93% to 6.33% between December 2022 and 2023.
Recently, QUALCO, in collaboration with El Economista, hosted the roundtable "Paving the way for innovation in consumer financing: Perspectives with QUALCO," featuring key industry leaders. During the discussion, Jesús Alarcón, QUALCO's Country Manager for Spain & Portugal, underscored the pivotal role of technology in enhancing consumers understanding and vigilance, facilitating effective recovery strategies and preventing defaults in loan issuance.
For Asier Atxutegi, Commercial Director at Kutxabank Kredit, consumer loan applicants tend to be financially stable. In turn, Itziar Riestra, Director of Banking Insurance, Payment Methods & Contact Centre at EVO Banco, agreed, attributing the upsurge in arrears to past issues rather than current trends. Bernardo Candel, Risk Manager at Aplazame, added that while concerns exist about collection rates and delinquencies, their portfolio renewal every 14 months hasn't reflected such trends.
Prioritising Technological Readiness
César Paiva, Commercial Director at Cabot France & Former General Director at Sofinco, raised the question of how technology should be trained to ensure readiness for future scenarios. He prompted a discussion on the adaptability of technologies, particularly Artificial Intelligence, which, like humans, learns from past data to anticipate and correct mistakes in different scenarios.
How should we train technology to ensure readiness for future scenarios? César Paiva, Commercial Director at Cabot France & Former General Director at Sofinco
Víctor Royo, Director of the Payment & Consumer Business Area at Ibercaja, echoed this sentiment, emphasising the need for organisations to invest in the latest technologies to manage alerts or recoveries effectively. "We are aware that we must be prepared for any situation, and I believe that we are all using the latest technologies to manage alerts or recoveries", he explained. Daniel Alegre, CIO of Findirect, reiterated this commitment, noting that their technology budgets are continually increasing, reflecting the understanding that greater productivity stems from increased investment in technology.
Despite the sector's recent successes, industry professionals' concerns about overdue payments persist. The participants unanimously acknowledged a heightened vigilance in managing these risks, emphasising the importance of investing in recovery processes and the entire lending lifecycle. Riestra emphasised the proactive measures taken to prevent delinquency, highlighting the role of information in accurately assessing creditworthiness.
"Recovery is at the end of the race. We look for concrete actions to prevent individuals from becoming delinquent due to personal or financial factors, as no one aims to find themselves in this position" Itziar Riestra, Director of Banking Insurance, Payment Methods & Contact Centre, EVO Banco.
Leveraging Technology for Insightful Strategies
María Ángeles Martínez, Area Manager of Financial Administration at ALD Automotive, underscored the transformative impact of open banking on the industry. Open banking has revolutionised lending practices by providing deeper insights into clients' behaviour and creditworthiness, making them more efficient and customer-centric. Martínez emphasised the importance of investing in such technologies proactively, as it is more cost-effective than dealing with defaults after the fact.
"We are aware that we must be prepared for any situation, and I believe that we are all using the latest technologies to manage alerts or recoveries", Víctor Royo, Director of the Payment & Consumer Business Area at Ibercaja.
Technology also improves processes not only for entities but also for clients themselves. Alarcón explained how companies that hire their services recover "in a much less invasive way." The practices of the Nordic countries are an example. "They barely use telephone calls to communicate with clients. Mobile applications are already present, but that does not mean that traditional channels are never used," he added.
In conclusion, speakers unanimously agreed that consumer financing is experiencing significant growth, driven by a customer perception shift. No longer fearing consumer loans, customers increasingly view them as convenient financial tools rather than burdensome obligations, signalling a positive trend for the industry.
