In Spain, the financial situation is marked by uncertainty and the increase in non-performing loans with late payments, more particularly when the volume of doubtful loans in October 2022 was 46,048 million euros, with a year-on-year rate of 13.06% (October 2021) according to the Bank of Spain’s records. The NPL ratio for consumer credit at deposit institutions stood at 4.9% in the second quarter, a far cry from the 5.6% reached before the health crisis. The consumer NPL ratio represents 0.3% of the total credit figure. Many entities keep these loans off their balance sheets as they present a higher risk of default. According to financial credit institutions (EFC in Spain) that provide consumer credit, the NPL ratio stood at 6.35% in October 2022. The delinquency rate in consumer credit is always higher than in mortgages, as it is a category that represents a higher financing risk.
In debt collection management, data analytics is critical to obtaining collection, influencing customer behaviour and maintaining customer relationships. Until recently, institutions were using outdated and inflexible tools and manual techniques; today, the process has been completely transformed. Even so, developing the infrastructure to automate the process takes a lot of work, so many institutions outsource this activity to improve their operations. Quantitative data management and the rise of automation have greatly facilitated the collection process. Quantitative information is essential; the underlying data enables the segmentation of customers to know the reasons or causes of non-payment and the possibility of retrieval. GDS Modellica,
based on its in-depth knowledge of the sector, generally differentiates three stages:
- Early-stage collections, known as the delinquency period (30-60-90 days)
- Mid-stage collections, for assessing the level of risk (120-150-180 days)
- Final stage Collections, known as the charging-off period, from six months onwards
Each of them has specific objectives and solutions that vary in decision-making strategy depending on the particular stage. In the early stages, it is necessary to improve communication channels with the customer, to reduce friction, and offer alternative methods, which will favour the evolution of the customer’s intention to pay.