This article was originally published in Spanish by El Economista.
Exploring the Pivotal Impact of Technology & Upcoming Regulations in Spain's Real Estate Servicing Sector.
Watch the full session with English subtitles below
The application of technology in the real estate servicing industry has revolutionised the management of non-performing loan portfolios for financial institutions and funds, unlocking significant potential. This was the primary conclusion of the "Navigating the Real Estate Servicing Landscape" roundtable, organised by QUALCO in collaboration with elEconomista.es.
The event brought together industry leaders Jesús Alarcón (QUALCO), Jesús Medina Muñoz (Deutsche Bank), Pablo Reigadas (Diglo), Patricia García Barrios (doValue), Jorge Ortega (EOS Spain), Eduardo Alonso Fernández (Kruk España) and Manuel Enrich (Ahora Asset Management), to discuss the pivotal role of technology in managing non-performing loan portfolios for financial institutions and funds.
The panellists emphasised that technology enhances customer experience, protects sensitive data and is crucial for effective debt recovery and credit management strategies. They all agreed that the real estate servicing sector has matured, solidifying its presence in the Spanish market.
Despite a slowdown in transaction volumes last year, 2024 is anticipated to be a year of "opportunities," particularly in the non-performing loans (NPLs) sector, which continues to weigh on the balance sheets of financial institutions and funds. The participants observed a growing interest in reperforming loans (RPLs) and a trend towards smaller portfolio sizes, a shift occuring amid greater economic stability, with high but decelerating interest rates and a "contained" default rate, though still slightly above the European average.
The impending regulation for servicers was another key topic of discussion. The panelists noted that the new law will be a turning point, leading to consolidation in the fragmented sector. The draft law on credit managers and buyers, currently under public consultation, aims to provide greater protection for financial consumers, particularly the most vulnerable. It also allows entities to sell their credit portfolios, thereby cleaning up their balance sheets and improving solvency.
The Role of Technology in Debt Recovery and Credit Management
Jesús Alarcón, QUALCO Country Manager for Spain & Portugal, underscored that technology forms the backbone of debt recovery and credit management operations. He stressed the importance of investing in robust, flexible, and configurable tools that empower clients while providing vital support. Alarcón recommended consolidating the numerous tools companies use to enhance efficiency and appropriateness.
He acknowledged the challenges of externalising tech services, switching systems, and training teams and noted that the benefits of managing one or two robust tools would make the leap worthwhile. Alarcón also pointed out that Artificial Intelligence (AI) has been crucial in accelerating sector transformation and enhancing debt recovery processes. Lastly, he discussed the impact of the future law on servicers, predicting market consolidation and fewer competitors and suggested that regulation might eventually be unified at the European level.
Maturity and Opportunities in the Spanish Market
Over a decade ago, Deutsche Bank identified the Spanish market as a significant opportunity, with over €300 billion in bank loans to developers. Now, the market has matured in the NPLs segment and other previously toxic assets. Jesús Medina Muñoz, Co-Head of Financing Coverage, Southern Europe at Deutsche Bank, highlighted that best practices are now well-established in the national market, offering comfort to investors.
Despite high interest rates affecting prices and financing, Medina pointed to October 2023 as a recovery point for international markets, with risks decreasing to pre-COVID-19 levels. He expressed confidence that the upcoming European directive on servicers' activities will improve sector coverage.
Pablo Reigadas, Business Development Director at Diglo, Banco Santander's servicer, described 2024 as a year "full of opportunities." He noted a shift towards smaller portfolio sales and a new investor profile. Despite high interest rates impacting financing and transaction speed, Reigadas highlighted the resilience of the real estate market and the importance of maintaining high housing prices for family stability.
Specialisation and AI in Debt Recovery
Patricia García Barrios, Bank Asset Management at doValue in Spain, emphasised specialisation, diversification, and segmentation in debt recovery management and highlighted how AI is key in making processes more efficient, reducing costs, and improving service quality. She also stressed the importance of early intervention with credits showing signs of trouble, significantly increasing the likelihood of success.
Meanwhile, Jorge Ortega, Managing Director of EOS Spain, highlighted the sector's maturity and ongoing consolidation, noting that the market remains active and attractive. He emphasised the non-optional nature of technology use, describing it as a "requirement."
Future Trends and Technological Investments
Eduardo Alonso Fernández, Business Development Responsible at Kruk España, discussed the industry's potential and the impact of upcoming servicer regulations. He emphasised his company's significant investment in technology and a commitment to helping debtors.
Lastly, Manuel Enrich, Chief Investor Relations Officer at Ahora Asset Management, stressed the importance of specialisation for the servicing industry's future. He highlighted the sector's regained momentum in 2023 and the potential entry of €150 billion in toxic assets into the market. By consolidating tools and investing in technology, the real estate servicing industry is poised to navigate the challenges and opportunities of the evolving landscape, driven by regulatory changes and economic shifts.
