Servicing: strength and scale across Europe

Intrum’s integrated business model enables the company to support clients in two ways: by buying portfolios of overdue accounts, and by servicing accounts – mainly collecting debts – on an outsourced basis. The servicing business generates around 55% of Intrum’s total revenues, collecting both on behalf of external clients and for the group’s own purchased portfolios.

Since April this year, George Georgakopoulos, Intrum’s Managing Director in Greece, has taken on the newly-created role of Head of Servicing across the group.

The intent is to drive ourselves commercially – in terms of product development, strategic sales and performance management. Quite simply, we intend to do more business, with more clients, in a more profitable way.

The new management structure has coincided with a boost to the servicing business, which reported strong results for the first half of 2023. Assets under management are up 9% year on year, while total servicing revenues of SEK 6.6 billion per H1 ’23 put the business 4% ahead of its position for the same period in 2022.

It is very encouraging – we have been writing a lot of good business and expect to have a better year than ever. We are achieving more success very quickly with this new structure and focus on driving the business, clients and profitability. The ingredients are there.

Looking ahead, Georgakopoulos anticipates growth in volumes and low churn, with gradually improving profitability margins. “We’ve had a period with decreasing margins but early this year have renewed our focus and changed the structure around servicing” he says. “We have a clear focus on cost reduction and further digitalisation which, in combination with expected increasing inflows of higher value claims from the financial sector, over time will stabilise margins at sound levels.”

Wide range of services tailored to markets

Intrum holds a significant footprint, operating in over 20 markets across Europe. “Our services vary per market but we have expertise across the credit managed services (CMS) value chain. From the management of small claims coming from utilities firms, all the way to very large secured business loans and real estate, covering all stages of delinquency,” says Georgakopoulos.

Banking & Finance stand for a majority of Intrum’s servicing revenue base, alongside other industries, such as Telco & Utilities, Retail & E-commerce and many more. Intrum’s agents make contact with customers, work with them to establish their financial situation and sustainable and manageable repayment plans.

For banks we operate plain vanilla outsourcing in a number of markets, all the way to managing ‘unlikely to pay’ pre-default exposures, as well as large loans to corporates such as hotel and shipping companies. The services that we give to banks are very broad in nature.

Service range depends on market customs and requirements. “We offer invoicing and reminder services in some parts of Europe and also service performing loans. Services are customised in markets depending on need and local practice.”

A different prospect from the competition

This ability to tailor services to clients’ specific needs is something Georgakopoulos says sets Intrum apart. “The core activities and expectations are the same across markets but the offerings are different. For example we provide invoicing and early reminders in the Nordics, but have also conducted large restructuring deals, often in the Southern European markets.

“We are running securitized portfolios for banks in Italy and Greece, very large real estate portfolios in Spain, ‘unlikely to pay’ funds in Italy, and restructuring the loans of active companies. We have been very successful both in plain outsourcing and in high-end value chain activities.”

Intrum takes these experiences in different markets and spreads them to new jurisdictions. For example, work in telecoms in Northern Europe is being applied to other markets, while the advanced and complex deals for banking clients in the Southern markets have increased levels of expertise elsewhere as well. 

Georgakopoulos has direct experience of these deals, having been part of Intrum’s 2019 strategic partnership with Greek bank Piraeus, which created the largest credit servicing business in the Greek market.

We bring a very strong local perspective as well as global experience that means we can help markets evolve.

Understanding client needs is paramount

The most important priority is to understand clients and their businesses, says Georgakopoulos. “Investors, banks, utilities and other clients are looking for reliable, trustworthy servicers. Clients value our strong collection performance and the fact that we understand their businesses. The other advantage Intrum brings, which is difficult to compete with, is our ethical, highly professional collections.”

Georgakopoulos adds that Intrum also protects its reputation by being careful about the kind of business it takes on. Further to that point, it’s important that we are aligned in ensuring our practice is ethical. “There is business we don’t do – such as high-cost credits with extra high annual percentage rates."

One of Intrum’s strategic priorities within Servicing is to increase its focus and value added to its largest clients. “We need to offer quality interaction to those clients from sales and customer experience. We are the only business that has this kind of footprint across Europe and this level of experience across the CMS value chain. It’s very appealing, to multinational clients in particular.”

This scale and the experience gives Intrum unique underwriting skills when buying from third parties. 

We have a wealth of data as well as people who have worked on portfolios early and late in various jurisdictions, giving us the methodologies needed. In a number of areas we have done extremely complex and value-add services for banks and other clients. None of our competitors can bring the same level of expertise and experience that Intrum has.

Market trends and the macroeconomic environment

When it comes to trends, Georgakopoulos says that clients in a number of markets are outsourcing earlier, with some passing accounts to Intrum to manage before default. These fresher accounts are usually easier to collect than more historic portfolios. “We are happy to accentuate this as it brings a number of advantages to the company and to us.”

Meanwhile, the expected wave of non-performing loans and defaulted accounts, that many predicted in the wake of the Covid-19 and cost of living crises, has failed to materialise. Georgakopoulos points to the efforts of regulators and governments to manage the fallout.

“Many people expected a deep recession and a surge of NPLs. Governments and central banks have worked to control the risk with their monetary policies,” he says.

“There has not been a material increase in delinquency but we do expect some increases in the future. The NPL market has cooled off – that said, I think it will become lively again, it’s a matter of time. A number of the deals have to be refinanced and there are also upcoming EU regulations that are expected to lead to increased supply. So we’ll enter a new cycle, with more selling and more outsourcing.”

While some would expect collections businesses to relish rising levels of delinquency, Georgakopoulos says this is not the case, as servicing is not cycle-dependent.

“As a business we don’t particularly gain when there are waves of NPLs. We have large numbers of assets under management, and in a good economy there is a continued flow of stock, plus recovery rates increase,” he says. “When there are high volumes of NPLs flooding in, the recoverability is lower but the volume makes up for it. This makes us a stable operator. Our business has a very healthy pipeline in Servicing.”

Digital approach accompanies bespoke service

As in most industries, the credit management services sector is seeing demand and expectation for greater automation and digitalisation. To meet this demand, Intrum is for example currently developing new customer and client portals.

“These are areas where we are investing. Servicing is currently a labour intensive business and we see plenty of opportunities within development of our digital interfaces with our clients and customers, to enable more self-serve and flexibility without compromising with the quality in our interactions.,” says Georgakopoulos.

Yet, while digital channels are a key element of customers’ experience, they aren’t the only important factor. 

“Commoditising everything isn’t what we want. We work with very large clients across Europe, offering services with a great degree of customisation. Of course we will pick up on trends in digital offering and customer experience. However, our proximity to clients and understanding their businesses and the value that adds is the biggest and most important lever.”

The advantages of technology go far beyond communication channels. Intrum has amassed vast amounts of data on account performance across different times and markets.

“We can design better consumer interaction strategies using algorithms,” says Georgakopoulos. “Using the means of collection customers prefer and making interactions easy and as unintrusive as they can be. There is also a cost management dimension to this approach.”

Regulation raising standards across the industry

Regulators have their eyes on the industry. In the banking sector, the European Union’s NPL Directive will bring in requirements for servicers, something Georgakopoulos welcomes.

This is good news for the industry – large parts of CMS are sensitive activities. We welcome transparency and clarity. It takes away the patchy environment you have in various markets, which is great for investors, clients and customers.

He adds that Intrum is always trying to drive a higher level of ethical collections. “It’s good for society and the economy that large companies like Intrum operate in this space as they are a lot more accountable. We have applied a code of conduct and our Treating Customers Fairly Instruction across our markets, and we follow-up internally to ensure our standards are being adhered to. Our agents work to understand the circumstances of the various customers and offer solutions that are sustainable for those customers.”

Intrum’s chief contribution to sustainability efforts comes from this societal impact, says Georgakopoulos. In 2022, 4.2 million people became debt free with Intrum – the direct result of servicing efforts across the business. “We help consumers to regain financial control,” he says.

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