Last week, I had the pleasure of chairing the Credit Connect Technology Think Tank, where we all gathered in Manchester to discuss the latest themes across Risk Operations, Credit, Collections, and Recoveries.

It was an interesting and lively discussion with a couple of key themes emerging.

Gradually Rising Arrears

It feels like we have all been waiting and predicting a rise in arrears levels over the last five years. As discussed over dinner, in some ways, it is our job to explain how the ‘sky is falling in’ so we can at least try to do something about it before it does. We often come across being seen as pessimists it feels…. but this time it does feel like levels are gradually increasing… and reported back widely.

The increase is slow and persistent, a notable, yet subtle, change of trend. The main concern now is the increase in interest rates, which is starting to have a significant impact on customers renewing mortgages or on renters who are having the costs passed on.

Energy and the price of energy was also still a concern… although maybe this is something we will hear more about when the temperature drops.

Regulatory Changes

2023 has been a big year for FCA-regulated firms with the introduction of Consumer Duty. This has now been implemented across the industry, and discussion revolved around the speed at which these changes are coming at teams. It is presenting difficulties for firms to adapt and adopt swiftly, with significant resources required. For smaller firms in particular, this can be a strain.

Further to this, CP23/21 Product Sales Data reporting is being flagged as a future change to watch. This is requiring firms to

provide detailed information on the initial sale, and ongoing performance, of individual agreements which will assist us in understanding how firms operate, allowing us to gain further insight into the market – https://www.fca.org.uk/publication/consultation/cp23-21.pdf

All this will add further burden to compliance teams and likely take resources away from what are already stretched data analytic and reporting teams.

With a general focus on data and the use of data to gain greater insights and capability on performance, this change in resourcing could impact capabilities around data analysis. Something that is being used to give companies a competitive edge. You wonder if more investment in this area is going to be needed as a priority.

Artificial Intelligence

It seems no conference in 2023 can be complete without discussing AI and specifically ChatGPT.

Of course, even the term AI can be controversial. “AI” can encompass a broad spectrum of technologies, from powerful language models to machine learning algorithms and scoring systems… and yet all too often we bandy about the broad term of AI that could mean anything… I am guilty of this too.

Tightening this language is important and a sign of increasing maturity and understanding of the technology and something we need to work on.

Tis area is seen as having potential for significant opportunity. It is however tinged with a sense of caution too.

On one hand, AI offers promising opportunities for automation, efficiency, and predictive analytics. Yet on the other, it is still felt that human interaction remains indispensable in many contexts.

It sounded like it is all going to be about striking the right balance, with of course, the devil in the detail around implementation too!

Changing Contact Channel Landscape

Demographics evolve and so apparently are our preferred contact channels for customer interaction in the UK.

Apparently, Telegram has risen to prominence as a popular chat application, being amongst the most downloaded. This was something that was definitely not on most people’s radar in the room… nor did we have TikTok or Snapchat either.

What was clear was the speed of change and the need to identify and adapt to these shifts in communication preferences. It is essential for staying connected with your customers.

This was the overarching theme, the need for adaptability and keeping your systems and processes flexible to adjust for these changes as they occur (and they most surely will).

What happened to the Metaverse?

The Metaverse…. it was the topic of 2022… and something that appeared to drop from discussion in 2023. Was it a flash in the pan or an idea that is in fact a longer-term change we will see later… and is ChatGPT the same?!

The consensus was this time it’s different… and I suppose time will tell.

Personally, I think the metaverse has not gone away and we should not underestimate the power of Large Language Models to help write the code to make this happen. Applications in fields such as medicine, vulnerability, and customer service all have great potential… maybe it is just building these is more complicated than we thought…. we may also find something similar with Large Language Models (ChatGPT)…!

It is after all not the first time the excitement around ideas has run away and ahead of the practicalities of implementation.

Balancing Tech Investments

Lastly, a bit of a reality check. At conferences and in discussions, we all have the tendency to focus on shiny things, the new, the novel edge cases… it is exciting after all to think about new capabilities and challenges to solve.

However, in the real world, we typically have limited budgets, real customers, and operations to run in the now, so choices need to be made… and this applies equally to technology investments too.

Assessing tech priorities wisely is still a priority, as is making the most use of the data and technology we already have too. It was a good point made across the panels. It is always good to keep our feet on the ground too.

Have a good rest of the week

Travel has a way of broadening perspectives and this week I have been in Canada again, at the RMA conference in Niagara Falls, where I have been generally eating too many burgers, drinking too much coffee and wondering where the vegetables have gone from my diet… all this in addition to chatting about the Canadian economic landscape and what people think will happen in the new year. Of course, some things are different but what was surprising was just how familiar the whole conversation and themes felt too.

So here are my key takeaways and observations from the week.

1. Economic Pressures Mirroring… well everywhere else: Just like elsewhere Canadian consumers are grappling with inflation and rising energy costs. This financial squeeze is starting to bite, with the burden heavier in some sectors.
2. Resilience in the Face of Adversity: Despite these challenges, Canadians are absorbing these costs and persevering. However, there is a sense that the pressure is mounting, with an undercurrent of concern around sustainability.
3. Digital Adoption – A Slow March: Interestingly, while consumers are enthusiastic about digital servicing, such as contactless payment and services like Uber, it feels like mainstream adoption in business processes is lagging behind. Canada’s pace feels like it is trailing behind Europe and is significantly slower than Asia.
4. Somber Outlook for Credit Risk and Collections: Professionals in this sector aren’t exactly known for their optimism, and this conference was no exception. A significant majority anticipate a recession in the coming year… okay we have said this for the last 3 years, but this time it is really going to happen… although I do agree too.
5. Unchanging Human Elements: Despite the buzz around digitalisation and automation, certain human needs still remain constant. The need for food, social interactions, and the pursuit of improvement of quality of life really haven’t fundamentally changed… ever. Some things never change I suppose… this will also be true in areas such as customer financial difficulty and vulnerability… and area also discussed.
6. Pace of Change – A North American Snapshot: A comment from the conference also shed light on the varying speeds of business across North America. Silicon Valley leads, rapid decision-making apparently, followed by New York and with Toronto unfortunately trailing. It really made me think about the importance of this to foster growth and innovation. Speed of decision and action could be a proxy measure and an interesting objective in itself… one to think about.
7. Rethinking Leadership: Also an interesting comment on the need for leaders to listen more and speak last. There is value in team discussions, feedback, and collaborative problem-solving… and by speaking last you get to let this conversation run enhancing creativity and the decision-making processes.

… and lastly I have quite a few really good cups of coffee too (not Tim’s… sorry)

So there is a little more on the economic outlook in my write-up here… but I also saw some cool tech too, so watch out for this soon.

Have a good week everyone.