Debt Collection Software Market - Growth, Trends, COVID-19 Impact, and Forecasts (2023 - 2028)

Debt Collection Software Market Analysis

The market for debt collection software is expected to register a CAGR of 9.7% during the forecast period (2021 - 2026). With changing lifestyles and increased purchasing power, consumers have become more empowered than before, and for every informed purchase decision made, they are creating a debt cycle. Whereas managing a debt cycle guarantees success for the business, accounts receivable is probably one of the most critical factors determining whether the company can withstand and operate with its competitive advantage.

• Consumer debt is primarily of credit card debt, medical bills, mortgages, student loans, and auto loans forms. Businesses often strive with accounts receivable because of a mixture of factors. Untimely invoicing, no collection process, sending the wrong invoices, or absence of a dedicated accounts receivable employee or team managing accounts receivable.
• Nevertheless, as long as the business has the right people, processes, and tools, such as debt collection software, managing accounts receivable becomes more straightforward and easy to manage. According to a study by PayStream Advisors, companies are witnessing a 10-20% decrease in Days Sales Outstanding (DSO) after implementing debt collection software.
• The debt collection software industry is being driven by various factors, such as managing and automating all debt collection and recovery processes, rolling out self-service payment models to quicken the collection process due to the increased need to control, rise in need to reduce bad debt and improve the cash flow while optimizing collection costs, and surge in demand.
• The increasing debt globally has been posing challenges for debt recovery. In the United States, consumer debt has increased nearly by USD 2.3 trillion since the height of the Great Recession in 2009, expanding across most debt products to top USD 14 trillion in 2019. While high debt often carries a negative connotation, the positive side is that the average FICO Scores of the US consumers have never been more top. The increased rate of debt taking in the United States and other countries is expected to drive the market for debt collection software across various verticals.
• Further, the outbreak of the COVID-19 pandemic has been increasing the challenges posed for debt recovery. Several state officials and regulators have taken steps to minimize the economic burdens stemming from COVID-19 on consumers in their states, including by placing additional restrictions on debt collection practices. In March 2020, Massachusetts Attorney General (AG) Maura Healey implemented and filed with the Secretary of State’s Office an emergency regulation designed to curb debt collection in the Commonwealth during the COVID-19 pandemic.
• Variations in enforcement procedures and order for payment procedures for the duration of the emergency and significant adverse economic effects especially rising unemployment may make it further complicated, and in some cases, restrict the power to enforce claims. On the other hand, the COVID-19 crisis is expected to increase the number of overdue loans and utility bills within the medium term, creating new business opportunities for debt collection software.

Debt Collection Software Industry Segments

The debt collection software is a solution for automating debt management processes. This software segments debtors consistent with their level of insolvency to differentiate collection processes and improvise recovery rates. B2B collectors are generally using debt collection software to collect on commercial debts that are accumulated through service transactions.

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Debt Collection Software Market Trends

This section covers the major market trends shaping the Debt Collection Software Market according to our research experts:

Increasing Automation in the Debt Collection Process to Drive the Growth

• Debt collection software offers various features, like customer segmentation based on collection scenarios, automated customer reminders, email and letters, streamlined communication with clients, suitable payment plans, transaction management, commission management, compliance management, invoice management, payment, and others resulting in reduced human intervention and automation of redundant tasks. This has led to higher efficiency operations and a lowering of the excessive cost incurred due to these processes, thus increasing the market growth of debt collection software in the market.
• Cloud computing technology is becoming mainstream, and the seamless connectivity provided by the cloud is making it accessible and is also increasing the ease of sharing data and applications. According to the Right Scale’s annual State of the Cloud Report 2019, 91% of businesses use public cloud, and 72% use a private one. Most enterprises use both options, with 69% of them opting for the hybrid cloud solution. Hence, the advent of cloud technology is also boosting the growth of the market.
• Though government regulations regarding data security are becoming stringent, Government policies and increasing investments in BI analytics tools are developing the market for spend analytics worldwide. Many global companies are collaborating with national governments to enhance spending and procurement processes using spend analytics tools to deliver a practical solution in society.
• Legal notices no longer pose a threat to debtors, and increasing rules and regulations have made the collection process even more complicated. Hence, many telecom and utility companies are using debt collecting software to benefit significantly increased online transactions. Companies have introduced a self-service payment platform to keep track of their customers, follow up on the bill payment, and maintain their credibility.

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