Debt collection to the fore as finance sector struggles

Creditors are outsourcing an increasingly larger portion of their debt recovery requirements

Managing debt collection is a growing industry worldwide, particularly in the wake of the sub-prime mortgage problems, says Rob Yeldon, chief executive officer of financial services and software company Admerex.

Admerex provides software and consulting services to financial institutions, telecommunication companies, utilities, educational and government organisations in 25 countries. The focus is on credit and risk management. The company also markets and supports high-volume payment processing, security and retail banking applications.

“Regulatory pressures such as Basel 2 and Sarbanes-Oxley are giving rise to increased demand for leading-edge risk measurement and management tools, along with related services,” Yeldon says.

“Creditors are outsourcing an increasingly larger portion of their debt recovery requirements.”

The listed Australian-based company is the dominant provider of debt collection management services in New Zealand through its purchase last year of Mercantile Systems, which had been incorporated in New Zealand in 1996.

Customers include the Bank of New Zealand, Fisher & Paykel Finance, DTR and several insurance companies.

CWX is the flagship software product of Admerex. It’s a system that manages the primary aspects of the collections and receivables process, using business rules that automate the traditionally labour-intensive aspects of collections.

The company has integrated the best of the software from acquisitions such as Mercantile Systems, which has introduced a .Net layer to the software.

Yeldon says the Australian and New Zealand markets have highly disciplined lenders but in the US, for example, people are not used to managing debt and there is a real push for borrower education. In Asia, non-performing loans are equivalent to 30% of the region’s gross domestic product, while in Europe there is more than $US900 million (NZ$1.26 billion) in non-performing loans.

Yeldon quotes research that shows New Zealand has the highest percentage of household debt in the world, followed by Australia. And anecdotally, one in 10 New Zealand households had not paid its utility bill within the previous 60 days.

“In New Zealand, there is a strong move for organisations to bundle debt and sell it to the highest bidder, usually in the mercantile agency space,” he says. “Telecom, for example, is a big user of these services.”

At the time of this interview, eight second-tier New Zealand finance companies had gone into receivership or liquidation.

Yeldon says the predictions are that several more will fail.

Admerex has a software development team distributed between Australia, Singapore, the Philippines and the US, developing multi-currency, multi-language systems. It has also “arabised” a system for its latest customer, the Bank of Dubai.

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Tags Admerexbasel2Sarbanes-Oxleyfinance servicesdebt collection

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