Poor revenue
management is costing lenders literally billions every year. According
to Bank of England figures, in 2003 more than £3.6 billion of
uncollected consumer debt was written off in the UK
alone.
Bearing in mind that this figure does not include debt writeoffs by
retailers, utilities, telcos and even the government itself, than
clearly the cost of not collecting consumer debt is staggering. This
scale of write-off is typical for most developed markets, and while the
absolute levels of debt write-off may be less in the developing
economies of eastern Europe and Asia, we also know that the arrears
levels in these markets are often much higher than in the more mature
markets of the west. But writing off debt arising from the non-payment
of loans, goods or services is just part of the picture. In addition,
there is the cost of employing staff, systems and services to manage the
collections process to ensure that the write off levels are not even
greater. Add to that the loss of future revenue resulting from not
rehabilitating customers and returning them to an “open to buy” position
where new loans and services
could be
sold. And finally, there is the cost of the wasted marketing investment
expended on winning customers only to find that they do not pay for the
loans or services that they have bought. It is a generally held belief
that it takes between 10 and 20 good customers to pay for the cost of
one bad one.