Tal Schwartz: Good morning, everyone, and welcome to
Canadian lenders Association events on how to build a
resilience collection strategy. Before we get started, we want
to thank our sponsor LEC stop for supporting events and
supporting FinTech lenders in Canada, and fintech lending
innovation in Canada. A few quick notes before we get
started, if you don't already know, the Canadian lenders
association is the largest trade group for commercial and
consumer lending in the country, we have almost 100 members from
coast to coast. We run events like this fairly often about
once a month. So if you're interested in joining us for
another webinar, or sponsoring or participating, please go to
lenders events.com. And at the end of the session, we'll be
sending out a recording. So if you missed parts, don't worry.
And with that, I'm going to hand things over to your moderator,
James. To get you started.
James Rose: Very good, thanks Tal. And thanks also to the
Canadian Lenders Association for every challenge and opportunity
to moderate them. Looking forward to today's discussion.
We have a excellent panel of everybody from Montreal,
Toronto, Mississauga out to Vancouver, and here in gloomy
Saskatchewan right now. So welcome. I just want to first
take a few moments, just introduce our panelists, and
we'll get right into it. There is an opportunity for feedback
ready. Everybody can just put their goggles with the speakers
to just on mute, and then we'll that way we don't get the
feedback and our ears will all be fine. So yeah, I just wanted
to introduce some of our panelists, and just wanted to
give them thanks. And we'll start with a mirror test Karimi
from Lexol responses for today. Amir is the CEO and co founder
of Lexol, which is a fast growing fintech startup that's
leading a change within collections industry and
impacting 1000s daily. Prior to that Emir practice banking and
IT law for many firms such as IMK, BCF, and hidden Blakely,
and then with the National Bank of Canada. And he's published
author and has contributed to the doing business report
presented by the World Bank Group, and Amir joins us, I
assume from Montreal. Then next we'll next panelist we have
Brian Simone, I think I got that right, just in terms of
translation. And Brian is the President candidacy Financial
Group, which is a leading full service partner and provider of
purchasing and serving solutions for institutions. Managing
receivables in Canada, Canada seed works directly with
institutions to provide efficient access to capital and
proving operational expense structure and utilizing
technology enabled operations, providing businesses with
flexibility across the credit spectrum to acquire all segments
in the consumer receivables market. And then, next, bright
and early out in Vancouver is Nathan Slee, and he is the CEO
of progressive which is one of Canada's fastest growing
financial technology lenders focus on changing the way
paycheck to paycheck, Canadians access and build credit.
Progressive prides itself in being a socially responsible
consumer finance company, whilst empowering collection agencies
and enterprises to offer proactive solutions and drive
healthy recoveries while protecting brand reputation with
industry leading, and SPS and servicing. And progressive was
also one of the sponsors of 2019 Canadian lenders Summit. And
then last but not least, we have Clint no Santa, and we want to
give a big shout out to Clinton. Just actually found out this
morning. One of our other panelists, unfortunately,
couldn't make it. Robert and Zini and I did have a write up
for him, so won't have as much to say. But I do want to thank
you for joining us. He is VP operations over at LM credit,
which is the sister company of LM financial and it's a loan
company specializing in that elevating credit and he's
joining us from Mississauga. So just prior to the introductions,
I did want to mention, we are encouraging and open dialogue
and questions. Um, you'll see just in the bottom of your
screen, there's two little bubbles just q&a, we were going
to offer an opportunity for questions at the end. But just
in terms of the format, I think could actually be a lot better
if there's any particular item that some of our panelists are
talking to, or any burning questions, we'll just answer
them live, enter them in, I'll read them out, and then just
leave it to the panel to discuss. So, yeah, the topic of
today's conversation is how to build a resilient collection
strategy. And that's in the backdrop of COVID, the winner of
the deepest recessions since the 1920s. And so many fintechs have
raised massive amounts of capital, within that last
quarter to potentially fill this need, there's been obviously a
lot of nervousness, there's been a lot of surprises, and I just
wrote this, you know, we want to talk about just some of the
experiences that we've had, learning by doing, and learning
in the current environment and, you know, crops up predictions
off, you know, for the future in order to ensure that we can
actually have, you know, a resilient collection strategy.
So just kind of want to then open up to the panel, just
talking about some preps, insights, and how we can
actually see that you know, what we need to do to send the
current environment, and how to, well just build a resilient
collection strategy.
For example, just dealing with multi channel that capability,
you know, what is sort of changed in the current
environment, or that we need to kind of focus in, you know, just
in terms of building and maintaining an efficient
collectors collection strategy on that front. And maybe I'll
just open up to Brian, maybe to start off with that.
Bryan Szemenyei: Thanks, James, first of all, thank you for
moderating. And thanks for everybody for for joining today,
I'll start with a little bit of level setting, which is, you
know, emphasizing something that everybody already knows. But it
which is that we're sort of in an environment that is
completely unprecedented, not just in Canada, but sort of
around the globe as far as what the economic conditions are. And
if you took us back to the middle of March, you know, in a
time period, where it just looked like the world was, was
on fire, sort of and getting worse during that period, there
was a lot of fear that was going on as to what it was the the
coming year was going to look like and I'm sure everybody went
through their own heart palpitations at that point in
time. But within our business, we were kind of looking into the
future and saying, We had to completely throw at the book as
to what it was that we think we thought we could forecast at
that stage. We just didn't know what was gonna happen. And as a
result, we were taking some pretty, pretty draconian views
as to what the recovery landscape was going to look like
in Canada were everything, as far as you know, runs on the
bank were being contemplated at that point in time. So, you
know, fast forward over the next six months, and it represented
sort of a sort of completely counterintuitive result from
what you would have expected, you know, you have massive
unemployment spikes you have, you know, GDP drops like crazy,
but at the same time delinquency rates have been down loss rates
have been down, I'm sure everybody's seeing it in their
own portfolios. And in the recovery, world, recovery rates
have been up dramatically. So it turns out that injecting in, you
know, a third of a trillion dollars into the economy does
something and it did, you know, quite a bit during that period
of time. So it's been a lot of sort of learning as you're doing
even within that recovery space. But if I was to sort of step
back and say, Well, what where do we stand today, the general
consensus is that there is a coming wave that everybody's
gonna experience be it losses, delinquencies, but also impacts
on recovery rates within the the Receivables Management space.
And when that comes is a little bit speculative. I mean, there's
different different views. I think other members of panel I
interest be interested in their thoughts as well. But the
general view is that at the end of this year, kind of beginning
of next year, there will be that wave of of delinquencies and
defaults that are sort of coming into the space. So I would sort
of say to your question, James, what do you need to do to try
and prepare for that? Well, there's a kind of a set of
things that I think all lenders whether they're small or large,
or specialty, or monoline lenders or sort of multiproduct
lenders should be doing in order to try and prepare for that wave
of activities. And we'll try and touch on some of those today.
The first one is you kind of mentioned there's just on his
channel management. I think Amir can probably talk about this one
pretty expertly as well and that you need to kind of evaluate
what it is how you're relationship with your customer
has changed and what's changed in their life because for the
longest time, you've been dealing with people and very low
touch, low friction. Somewhat passive means you don't want to
be constantly speaking with somebody every day or every week
or every, every month even, you just want to make sure that
you've got, you know, a frictionless payment structure
in place, that relationship is different. Now, this person is
no longer somebody who you are trying to build a relationship
with that will, you know, that you will be able to extend
additional credit for, you're now trying to build a
relationship with this person where you get top of pile as far
as new payments are concerned. So as they've got sort of a
fixed amount of cash capital that they can utilize to satisfy
their obligations, your goal should be to be the first person
on the list. And that means having kind of multiple
strategies and multiple channels that you can deal with that
person on in order to try and communicate what it is that that
their options are for for repayment. And it's a it's a
firm message, but it is definitely a fair message as
well. So I'd be interested in some other it's sort of a long
winded answer, but interested in some other perspectives as well.
Amir Tajkariml: Yeah, well, is that okay with making James,
I'll go add a few points there. I agree. I mean, federal aid was
great collection went higher. But one thing is for sure,
there's going to be a massive backlog of receivables that are
going to be out there very soon, post towards by the end of
winter, and to be able to collect on those traditional
channels won't work anymore. I mean, we recently conducted a
survey right at the beginning of COVID, Alexa work with over 3000
Canadians just to understand what they're expecting, what
they're getting, what they want, what they want, versus what
they're getting. And the results were fascinating because people
don't like to answer phone calls anymore. We don't answer phone
calls anymore. We don't pay attention to letter mail that
sent that home, we just keep it and forget it. So now it's just
one of the most important factors of collection is getting
the person's attention, right? It's the rule number one, get
the person's attention. If that doesn't work, you'll never
collect. And that's going through digital channels,
whether it's email, whether it's SMS, the channel that converts
the better. And then the second thing about channel is it's
about templating, what's the message you're sending, if
you're sending the same message to everyone from 30 days to 90
days, we have a huge problem there. Because they don't engage
with that template with that wording, as well as other
people. So these are in terms of channels, digital contact
methods is absolutely important. It's number one factor that came
out. And then the second one is once you've caught their
attention, what's next you have to convert them right. And
especially during a season period, wherever it's going to
be have a lot of past due accounts past the receivables
out there, you want to be able to offer them a flexible payment
options. That's the number one number two reason they came out.
And it's extremely important in weather. So rule number one, you
put in some digital channels. And then number two, you convert
them with flexibility. That is what we are focused on it with
Alexa is to offer technology that can automate that because
at the end of the day, one other important thing is that you may
have enough manpower to handle your current collection, the
early delinquencies or, or or a portion of those recipients do
receivables. But you won't be able to do the to handle all the
backlog. So automation will be key to helping or establishing a
resilient collection strategy. I'll stop there no looking get
back to other. Yeah.
Nathan Slee: Great and great comments, guys. And I'll kind of
echo you know, I'll echo a lot of that. I mean, certainly
echoing Brian's sentiment, I think everyone felt this with
bigger description, Brian of COVID, kind of, you know, start
to now is, you know, I think a lot of boardrooms, were having a
lot of the similar conversations that sounds like you guys were
having. And I think a lot of us have been at least pleasantly
surprised in the short term that the results are a lot different
than expected. Also, I agree with both you guys that, you
know, the wave is coming. I think we're all preparing for
it. And, yeah, we're no different for sure. You know, my
kind of high level comments, I think the way that I look at you
know, how to build this resilient collection strategy is
the things I'll mention are things that that anyone should
probably be doing anyway. But I think because there's a massive
wave, it's going to force us right, like I can, I can
prescribe a bunch of stuff. And I think the things I'm going to
mention probably apply to most businesses, right? It's more for
me, the strategy is more about, you know, broader trends in a
lot of different product lines. And then, you know, an event
like COVID It forces us to sharpen our pencils and get to
work on it. So the things that I see in the marketplace and we'll
see every We're so you know, hyper personalization, right? A
little bit to the, to the point of channel management. But it's
deeper than that. Right? It's, you know, again, similar to what
Amir was saying, get customers in the right channels with the
right message that's hyper personalized to them. Right?
We're all used to it. Now every ad we see on the internet is
hyper personalized to us, you know, everything that marketers
are sending our way is hyper personalized. Right. And so a
lot of that is it's about, I think, historically, the
collection agency or the collections world has been a
little bit like, you owe us money. So we're in the driver's
seat. Right. And I think consumers, millennials, the
younger generation, you know, they expect a different
interaction, they expect everything hyper personalized.
And again, I can say that any business, not just collections.
Amir Tajkariml: I think the thing is the reason I'm sorry,
this this collection, this collection has never done it.
Right. A lot of other segments that have done it collection has
never done it.
Nathan Slee: Right. So it's a great, it's a great opportunity,
right? There's, there's low hanging fruit there. I think the
other thing that I see is, is, you know, it's, we're in an
instant gratification world, right? You know, I think about
payment experience, like when I first got a Visa card, you know,
I'd have to if I went to a merchant, they'd print out a
little slip, and I'd have to sign it. Right. Now I get
annoyed if they don't have tap. Right. So again, it's similar in
the collection space, right? If you're trying to collect money
from someone, you want to make it as easy as possible, you
know, hit them play in this space, where they they play if
they're used to making a payment online with PayPal with, you
know, the credit card with Apple Pay, whatever it is, right?
We're getting so impatient as consumers. And I think if if,
if, with our collection strategies, we can adapt to that
same philosophy, reduce friction, reduce friction, I
think the expectations are really high. And, you know, as
Brian says, We want to be at the top of mind at the top of their
kind of payment stack. Well, if I've got three emails sitting
there, and one is a PDF form, that I've got to print out sign
and fill in my credit card number by hand, or if I've got
one, that's Apple Pay, you know which one I'm gonna pay first,
right? And obviously, you know, maybe I'm speaking to a more
tech comfortable generation, but there's more and more in our
pools. I think Brian was, we were planning to get into this
as well, I think that the other thing is, is trying to build a
data driven strategy, right, we're all sitting on hordes and
hordes of data. And, you know, you hear a lot of AI and machine
learning, and all these kinds of buzzwords. Some of it sounds
really scary, but to be quite honest, you know, anytime I've
looked under the hood of someone who's talking about an AI
solution, it's really not actually as complicated and make
it sound, you know, they want to make it sound really sexy to
attract investors and attention. But really, it's actually so it
gets my point on that is, don't be intimidated. Right, by don't
be intimidated by trying to dive into your data. It's not as
scary as it sounds. And there's lots of people that, you know,
that can help. But we're all sitting on a lot of data that
can help us kind of get back to that hyper personalization or
segmentation, right? Find ways if you don't have internal
expertise, find some third parties, find some outside
resources, and really dive into your data and understand how you
can, you know, segment personalize, you know, hit hit
people where they are, I guess, I think, I think all of this is
these, you know, sort of tidbits, I think are stuff that
like I said, we should be applying anyway, in any
business. But, you know, collections is kind of ripe for
it. Right for for disruption, right for kind of innovation.
And I think I think the coming wave is gonna force people to
kind of innovate or fall behind.
Bryan Szemenyei: And I'd emphasize as well, just to kind
of echo what you're saying, Nathan, is that this group, I
mean, the CLA members, you know, should be a group in our group
that are more comfortable with data and know more about the
customers. And I think a big bank or sort of a big lender or
sort of a legacy lender would. And although the big banks have
a lot of information available to them, it's they surprisingly,
don't do a really effective job of deploying and utilizing that
information within a recovery strategy. They do a really good
job of using that information and customer acquisition
strategy and for fraud prevention, but they don't do as
good of a job on the back end when something is sort of rolled
into a non customer category. So I would say that it's not only
as the sort of the market ripe, but I think this group should
should have the tools and the expertise to be able to sort of
capture that it takes a little bit of elbow grease, and it does
require a focused effort. But it is it should be something that
that we're able to obtain.
James Rose: Something I think you kind of touched on sort of
mirrors, specifically backdrop, you know, when we're talking
about flexible payment options are hyper personalization. But,
you know, just in terms of the changing environment and talking
about automation, what kind of strategy Jeez, what can be done
at anything when, you know, sort of you're dealing with, you
know, a bulk amount of, you know, possible, you know,
collections. And you're talking about hyper personalization.
But, you know, when things are consistently changing, how can
you consistently, you know, try to personalize, when people's
circumstances are so precarious, and, you know, one day they
might be able to pay, but then you know, that it's next month,
a month, things are continuously changing for them is a way to
personalize that as their options in order to deal with
those types of situations. You know, presumably, it's
technology, but perhaps we can sort of talk about that, given
that, you know, certainly one of, you know, provide
flexibility and personalization. But on the other hand, you can't
be so granular that you're dealing with just one customer
all the time. And, you know, their particular situations.
Bryan Szemenyei: Yeah that sort of emphasizes the
personalization is kind of a an Nathan could probably speak more
accurately than I but it's sort of a form of really
sophisticated segmentation, where you try and understand
what a customer, what kind of general box a customer might fit
into, and what type of person that that customer is, what what
point in their life cycle they are, what point in their credit
cycle they are, what their propensities are, to repay what
their capabilities are to repay. And trying to define that
personalization, you can generally group people into
certain areas to indicate to say that this type of customer, this
customer block fits within a category within my overall
portfolio, that they're just not capable right now they don't
have the capacity in order to repay me at this time they're
unemployed, they have no assets, you know, they're living at
home, they have nobody they can rely on, there's just there's
nothing within that personalization, that this
person is going to be time well spent on your side to put
resources behind trying to collect on that individual. But
what that doesn't mean is that that person or that group of
people are not somebody that you want to try and maintain a
relationship with, because that situation will change, these
boxes are not static, and people are dynamically moving around
from them and their capacities over time. So if there is a
group of people that you kind of deemed to be low capacity, low
propensity, in your overall group of accounts, you don't
want to actually spend time on those guys, you might not even
try and collect on those accounts at all, because you'll
just be throwing good money after bad. But you do want to
maintain a relationship with those people and try and make
sure it may maintain some sort of degree of sort of ongoing
thread into them. So that way, when their situation changes,
you can reach back into them or they can reach back into you. So
don't look at these hyper personalisations as being fixed.
They change constantly.
Amir Tajkariml: Yeah, absolutely. And I love that
Brian said, keep the relationship absolute, it's It's
spot on communication, and segmentation is only the first
part. That's really, that's step one. Once you've done that, even
through technology, whether you're communicating via digital
channels, there are certain KPIs that you can put in place. So
you can detect if oh, this person is not engaging as they
used to, or this person is not paying as they used to. So it's
super easy to put in place doesn't take AI, I mean, you can
just I don't know, this person is not opening the emails or
clicking on the pay button as fast as it used to be or they go
on the pay button six times before actually paying. So
there's certain trends that you can, you can detect to see if
beyond the hyper personalization or beyond the segmentation,
something is not going as planned. And these KPIs within
your collection strategy will indicate that they will divulge
some information for you to act accordingly. So maintain that
relationship, whether it's in person, ideally not and you want
to make it as automated as possible. I'm talking because
I'm a tech guy. But, ideally, yeah, you can put some KPIs in
place so that you can there's some information that pops out
when something is going wrong or something is not being as as, as
regular as it used to be. It used to be there was in my
opinion.
Nathan Slee: I'll touch on. I'll touch on that question. Maybe
James, I think because, you know, I sort of started this
hyper personalization comment. I'm just trying to now I gotta
navigate zoom to. James, you have that question in front of
you. So I had it up in this. No, there it is.
James Rose: Yeah, it was a question just about hyper
personalization versus privacy. Is there a line drawn in the
context of collections?
Nathan Slee: And I think the way I think of it was probably more
the way Brian and Amir were talking about it, where it's
more about using the data you have to understand and respond
to the behaviors that you're seeing. Right. So understand
your own like segment your own portfolio and understand which
segments want to be want to hear from you at what time of day how
frequently you want to use what payment methods right I don't
think you're good dig into any privacy concerns or using your
own data to understand your your portfolio's and their behavior.
And then I think Brian's right is probably more accurate to
call it hyper segmentation, and understanding each segments
behavior and each segments preferences. And again, you can
do that all with your own, with your own data, where it's not
about digging deeper into the customer's kind of personal
data.
Amir Tajkariml: And I guess I'm putting my previous previous
life as a banking lawyer hat, you use, you know, privacy, you
use the data that you need, in order to offer the service that
the customer needs, beyond any other data, that's where you go
into the gray zone. And you don't want to do that, you
always need to use the data just to offer the purpose, the
service that the customer needs. And at the end of the day,
within collections, segmentation is a service that the customer
needs. So you see, I mean, if you don't need to know their
their sex or their or their, their age, in order to offer
good collection strategy, you might want to avoid that rule of
thumb, but there are some great sales. But in terms of data, you
always want to use the strict minimum, let's say in a good
rule of thumb in order to offer the best services possible. And
that best service and that minimum, are often like zones
that you have to be very delicate with.
Bryan Szemenyei: I think that's a good point here. I mean, and
generally, there are certain aspects, I mean, of of your data
that you want to make sure you, you understand are more
sensitive than others, even if you are segmenting people down.
You don't want to be breaking, you don't want to let the
machine just sort of determine your behavior. Because if you
are breaking people down in a way that is based on their age,
or is based on a socio economic status that ends up meaning you
treat different groups differently and offer maybe a
different settlement option or a different resolution option to
one group than another, then you can run into issues. But that's
where it's that's some of the art and making sure that your
data is being and your your models are being effectively
moderated so that you don't just sort of let the machine run
wild. But it's an it's a good point.
James Rose: So couldn't they go right? LM? Do you guys do sort
of segmentation as well? Or do you guys have maybe a little bit
of a different strategy, just in terms of, you know, just in
terms of channels and what have you?
Clinton Hosannah: Yeah, definitely, I want to first
thank the CLA for including us here in this in this panel is
very interesting hearing what everyone else is saying. And
I'll echo a lot of what they've said, I would only add that, you
know, for us a good collection strategy, while using data and
data mining to make sure that we stay on top of things, also
includes responsible lending, and especially in with a
possible looming second wave of COVID. And obviously, the
impending end of government help to the people that that need,
and even the companies that needed therefore employing
people. We also wanted to add not just to the to the data
mining and the tech aspect to it to a more empathetic look at our
book, and segment it in where we take certain demographics. And
then from that, do a focus group, if you will, and talk to
people preemptively. You know, maybe when we gave them the
loan, in the beginning, there were indicators that they were
probably in a higher risk category, and talk to them about
what they're going through what they're seeing happening in your
own life. And then from that be able to glean from it which we
have strategies that are kind of pro proactive. In the event,
there's a second wave. And for the obvious in eventful
situation where when a funding stops, that there'll be a lot of
people dealing with what they've done in terms of deferrals and
whatnot and having to kind of reconcile that in their own in
their own homes. That being said, some of the data that
we've received not just from the actual what we have on file for
them, but to compensation to a segment of the population. We've
been able to establish programs that someone can opt into and I
know when you're dealing with with massive quantity, it can be
labor risk, but where that labor is concerned will help us get
more market share in the long run especially through word of
mouth.
James Rose: So what are the questions that kind of did have
as well kind of went around just feeling and understanding
particularly with its within this time just just trying to
understand your economics clearly. Because right now, you
know, we mentioned there's been In a huge influx of government
cash, we assume that there's going to be, you know, a wave
that eventually there's going to be withdrawal of, you know, some
some of that cash. So how do we kind of avoid throwing good
money after bad? And what are some of the strategies that we
can, you know, employ? What are some of the things that we
should actually you don't focus on? Is it? Or do we just go for,
you know, the large, potentially large receivables? Or, you know,
do we sort of focus again, with those segmentations certain
segments where we think we can get more receivables initially,
and then perhaps, once things taper off and get a little bit
better, we can, you know, go against other receivables. So,
sort of what are some of the strategies to ensure that, you
know, just isn't certainly in the medium term anyway, short
medium term that we're using resources and our economics
appropriately and efficiently.
Bryan Szemenyei: Yeah, this is, sorry, no, please go on.
Clinton Hosannah: I think that because these are uncertain
times, that there has to be a certain amount of expenditure
that's allocated, to just kind of dealing with that exact type
of thing. And it's something that we have to eat knowing that
within the next 12 to 18 months, that'll come back, obviously,
the businesses out there to be had, and, you know, kind of like
the canary in the minefield right now, will be the way
receivables are, are going to be affected? Should there be a
second wave and if there isn't, with, with the ending of, of the
government stimulus, seeing how many people and a lot of studies
out there that are staying on top of that hardcore, of how
people will actually be impacted by that, and then we'll be able
to scale up going going for it, but there has to be some
understanding that there's going to be some money spent, and will
be more than the not in terms of keeping your some of your
receivables anyways, and the more customer service based type
of scenario, instead of going third party.
Bryan Szemenyei: Yeah, I mean, it is a challenging time to
understand what it you know, what segments are going to
behave in what way because as Clinton says, the government
stimulus programs have just sort of, you know, poked the machine
and now the machine is acting in ways that it never has before.
But there's, there's sort of two elements that I would sort of
highlight as far as understanding your economics.
And that's really just getting really clear down to what your
unit costs are on a lot of these fronts. And there's, there's two
pieces that make that tricky one is, you get sort of emotionally
attached to the loan that you've given out. And if you've given
out a $10,000 loan, you then go to that person and try and
collect a $10,000 loan, that number is gone, that person has
an a different situation than when the loan was originated,
could have been a health incident could have been a job
loss could have been macro economic factors, but that all
that number represents is the ceiling of the number that you
are possibly able to recover from that person, it does not
represent that is the number that you have to be going after
that individual for because that person's capacity and propensity
to be able to repay you has changed dramatically over that
period of time. So you almost have to re adjudicate that
individual to say how much credit is this person worth
given their current situation? And would I take this amount of
credit in replacement for the $10,000 account or the $20,000
account that I previously had. And that can be a difficult
emotional point to make, and that you still get attached to
the $10,000 account. And you may want to hang around the hoop and
say, You know what, I'm not going to take a lower amount.
But as we sort of said earlier, just maintain a relationship,
because we think in the future, the person will have capacity,
or will have the desire to repay me. So that's sort of item one.
The second item is about understanding your cost
structure much more clearly than you previously have. So you
don't want to spend $3,000 chasing an account that is only
$2,500 in balance, right? I mean, that's just kind of
obvious. But, you know, you've got to really understand how
these costs that you incur, compare against the benefits
that you're that you're getting on them. And if you're spending
an inordinate amount of money to try and track down low balance
accounts, or even mid balance accounts, then you probably
could be taking those dollars and redeploying them into
originations and making a better return on equity in that side of
your business. So it is a it is something you really understand
need to understand your your unit economics and and your
opportunity costs much more clearly.
Amir Tajkariml: I again, I agree. We're aligned on a lot of
things that Clinton and Brian said in my opinion in terms of
treating where how you attack your receivables i I personally
believe that not you know, not everybody is an absolute
delinquent as soon as they are laden on an on a on an
receivable. I think one strategy can be to focus on the low
hanging fruit. Early delinquency can be salvaged through
automation. Again, to come back to that. I think automation can
help attack a lot of those receivables that can be self
cured. And you can allow your team, your collection agents to
actually focus on the more complex accounts, the ones that
actually need human intervention, those can have
their own treatment cycle, those can have their own strategy. But
there's a lot of a portion of it, where you can, you can
automate and collect from using using automation using using
software. And that will allow you to basically kind of fucking
hone down on what are we actually focusing on? Because a
lot of it is being handled in the background? That's one thing
and I noticed that very interesting question. I think
Kevin is put there, James, that okay, if I answer it, or well,
we'll give her opinion on it. Is that okay? I can't hear you.
Clinton Hosannah: Yeah, go ahead. Please, go ahead.
Amir Tajkariml: Yeah. And it's, we noticed is, how effective is
having multiple payment methods? Do you see there's a substantial
decrease for defaults, we noticed that adding credit card,
bank transfer and PayPal, it just it absolutely increases
payment methods. Because don't forget, quite often, maybe one
account doesn't have money, but your payroll is now deposited
into another account, you didn't have time to transfer that
account, or that payment method, just being able to do it and
select different accounts on your own on your mobile is
absolutely tremendous. And it really increases your collection
rates. And the other one, how effective is communication via
social media? Again, I'm putting my my previous lawyer hat,
usually, when a loan is given to a consumer, you have a clause in
there that says you allow us to communicate with you via the
method that you have provided, if one of those method is social
media, I guess it's okay. But it's very, very rare that you
give your Twitter handle or your Facebook handle to it. And in
terms of commercial loans, you always have section 13 is always
there right before miscellaneous that says notices can be sent to
this email address or this email address for the borrower or
creditor. So I mean, unless it's actually allowed, I don't think
you can, you can send communication via social media,
that's an opens Pandora's box,
Bryan Szemenyei: I would echo that point is that, you know,
going on, there are some precedents not in Canada, but
in, in Europe, and some in the US of companies trying to use
social media as a as a means in order to collect. And it's sort
of the equivalent to sort of driving up to somebody's house
and then putting a stake in their lawn as this person owes
money. And it really is not received well by government
regulators, by rightfully so. So I would highly caution against
against using social media as a as a channel, but the having
multiple payment channels is certainly useful. Again, a point
of caution is anytime you add multiple payment channels, you
will cannibalize some of your previous payment channels, which
might be fine. I mean, ultimately, the objective is to
remove friction from the customer's payment process
cycle. But if you're sort of input, bringing in a payment
processing system, for example, like I'll use square as an
example, though, it's not one that you need to be you need to
be physically there. But it has a very high transaction cost. If
you're if you're cannibalizing some people from another payment
cycle, which is a lower, lower cost transaction over to a
higher cost transaction channel, you're just dropping your costs,
you're not really increasing your recoveries, there might be
some offsetting effect there, but just make sure you
understand that it's not about having 1000 different payment
cycles, it's about having five really good payment channels.
Nathan Slee: Just to pick up on that a little bit to go a little
deeper on that. I mean, I think as we're all trying to roll out
new strategies and come up with ways to be more resilient. You
know, don't don't be shy to start slow, right? Like, like,
if you're rolling out a new payment tool, you know, roll it
out to a very small segment, write test everything first be
scientific about it, understand if it is having the desired
impact or not having the desired impact, right, like don't get
don't panic and roll something out new to your entire portfolio
without seeing if it's worked or not, right, give give everything
a chance in a small test environment and measure those
results to make sure that you're actually getting what you want.
James Rose: Absolutely. I guess sort of to that point. So
starting slow, is there any reimagining different types of
partnerships for example, that, you know, we can exploit just in
terms of more efficient strategies going forward just to
ensure that you know, the old adage together we're stronger
type thing is, is that any of your guys's mindsets are, you
know, at this time?
Clinton Hosannah: I'm planning to partner with everyone in this
channel.
Bryan Szemenyei: Well, and I think I think the point that I
was trying to make and this is obviously sort of, you know,
self serving is I think all of our businesses are built on the
idea of partnering with each other. Because in in sort of an
individual basis, no company, you know, within the CLI makes
up a significant conglomerate to an absolute behemoth
organization, like a bank that has all of these verticals, and
can build out all the components and build out their product
teams and their tech teams, and they have 20 people on a single
channel and all those pieces, that will never be the path for
small business. And it shouldn't be, it's not the most effective
way to to grow our businesses as a whole, because the opportunity
costs and the resources and the time to deployment are just way
too high. So I encourage all companies within the CLA to look
into the network that this is because individually, we
represent a vast array of very deep experts. And frankly, I
think better experts than exist in a lot of more larger
conglomerates. So collectively, you do have quite a expansive
suite of capabilities, there's some things that you want to
internalize. And there's some things that you want to
externalize. But I think partnerships are the much more
effective way to deploy and test and decrease the risks that
something will not, will not sort of be effectively launched.
So yes, is this is the quicker answer to utilize partnerships
wherever you can and.
Clinton Hosannah: You know, in this, in this age of
uncertainty, especially as it relates to what may happen in in
the fall, in regards to stimulus as well as possible second wave,
Echo Brian's sentiments were I'm looking forward to being able to
lobby government, federal and provincial for leverage that
will allow for less red tape. And in certain instances when it
comes to lending and for sure, in terms of collections, while
being responsible, and having, you know, a kind of pulse on
what's happening with the the Canadian public still be able to
be effective at it, you know, because I will say that some of
the people that we've heard from when it comes to collections,
from what they hear in the media, what they have a clear
understanding or not, it's kind of like, I don't have to pay in
on their smug about it in the sense that, hey, you know, what,
you know, it's COVID, you know, what I mean? And I'm thinking to
myself, you know, you have to be wise, I don't want to say
something to them that's going to, you know, make them feel
like, they have no understanding, but the truth of
the matter is that, you know, with deferrals and taken
advantage of these types of things, whether it's with us or
with a big bank, the chickens will, at one time, come home to
roost, you know, and we'll be there still. So I think the CLA
being this conduit to be able to lobby government and kind of
help shepherd some of the people that are going to be hurt with
with these pain points is why so a lot of the projecting that we
can do a lot of the planning that we can do squarely lens in
the the understanding that our relationship all converge with
this CLA type of middle ground.
Amir Tajkariml: Yeah, what Clinton said.
James R: Keep muting myself there. So we're at 10. Well, we
got about 14 more minutes left. So I just want to encourage
anybody if they've had questions, we were like I said,
we're going to leave the last 15 minutes for questions to the
end. But again, we're all obviously wanting to encourage
people to ask questions throughout. But just given that
we're sort of nearing the end, if you do have any questions, do
encourage you just to go in the q&a box or type them in, and our
panelists will certainly be happy to inter entertain those.
So I guess maybe just moving on to the next topic. Is just in
regards to the Yeah, the government us, you know,
stimulus programs and the, you know, withdrawal of that. And
how do you think what do you think is going to be the biggest
factor and biggest risk to our respective firms or firms or
businesses as those you know, government payments, you know,
sort of do come to a halt. Obvious See, when we're dealing
with bankruptcies, you know, there's a process there that's
sort of out of our hands. But how is it that we can best sort
of manage that as the inevitable government funding does come to
a halt?
Bryan Szemenyei: Yeah, is so I think as that government program
is going to come to a halt, there's going to be sort of some
specific consumer effects. Naturally, for those people who
are on certain programs who are not able to transition to EI,
they'll find a pretty material drop in their, in their top line
income, that they've got available to them. And sort of
concurrently that a little not a lot of people are sort of
noticing as well. OSFI right now is changing the regulations
around how it recognizes mortgage deferrals, which is
going to make it much more difficult for for the banks in
order to continue their their mortgage deferral programs, and
they're going to start pushing to get those those payments back
up to good standing. So as a result of that, you're going to
see a very material top line drop in people's income and a
pretty material increase in people's non discretionary
spending. So those items are going to create quite a bit of
squeeze and a crunch on free cash flow available for for debt
retirement or savings. And as much as people have been
satisfying their debts during this period of time, that will
affect recovery rates, and it will affect delinquency rates as
people can't satisfy minimum payments on their debt. So that
is what will happen in the fall. Right. The question then is how
do you sort of prepare, you know, for that exercise, and and
what can you do in order to try and to try and satisfy it? I
think that's kind of what we've been trying to talk about today.
And but establishing those relationships early and get
those those sorts of pieces in place. You know, ultimately, for
those consumers, though, they're going to, they're going to stop
paying. And I think people need to establish a, you know, as
we've started from the beginning of relationship now, in order to
maintain some degree of consistency on a post on a sort
of a post stimulus basis. Now, the other open question here is
whether or not there will be a second round of stimulus
programs that are being put in place. I think one thing I've
learned through this exercise is don't fight the Fed in Canadian
version of it. So don't fight the BOC, if you want to call it
that. So wait and see whether or not there is a another program
that is run out. But if that does happen, then we'll find
this will just keep pushing, you know these items out farther and
farther. Specific as it relates to insolvencies. insolvencies,
as you mentioned, James, those are a difficult one in order to
prevent the actual event from occurring. Because by the time
you receive an insolvency, notice the consumer has already
walked into a trustees office, they filled out an insolvency
form, they've gone through the financial disclosures, and
they've submitted the file, they've already jumped the sort
of emotional shark if you will, and they're filing that process.
So there's very little mitigation you can do to the
event itself. What you can do is evaluate the insolvencies that
are coming through, they're not written in stone that the
information that is presented is the information that you must
accept. There are excuse me, challenge options, there are
sort of different tactics you can take with the trustees in
order to try and increase the quality of the insolvency that
is coming. Those have very strict guidelines around them.
And you know, we could spend a whole session on that as well.
But don't ignore that part of your book, because it does
require some attention as well.
Clinton Hosannah: I think that part of this, too, is keeping an
eye on what's going to happening politically. I mean, if Erin
O'Toole triggers a an election after Troodos throne speech, and
depending on what happens after that, if we're in a situation
with majority Liberal government, federal Liberal
government or a majority or minority, new, more right
leaning federal government, and we can rest assured that how the
stimulus potential stimulus package if there is a second
wave is rolled out, definitely affect what we can do. But
paying attention to it on on that level also gives us an
opportunity to be ready again, in the event that there isn't, I
mean, you know, Canada's doing very well, we obviously should
be doing better, like lower numbers in terms of cases of
people getting COVID, but it's still pretty low. And I think
that if there isn't a second wave, we know for a fact that
they're not going to want to pull out money instead, it'd be
more of an aggressive way to lower deficit. And with that
being the case fiscal responsibility would be the
message. And as long as that message is being communicated,
whether it's through tech, in in, in what we do, AI or
otherwise, that's how we can make sure to, to mitigate what
can become Other hand collections, but at the end of
the day, there should be a lot more business coming in and
hopefully that it helps on that end to in terms of acquisition.
James Rose: Or question here, from Eric, options, benefits
last drawbacks of third party slaps external collections or
credit counseling for first notice and or unresponsive
clients, good extending an offer for assistance be more
effective.
Bryan Szemenyei: I'm not going to begin, but I'll turn it over
to others who always have an opinion. You know, if somebody
else feel free to jump in, I think there's different kinds of
categories that you've kind of broken out there. If I
understand the question, it's what for very early stage
delinquency, should I be internalizing that that
activity? Or should I be partnering with a third party
collection agency, or a credit counselor in order to send a
notice from a third party, will that generate a better response
than it would if I just send another notice from the company
that I already have? I think to some degree, that depends on the
hyper personalization that we kind of talked to at the
beginning, it depends on the customer. And that if you
already have a positive relationship with that customer,
then you should be able to generate a better response than
a third party agency being kind of dropped in front of them. I'd
also caution that a third party agency can sometimes create a
little bit of a defensive posture from a consumers
perspective, and that they, they suddenly feel like they can't
call out and reach out to you because they're, they're being
reached out by a collection agency, it's not always the
case. But sometimes it can have that sort of effect with people.
So you've got to be a little bit cautious, it can be a little bit
expensive, but it is a effective means in order to induce an
activity from a consumer who you haven't been able to develop an
effective relationship with or who was already in a defensive
posture, you know, you're better to kind of push that
relationship and let them be the bad guy than it is to let you be
the bad guy. So it kind of depends on that. As it relates
to the credit counseling industry, it is important to
break the credit counseling industry into its kind of
constituent pieces. There are for profit credit counselors and
their non for profit credit credit counselors, the non for
profit credit counselors are a softer approach to the consumer.
And they don't cost the consumer as much money, they cost the
creditor money. But it is a more sort of accepted version, I
would say of credit counseling for the consumer space, the for
profit credit counselors will actually charge the consumer
money. And I don't want to sort of paint them all with a single
brush, but they sort of to help the consumer dodge their debts.
So it's a different type of process than it is somebody
who's actually helping them resolve their debts. And I would
say make sure that if you're if you're going down that path,
even if it is a for profit, make sure it's the right type of for
profit. And it's not just kicking off a relationship to
another party whose primary job is going to be to wrestle that
relationship from you.
Amir Tajkariml: Yeah I knew that, it might be what we see
with our clients is that if in early delinquency, you want to
go to third party what that does is one yes, absolutely. Like
Brian said, it's expensive. But we also noticed that it kind of
this we work with telcos, we work with utilities, we work
with banks, and they told us listen, we want to avoid going
to collection is third party is good. I'm not I'm not bashing
anyone. But I'm just saying, we want to avoid getting going to
collections at the beginning, because we noticed as soon as
you go to collections, it kind of breaks that relationship
between us and the customer. And what it also does is that that
collect third party doesn't necessarily have your brand, as
a at heart in terms of that, that's our value proposition.
They're working with multiple brands. So it may have an effect
on your brand, because the strategies may be a little bit,
a little bit more tough and right, rightfully so. But just
in terms of early collection. That's why one of the we've
noticed these days. And now especially with all the social
media out there, as soon as you see a bad review, it can affect
the whole, the whole the whole pie. So you want to be as
flexible and as keep as internal as possible. Because it can, it
can break the relationship if you go to third party a bit too
soon. What we've noticed the past 50 years, six to seven
years collection has always been a little bit on the on the rigid
side. And nowadays flexibility is key. You need to keep that as
internal as possible. And we've seen the results are better when
you try internally to handle that situation with the
customer. And then ultimately if it doesn't work, we're like you
know, you've tried your your different scenarios, and then
you can give it up to a third party anyways, in our
experience, we've noticed that internalizing it as much as
possible at the earliest at early stage makes a difference.
Because brands right now like big brands, Rogers, these,
they're very, they're very worried that their brand may may
be affected, right, it's very important to keep that perfect
reputation. And off very often has happened. And we have data
to show it. I mean, we're not going to hide themselves. It's
that when it goes very often, when it good went to collection
agency, it became a little bit rough. So that's that's the
thing, but it's all changing. It's all improving. And with
those my comments regarding early collections, or lead
delinquency.
James Rose: Right,1 we have, maybe time for one more
question. So just play if anybody has one. But I guess in
the meantime, I'm going to hand it back to Tom here. But I just
saw just want to thank the panel for sharing your insights and
with us and your, your, your tips, and how to build a
maintaining resilient collections practice,
particularly within these times of uncertainty. But you know,
one of the things that I got out of it, though, as well,
especially we're talking about the beginning, you know, certain
strategies that can be employed, or I guess, kind of things that
we should be doing anyway. And if we're constantly doing those,
looking back at what's effective, and what's not
effective, that'll certainly help by us, you know, in the
future, because things are always dynamic and changing. I
guess this is just more of one of a degree. So yes, I just want
to thank Amir and Nathan, Brian, and Ben, for joining us today
and having this opportunity, also to moderate and it was
great meeting you virtually as well. And yeah, thank you to
everybody who participated and throughout the country, and I'll
just hand it back to Tal.
Tal Schwartz: Thanks so much, James. And thank you, everyone,
for a really interesting discussion. We, like I mentioned
at the beginning, we're going to be circulating the recording to
everyone that registered, so don't worry if you miss a little
bit of it. And, you know, we'd love to have you back. We're
running these webinars on different topics and lending and
fintech almost every month. So if you want to participate, if
you have a topic that you'd really like us to cover, or if
you just want to be more involved in the Kenyan lenders
Association, please reach out at myself or, or follow us on
LinkedIn. Again, thank you so much to Lexa up for sponsoring
this, this webinar. And we'll be sharing laptops contact
information as well in when we share the recording. So if I Oh,
thank you, everyone so much for joining us across the country.
And I will see you all very, very soon.
Unknown: Thank you. Appreciate you guys.