Industry conditions have improved, despite consumers looking to save more than they spend
Melbourne, Australia (PRWEB) December 10, 2012
After a disappointing industry performance during the onset of the global financial crisis, the Debt Collection industry has begun to rebound. According to IBISWorld Industry analyst Jeremy Edwards, “over the five years through 2012-13, the industry has experienced improving conditions, despite consumers looking to save more than they spend”. The industry has grown by a compound annual rate of 3.4% over the five years through 2012-13. Conditions are improving slower than expected, but increasing consumer confidence and household disposable incomes should result in increased spending. Increased scrutiny towards debt collectors may result in slightly lower revenues as operators engage in less risks. Industry growth is expected to be 4.6% in 2012-13 to be worth $1.9 billion.
Reduced reliance on credit will lower value and volume of debt available for purchase from clients. The recent financial scare has also made Australians savvier spenders, even among the youth and young working adult generation, with data indicating that this age group is saving more. “A habit that is likely to further depress revenue growth for debt collectors over the next five years”, says Edwards. The number of bankruptcies is also expected to level off, reducing earnings from this segment of debtors. Following these trends, consolidation is likely to occur as the fight for market share grows. Employment will continue to grow, but at a slower rate as efficiency gains from technology are forecast to increase debt collected per employee per hour. Furthermore, larger firms with the capacity to expand overseas will do so, fulfilling labour requirements at a lower price overseas to protect profit margins. Over the five years through 2017-18, growth should be stronger than average in the immediate term as households and businesses deleverage while economic conditions remain positive. Over the next five years, a larger proportion of revenue should be generated from contingent collection as opposed to the debt portfolio collection.
The Debt Collection industry is experiencing increasing consolidation, however, the industry remains fragmented. The industry involves a range of operators with varying sizes; the two largest operators are currently Collection House and Credit Corp. Within the industry, a large number of small players exist, dealing primarily with recovering loans from individuals and small businesses. As such, the industry is deemed to have a low level of market share concentration. Market concentration is expected to increase over the next five years despite some new entrants, as larger companies purchase small firms or simply push them out due to ability to bid higher for debt portfolio collections.
For more information, visit IBISWorld’s Debt Collection report in Australia industry page.
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IBISWorld industry Report Key Topics
Debt collection firms retrieve debt payments from delinquent individuals and businesses that have fallen short of the terms and conditions outlined by their loan agreements. A firm can act as an agent on the behalf of a creditor for which the firm receives a fee or percentage of the total amount collected. Alternately, firms purchase 'bad' debt from the original creditors at a discount to its face value.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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