Tuesday,16 July 2024

Transforming debt collection in Southeast Asia amid rising NPL

5 min read

Interviewed By Foo Boon Ping

Then Kian Foh, co-CEO of Collectius, delves into the intricacies of the NPL market in Southeast Asia, and the company’s unique regional operating model that looks to enable financial institutions to manage non-performing and bad assets on their balance sheet

Singapore-based debt management company Collectius aims to revolutionise the debt management landscape in Southeast Asia. Established in 2014 and funded by a Swiss-based holding company, Collectius specialises in managing nonperforming loans (NPL) and conducting debt restructuring for financial institutions across the region with a primary focus on Southeast Asia.

With a presence in seven countries including Singapore, Malaysia, Thailand, Vietnam, Indonesia, Philippines and India, Collectius has rapidly expanded its reach since its inception. The company operates through two primary revenue streams: debt purchases and outsourced debt servicing for financial institutions. By acquiring NPL assets from banks and employing their technology platform, Collectius effectively reaches out to customers and initiates the debt collection process. Additionally, the company offers outsourced servicing solutions to financial institutions to help them to manage their NPL portfolios.

Collectius has garnered a diverse clientele, including over 100 financial institutions comprising both banks and non-banks. By collaborating with these institutions, Collectius plays a pivotal role in servicing and collecting outsourced NPL accounts, as well as acquiring NPL directly from select financial institutions.

The NPL market in Southeast Asia has seen significant deterioration in recent years with the build-up of inflationary pressures and higher interest rates, posing challenges for banks and eroding their profitability. The State Bank of Vietnam, for instance, reported a noticeable increase in NPL, mirroring a broader regional trend.

However, Collectius has managed to thrive in this environment. Despite subdued sales initially, the company experienced 18% increase in full-year revenue in 2022 to reach $41.4 million, with total assets under management growing 42% to an impressive $7.1 billion by the end of the year. Loans purchased by the firm amount to $4.8 billion while the remainder are debt serviced on behalf of clients.

Collectius’ co-CEO, Then Kian Foh, attributed the surge in NPL in the region to macroeconomic conditions such as increasing interest rates and inflation. These factors have constrained consumers’ disposable income, making it more challenging for them to meet loan obligations. Consequently, Collectius has observed a shift in customer behaviour, with individuals becoming less willing to settle debts for larger amounts and prioritising minimum instalments instead.

While auto loan delinquency has emerged as a prominent sector experiencing a higher incidence of NPL, Collectius recognised the market potential for debt management across Southeast Asia. Then explained that the concept of debt selling is relatively new in the region as compared to more mature markets like Europe and the United States. However, as the market evolves, Collectius anticipates higher growth in debt sales, with inquiries from financial institutions in countries such as Malaysia, Indonesia, Thailand and Vietnam steadily rising.

Collectius’ success so far can be attributed to its unique regional operating model, that combines technology-driven solutions with a commitment to compliance and customer-centric practices. The company has invested significantly in its proprietary technology, leveraging a comprehensive customer relationship management system and behavioural scoring to optimise debt management processes. By segmenting customers based on risk and applying tailored collection strategies, Collectius ensures efficiency and resource prioritisation.

Furthermore, Collectius sets itself apart by employing artificial intelligence (AI) tools to ensure regulatory compliance and enhance customer experience. Its advanced call monitoring software audits 100% of calls made by its debt management mediators, using AI to identify potential issues related to tone and language. This approach not only improves compliance but also fosters respectful and fair interactions with customers, a core principle for Collectius.

Looking ahead, Collectius envisions further growth as it aims to be the leading fintech debt management company in the region. The company seeks to instill best practices, compliance, and convenience for customers while dispelling negative perceptions surrounding the debt collection industry. Through its commitment to fair treatment, advanced technology, and a regional presence, Collectius strives to reshape the debt management landscape in Southeast Asia.

Keywords: Debt Management, NPL, Compliance, Debt Restructuring, Financial Institutions, Bad Assets, Balance Sheet, Debt Selling
Institutions: Collectius
Region: Southeast Asia
People : Then Kian Foh
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