Optimizing Debt Recovery: A Strategic Imperative for Lenders

As consumer debt soars to $17.8 trillion in Q2 2024¹ and auto loan debt reaches $1.62 trillion², lenders face mounting challenges in managing delinquencies and maintaining financial performance. With auto loan delinquencies at 4.4%³ —the highest since 2021—lenders are under increased pressure to recover outstanding balances efficiently. Compounding the issue, Buy Now, Pay Later (BNPL) services are projected to exceed $114 billion in 2024⁴, further contributing to financial stress on borrowers and increasing delinquencies across multiple lending products​.

In this environment, relying solely on traditional collection methods is no longer sufficient. Augmenting existing recovery processes with automated, scalable tools is essential to ensure lenders can protect liquidity, mitigate risk, and maintain competitive advantage.

Key Drivers Making Optimized Debt Recovery Essential

1. Soaring Delinquencies and Debt Growth
   As economic pressures continue, delinquency rates are expected to rise further in 2025, affecting auto loans, personal installment loans, and BNPL products. This growth in delinquencies makes efficient debt recovery operations critical to maintain portfolio health.


2. Reduced Financial Support and Rising Interest Rates
   With pandemic-era support programs expiring and higher interest rates squeezing borrowers, lenders are seeing an increase in delinquent accounts. To manage the volume effectively, they need scalable tools that complement their existing collections methods.


3. Operational Efficiency and Cost Control
   Handling increased delinquencies manually can quickly overwhelm internal teams, driving up operating costs. Automated recovery solutions enable lenders to reduce manual intervention, lower operational costs, and focus on high-value activities.


4. Regulatory Compliance and Reputation Management
   Regulators are increasing scrutiny on fair and transparent debt recovery processes. Ensuring compliance while safeguarding borrower relationships will be key to avoiding fines and protecting brand reputation.


5. Preserving Long-Term Customer Relationships
   Effective recovery isn’t just about recovering debt—it’s about retaining borrowers for future business. A customer-friendly recovery process can help maintain trust, fostering future lending opportunities and long-term growth.

Augmenting Collections with Payliance’s Presentation Manager

Payliance’s Presentation Manager is designed to augment—not replace—existing collections efforts, delivering automation, configurability, and compliance tools to improve operational outcomes.

• Higher Recovery Rates: When integrated with traditional recovery methods, Presentation Manager improves recovery performance by 30-50%, helping reduce Net Charge-Offs (NCOs) and boost portfolio performance.
• Cost-Effective Operations: Presentation Manager aligns costs with performance by ensuring no fees on unsuccessful transactions, lowering operational expenses.
• Built-in Compliance: Developed by a licensed collection agency, it automates borrower notifications and provides pull-back functionality to minimize disputes and maintain compliance.
• Seamless Integration: The solution integrates with existing Loan Management Systems (LMS), fitting within any point of the collections waterfall, ensuring continuity and scalability without disrupting current operations.
• Flexible and Scalable Recovery: With 100% configurability, lenders can tailor the number of collection attempts, transaction sizes, and timing to align with product and portfolio needs, ensuring efficiency at scale.

How Optimized Recovery Drives Strategic Value

1. Unlocking Capital for Growth
   Faster recovery cycles reduce non-performing loans, freeing up capital for new loan originations and supporting portfolio expansion. Improved liquidity strengthens financial performance, contributing to better EBITDA and loan capacity.


2. Mitigating Risk Amid Economic Uncertainty
   Automated tools enhance risk management by providing real-time insights, enabling lenders to prioritize high-risk accounts and protect cash flow. This flexibility is essential in an unpredictable economic environment.


3. Achieving Competitive Advantage
   Lenders with superior recovery strategies can offer more competitive loan terms, attracting new borrowers and retaining existing customers. Efficient debt recovery becomes a strategic differentiator in a competitive market.

Act Now to Build Resilience

In today’s volatile lending environment, augmenting existing collections with automated recovery tools is essential for maintaining profitability and building long-term resilience. As economic conditions continue to evolve, lenders that invest in optimized recovery systems will be better positioned to navigate challenges, manage risk, and maintain customer loyalty.

See How Much More You Can Recover

See how Payliance’s Presentation Manager can unlock new value for your portfolio. Run the Debt Recovery Value Calculator today: Try the Recovery Optimizer

Don’t miss out on potential savings—schedule a consultation with our team today to start optimizing your payment processing debt recovery.

References:

1 https://www.fool.com/the-ascent/research/average-household-debt/

2 https://ycharts.com/indicators/us_auto_loan_debt

3 https://www.fdic.gov/analysis/risk-review/2024-risk-review/2024-risk-review-section-4.pdf

4 https://www.globenewswire.com/en/news-release/2024/09/03/2939465/0/en/Explosive-Growth-in-the-Buy-Now-Pay-Later-Market-A-Deep-Dive-into-Trends-Drivers-and-Challenges-Ahead-Future-Market-Insights-Inc.html