The State of the Consumer Finance Industry Today

“These are unprecedented times.” This has become a common refrain among pundits, analysts, and everyday people. Still, it more or less continues to describe the situations we face day by day in 2022. As we make our way into the third year of being at the mercy of COVID19 and its effects, we find ourselves slipping at the brink of an increasingly likely recession. 

What does this mean for the Consumer Finance Industry? What is the current state of affairs and what can we do in the coming weeks to best prepare ourselves for whatever 2023 may hold?

Current Consumer Finance Industry Trends

1. Increased Inflation & Delinquencies

As is common during recessions, inflation is very high and delinquencies are quickly rising. While signs show that everyday people are making adjustments, most are not pulling back completely yet and we are seeing far smaller payments being made as compared to just six months prior.

2. A Shift to Digital Collections and Servicing 

Considering this rise in delinquencies, paired with the coming holidays where people will need more cash on hand for holiday expenses, Consumer Finance agencies are looking to invest in digital and a lot of careful thought and creativity is being put into how to get debts paid.  

3. Changes in Hiring and Staffing

Buy Now, Pay Later (BNPL) stocks are down significantly, necessitating proactive planning in several sectors within the industry, including increased staffing within the digital space (not call centers) and creditors relying on more vendors than we have previously seen. Conversely, in the world of FinTech, layoffs are on the rise, and it is fair to predict that many companies are not going to be able to weather the coming storm.

4. A New Kind of Workforce

Amidst all of them post-COVID changes in the world, is the new work from home (WFH) workforce. WFH opportunities that sprung up during the height of the pandemic have now seemingly changed the state of the US workforce forever. Throughout the Consumer Finance Industry, very few employees want to come into an office, and we saw historically high attrition rates when companies required employees to return to their offices. This new trend is also reflected in the hiring sector where posts with the same job requirements, one in office and one WFH, see 10X the number of applicants for the WFH posting. Although this is a significant change in operations, most Consumer Finance agencies do not see a difference in productivity attributed to the shift.  

The Consumer Finance Protection Bureau (CFPB) 

The Consumer Finance Industry is more regulated than ever before, and in the wake of the Hustein decision, we have already seen approximately 1,400 copycat cases. In response, collection agencies are calling on the CFPB to speak out about how Hunstein harms consumers by limiting multi-channel communication and accruing expensive legal costs. 

Along with addressing Hustein-related concerns, the CFPB is faced with several issues within the Healthcare Finance sector including multiple obstacles related to high deductible plans and concerns regarding the ethicality of healthcare-related credit reporting.   

Preparing for a Likely Recession

In the coming months, we will likely see an increase in payment plans, reduced interest rates, and bigger discounts. As these changes become more prevalent, the transition to digital will become increasingly valuable within the Consumer Finance Industry . Not only does this encompass technologies such as self service portals that offer payment plans, but also alternative forms of communication including email, text messages, and AI. While 73% currently report using some kind of AI (81% report using decision tools, 55% voice, 45% real time agent scripting, and 36% chatbots) these numbers have risen consistently over the last year and are projected to continue to grow in the year ahead.   

Recessions can be frightening, but you do not have to go it alone. Prodigal assembled an expert panel of current and former executives from American Express, Bill Gosling Outsourcing, and Halsted Financial to explore “How to do more with less in the face of recession.”

Webinar: How To Do More With Less In The Face Of A Recession

Join our free webinar on Monday, December 5 to best prepare yourself for success – no matter what 2023 may have in store. Get more information and save your spot now at: https://page.prodigaltech.com/webinar-prepare-for-recession

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Brian Reed

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