B2B Payments

Debt Collection Technology And The Maze Of Regulatory Compliance

For the third year in a row, payment technology service provider BillingTree has released new insights into the ways collection agencies do business. The ARM Industry Operations, Technology & Payments report for 2015 explores the way businesses collect debts, adopt new technologies to process payments, and navigate a changing regulatory landscape.

According to BillingTree Head of Marketing David Yohe, the report offers some of the most transparent insight into how the accounts receivable management sector plans to expand. “After three consecutive years surveying the ARM Industry, a clearer picture has emerged of what concerns agencies most including how they are looking to grow profits and where they are seeking help,” he said.

That picture reveals that collection agencies are on the edge of explosive growth in adopting payment collection and processing technologies. For the first time since BillingTree began its survey, there was no discernable difference in the adoption of payment technologies on the basis of company size.

Emerging technologies, the research found, remain a top priority for the ARM industry’s growth efforts, surpassed only by expanding client base. BillingTree’s research makes clear that collection agencies are embracing payment technology, but the data show how complex regulations can thwart this trend.

Payment Technology Enters The Fast Lane

Traditional payment tools like checks and lock boxes are still used by more than a quarter of respondents (29.6 percent), and in-person payment assistance remains the most common form of debt collection, the research found.

But the survey suggests a dramatic shift toward high-tech payments tools for businesses is on its way this year. For example, BillingTree found that of those companies that use in-person collection methods, 80 percent of them also utilize online bill pay methods as well. Those companies collecting ACH payments through in-person agents, 90 percent do the same online.

This gap between the use of in-person collection methods and digital methods narrows even further when businesses offer foresight of their 2015 plans: 97 percent of companies told BillingTree they plan to use online bill collection tools this year. Nearly a quarter of businesses surveyed said they plan to adopt Virtual Agent/Negotiation technology in 2015, up from just 5 percent in 2014. Likewise, 32 percent of firms plan to introduce Interactive Voice Response this year, compared with just 18 percent the year prior.

Compliance Fears In A Changing Landscape

There may be a major spike coming in the adoption of payment technologies by businesses of all sizes, but the incoming regulations surrounding these technologies seem to pose as the tallest barrier to introducing more efficient, high-tech payment methods. The integration of new payment processing and collection technologies came in third place among businesses’ top concerns, beat out by compliance policy, which came in first place.

“Financial and operation risks resulting from a complex and dynamic regulatory environment represent the greatest challenges faced by collection agencies today,” BillingTree’s report found. “Addressing those challenges threatens to divert time, money and resources from the core objective of efficiently and effectively collecting payments on behalf of clients.”

Reg E, the Electronic Fund Transfer Act, remains one of the most significant points of friction for businesses surveyed looking to adopt new payment processing tools. CFPB Enforcement and credit card brand guidelines were also highly cited as the highest compliance risk. Agent-assisted payment authorization is seen as the greatest payment method compliance risk factor for businesses – unsurprising, BillingTree said, considering the room for human error – followed by Web payments, thanks to a perceived risk of fraud and security breaches.

Collection agencies may be concerned about adhering to regulations when adopting new technologies, but according to BillingTree, the ongoing use of outdated payment methods like paper checks is in itself a major threat to compliance, increasing the risk of human error during payment reconciliation.

Gaps To Fill

The data reveals that U.S. businesses in the debt collection industry are on the precipice of normalizing digital payment methods. Still, BillingTree points out, considering businesses’ ongoing use of outdated payment technologies like paper checks, there remains a significant opportunity for payment technology innovators and service providers to raise awareness of faster, more efficient tools among today’s business community.

Another gap, BillingTree found, exists in the types of payment technology providers that are available for businesses today. Among the most common tools firms said they seek out are virtual negotiation and skip trace technology services.

Yet another area with potential for growth is the ability for payment gateways to provide and analyze key data for businesses. According to the survey, more than 80 percent of businesses said that they rely on these gateways to access crucial data to manage their payment operations; more than half (62 percent) require full data details. “This suggests that the need for an integrated payment technology solution is critical for agencies who want to effectively monitor and manage their operations,” the report concludes.

BillingTree noted that the emergence of regulatory compliance concerns among debt collectors in past years’ surveys gave rise to a greater focus on the issue for 2015’s research. Two major events are headed toward debt collectors this year: the CFPB’s anticipated debt collection rules, and the Federal Communication Commission’s clarification on the Telephone Consumer Protection Act. While the growing complexities of compliance and regulation may lead businesses to be weary of adopting new technology, BillingTree’s conclusions suggest innovative payment processing and debt collection tools will actually reduce the risk of human error and compliance violations. Despite any reservations about new technologies, it appears businesses are about to make high-tech payment technologies mainstream.

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