Processing AI

This week I was lucky enough to attend the SmithNovak NPL Europe conference in London. It was an interesting day of discussion through the debt purchase and servicing processes. The industry, which after what seemed to be seeing a slow down during the pandemic, is clearly now expecting volume to increase.

Feedback from most on the day were expectations that volumes (# of portfolios for sale) will be increasing towards the back end of the year, although the smart comments I felt were pointing to this being slightly later and increasing only in early 2023 (lagged due to the sale process). This will be likely led by Italy and Southern Europe, the UK, with the rest of North-Western Europe then following suit.

Despite the real shock for many economies over the last few years, the sense was this will ultimately probably not be on the same scale as what we saw in 2008. This is in part due to the government support provided, but also interestingly due to the greater awareness and sophistication of creditors, who are pricing and understand the process better too.

Connecting facts

Sometimes at these events, it is also not purely what is said that is interesting, but the connections between the discussion, linkages and reactions that can make you think too. Here are some of my observations.

Artificial Intelligence

AI has frequently been used as a catch-all term for many things from process transformation, data capture, data science, and everything in between. In the AI discussion this was neatly broken down into more discrete blocks I felt.

  1. Make sure you have the right data. Use internal data, scan documents, if you need to
  2. Structure your data. It can take time, but is a critical step
  3. Define your business problem. Businesses are about solving problems for customers and employees. Find areas of pain where you can make improvements, being human-centric is key.
  4. Don’t be afraid to redesign the process. Good process design can lead to better outcomes (and easier modeling/data analysis)
  5. Build your AI models and make sure you have enough processing power, to build and rebuild. AI is a processing power-intensive process
  6. Use data analytics and feedback loops to continue to improve and optimise. It never stops.

All great insight I thought.

Quantum Computing

For the first time, at a work event/conference, I heard the words Quantum Computing used. It was in the context of the processing power needed to run and re-run models.

Processing power is needed and will be increasingly needed, to model with more and more data, doing this faster and repeatedly. (It is a great question to ask any vendor in terms of their capability in this area too).

Quantum computing is of course a potential future solution to enhance computing power.(just like GPUs were in the early days of AI).

The mention of this was a micro-indicator, that this really could be in our future sooner than we think.

COVID culture and masks

With attendees from all over Europe, in the UK, and in a non-restricted COVID environment, our reactions were interesting. Some of us initially had masks on, some quickly discarded and comments of “it’s nice to see everyone’s faces again” were made. I felt it really reflected the mix of local restrictions back in home markets. We are all still adjusting.

Investors vs Servicers

Lastly, sellers, investors, portfolio managers and servicers are of course all part of the NPL chain. They were all represented at the conference.

However, despite being intrinsically linked the culture and focus between the groups came across as really quite different.

On one hand, there was talk of portfolio performance, securitization, ESG, IRR, processes, and techniques to increase returns for investors. It was all very 50,000ft and quite removed from the customer.

Then on the other hand there was a discussion of individual customer situations and the strategies to improve outcomes. It was all much closer to the customer.

There was a cultural gulf between the two perspectives at times I felt.

At the end of the day, all debts do have a customer involved. An originating creditor has lost money, and any recovery still needs to come from the customer, often representing their livelihoods and assets.

We just need to be careful, in the rush to look at returns, not to forget this human element. This is not to change the process per se, maybe more to just make sure we are careful to change the language involved sometimes…

Have a good week everyone

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A new rule

Another long weekend this week – in the UK, through April and May, the public holidays just seem to keep coming.

This time of year is great, the days are warming up, evenings are getting longer and a few days off is always welcome.

The only challenge seems to be that delivery dates don’t, unfortunately, stretch or take holidays too…despite having extra days off, the work still needs to get done.

So we all seem to be forced into trying to cram a 5 day week into 4, leading to some mad busy weeks, late nights, and a bit more stress to get things over the line.

Productive and effective I am not so sure, but it is nice to have a bit more flexibility and a three-day weekend for a few more activities, social of course.

Welcome to the 21st century

This week, in catching up with podcasts, I also came across an interesting idea that the start of the 20th century did not actually take place in 1901, as calendars would say. It really transitioned, culturally speaking at least, in the 1920s.

The change, triggered after the end of the first world war, was a period of dramatic social and technological change after which things were never quite the same again. The modern 20th century was born.

The parallels with the 2020’s are interesting. The pandemic and with plenty of technological changes under our belt, are we seeing similar triggers that are now embedding permanent changes to our culture… is the 21st century culture starting now?

It sometimes feels this way and certainly gave me pause for thought. It will be interesting to consider and whilst there is a need to watch for knock-on impacts change does bring new opportunities too.

Sensitivity training

The final observation this week was around price sensitivity.

I needed to buy a replacement 15cm ruler, the small ones we used at school and felt sure I could pick one up at a major retailer. It was afterall a simple, low-cost item.

Yet in-store, none were available. What was available, was a ‘high tech’ foldable 30cm ruler… certainly likely to break in my bag and 10% more expensive, than the non-folder alternative (and 50% more expensive than the 15cm version!)

In the end I had to find what I needed online, but it set me thinking about two things.

  • Firstly, how we are sometimes presented with unnecessary technological developments, trying to meet a need I am not sure I really had
  • Secondly, at low price points, my sensitivity to pricing is really quite low

This second point is of course evident whenever you buy ice cream at the seaside or lunch in a cafe.

One ice cream, or coffee and cake is no problem. I normally splash out, not concerned with spending the money, but buying for a whole family or group of friends and it seems quickly adds up… I don’t resent spending the money, but it does lead to a bit more of an ouch effect on the wallet.

To put this another way – increasing prices by 10% on £2 is only 20p, but 10% more on £200 is £20 and it hurts much more.

It is all about relative vs absolute price increases I suppose… and at some point for most of us the absolute price increase that actually matters even if the percentage increase is low. It also all adds up over multiple purchases too, something we don’t notice on each transaction.

Something to be conscious of when we see inflation figures and the impact on cost of living going forward I think.

Have a good week everyone.

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What we can all learn from ABBA

This last week was again a short week, and being an extension of Easter it involved a short trip to London to see Hamilton, the musical, which together with my trip to the ABBA museum in the prior week, has made this a very musically themed fortnight.

Outside of widely popular songs, and great performances this did set me thinking. There was a common thread to greatness in just how hard, deliberate, and diligent people at the top of their game are in their work. 

I know it can look easy, like a natural talent, but once you scratch behind the surface you often find an almost obsessive compulsion to be the best in the field and intense focus… sometimes at the cost of other aspects of their lives too.  It almost seems to define success or at least be a close relation.

Basically, hard work matters… and yet you cannot do everything… so choices also matter and choices need to be made on where to focus.

Hard work and choices

This, of course, also translates back to work and our lives in business, it is not that dis-similar.… albeit, without the spandex and glitter (…maybe?!)

I mean, how many of us know people at work, brilliant in one area but not that rounded in others; businesses that aspire for huge growth but actually take more of a lifestyle type approach; or those with intense focus that burn out employees without the same mindset.

Just like in the world of celebrities, we are sold on the dream of having it all.

Success is often defined one-dimensionally, looking solely at achievements and not really acknowledging the consequences of getting there. 

Telling the whole story

We are all attracted to the story of the human genius, the amazing business with growth, and the perfect employee culture. Just like much in social media, it is not that it is untrue, it just does not necessarily tell the whole story. 

Getting there takes hard work, along the way there will be failures and disappointments, you will have to keep picking yourself up again and again, decisions need to be made professionally and personally to meet one goal, dropping other goals and aspirations to maintain focus.

Real-world trade-offs 

In truth we live in a world of trade-offs, our time and focus is limited.  A key is deciding what we want our trade-offs to be and more importantly being comfortable , on balance, with the decisions we have made (and if not changing them).

We are after-all, all on the same journey, just to maybe slightly different destinations. More transparency and honesty in our own journey can certainly help. Being human and talking about it can help others too.

To borrow a phrase… knowing me knowing you is the best [we] can do!

Have a good week everyone

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