As household debt rises, demand for debt collection services will increase as well, allowing suppliers to boost prices.
Los Angeles, CA (PRWEB) July 25, 2014
Debt collection services have a buyer power score of 4.0 out of 5. The high score implies that buyers have favorable negotiating conditions. Demand for services primarily stems from high debt and greater consumer spending. In addition, as consumers and businesses take out more loans, there are likely to be a greater number of loans that are past due. “This will lead more buyers to seek collection services,” says IBISWorld business research analyst Aileen Weiss.
Buyers have a fair amount of negotiating power with debt collection agencies due to the high availability of substitutes, low market concentration and low switching costs. Buyers can choose to use a debt buyer instead of a collection agency, which would also reduce the buyer's risk of having the debt on their liabilities. Alternatively, buyers may bring the entire process in-house to avoid high service fees and to increase control over the account, though buyers may consider purchasing debt collection software to streamline this process. “Having alternative options gives buyers more negotiating power since they have the option of walking away from the debt collector entirely,” says Weiss.
The market for debt collection services is also not very concentrated. Buyers have an edge when negotiating a price and the terms of the contract; agencies are willing to negotiate to attract customers since most buyers have numerous alternative options that meet their needs. Also, there are low switching costs, allowing buyers to easily take their debt accounts elsewhere. This added concern for the collection agency also contributes to higher negotiating power for the buyer.
Though negotiation power is high, buyers must be wary of the agency's level of specialization as well as the likelihood that the debt will never be recovered. Buyers must ensure prospective agencies are properly bonded and licensed, adhere to regulations and employees are appropriately trained and are experienced. Otherwise, selecting an agency that does not meet such requirements can increase switching costs. Finally, buyers must carefully select a pricing model when signing the contract; buyers may avoid unnecessary fees if no money is collected even if agencies spend a significant amount of time trying to recover the debt. Major vendors include Altisource Portfolio Solutions SA, Coface Collections North America and Diversified Consultants Inc. For more information, visit IBISWorld’s Debt Collection Services procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of debt collection services. Creditors hire debt collection agencies to help collect payments on accounts that are past due or in default. Debt collection agencies do not include debt buyers, which are companies that buy debt at reduced rates from creditors or debt collection agencies and then retain all the money collected from the accounts.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Buying Lead Time
Key RFP Elements
Buyer Power Factors
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