Technological innovation has been key to driving the growth of fintech. This innovation, however, has largely bypassed the world of debt management.
In Part One of our chat with Amon, we look at why the debt industry has been slow to innovate, how tech is driving that change, and why creditors need to be focusing on how they treat their customers in debt.
Abi: Welcome back to the Ophelos podcast. Today I'm joined by our CEO and co-founder, Amon, and we're gonna be talking about innovation in the debt management industry. To start with, why do you think there's been little innovation in the debt management space?
Amon: Yeah it's a good question. So I have a couple of theories and to be honest, it still strikes me as somewhat odd that when you compare other areas of the financial services sector we have seen far less innovation in the debt management space.
So first and foremost, I think it's mainly because of the reputation this industry has. It's perceived as deeply unsexy, that's just the reality of it. People connect somewhat negative emotions with collections and that has an impact on entrepreneurs and other figures that maybe drive towards making things more advanced on the front end, and taking the same approach on the back end. I think being in a space that is perceived as unsexy really doesn't help.
From a regulatory perspective, it's highly regulated. Which again, makes it far more complex to enter the space.
And lastly, it traditionally has not been a technology space. So when you think about the people over the past, let's say two, three decades, that have been operating and working in this space these are, generally speaking, not necessarily technology experts, be it computer scientists, machine learning experts, data scientists, product experts. And as a result, when we see innovation, or perceived innovation in this area, it's primarily operationally-driven rather than technology and product-driven, which from my perspective, doesn't necessarily equate to innovation.
The way we think about innovation is for technology and for product and how that ultimately impacts customers and businesses in doing better and creating better outcomes, which is a remarkably different approach to most companies in the space.
So in a long-winded answer, I don't think it's one specific thing, but a culmination of a number of different things.
The main thing that has been changing over the past five to ten years is that we've gone more and more digital. That's a no-brainer. And so when we say we've gone more digital, we've gone more digital from a financial services perspective; getting access to credit online and making purchases online. And so that has become way easier, more frictionless, cheaper. And so by expecting people to then resolve a debt in a kind of analogue fashion, you create a huge imbalance, and in particular, you create a huge difference in experience, right? Because on the one hand, you make it very easy, very simple for someone to, let's say, get access to a credit card. On the other hand, you make it super, super hard for someone to pay off a debt that they've built up for this credit card because of an unexpected life event, for example. And what's really changing is the expectation that customers have across the entire life cycle and across the entire customer journey that we see.
So that is massively changing now. And the second thing that's changing outside of the experience is that we have an unprecedented cost of living crisis. And when we say unprecedented we're talking about the worst cost of living crisis in fifty to a hundred years, pretty much since the Second World War. Real wages and real income is plummeting here in the UK and elsewhere in the world.
And so what it really does is shine a light on what businesses are doing. Any CEO for a large enterprise needs to ask themselves the question:
"What is our strategy and what is our process when it comes to managing customers who have fallen into debt."
And by the way, that's not 2 to 3% of your customers. That is potentially 50, 60% of your customer base. That affects almost every single household in the UK and therefore almost every single household you as a business have.
And so you put these two things together, it makes this a massively important topic. And you know what's very clear is that very few businesses have answers. The status quo and just keeping on going as we have over the past 10, 20 years is not good enough. And so we need to find answers to these questions and that's what we are here to do. One of the reasons why we exist is ultimately to help customers manage debt in a better way and hopefully get out of debt. And that, in my perspective, you can only do at scale with technology.
Abi: Thanks so much. This has been part one of our conversation with Amon. I'll be talking to him more in part two about what businesses can actually do to rethink their strategy. If you want to hear more in the meantime, check out our blog on Ophelos.com. Thanks for listening!