1 00:00:04,019 --> 00:00:06,389 Sean Aylmer: Welcome to the Fear and Greed daily interview. I'm Sean 2 00:00:06,390 --> 00:00:09,420 Sean Aylmer: Aylmer. Debt collection can tell you a lot about the 3 00:00:09,420 --> 00:00:12,660 Sean Aylmer: state of the economy, consumer spending and business confidence. And 4 00:00:12,660 --> 00:00:16,109 Sean Aylmer: right now, one of Australia's major debt collectors, is seeing 5 00:00:16,109 --> 00:00:19,110 Sean Aylmer: a huge increase in both the number of files being 6 00:00:19,110 --> 00:00:23,310 Sean Aylmer: referred for collection and the average debt per file. Andrew 7 00:00:23,310 --> 00:00:26,849 Sean Aylmer: Smith is the Chief Executive Officer of ASX listed Credit 8 00:00:26,849 --> 00:00:30,840 Sean Aylmer: Clear, which counts Australian banks, telcos and insurers among its 9 00:00:30,840 --> 00:00:32,610 Sean Aylmer: clients. Andrew, welcome to Fear and Greed. 10 00:00:32,880 --> 00:00:33,660 Andrew Smith: Thanks for having me. 11 00:00:34,260 --> 00:00:38,040 Sean Aylmer: So let's start with what has happened up until now. 12 00:00:38,040 --> 00:00:42,629 Sean Aylmer: Have companies been holding back on debt collection, post, or 13 00:00:42,630 --> 00:00:44,550 Sean Aylmer: maybe, during and post COVID-19? 14 00:00:45,150 --> 00:00:48,479 Andrew Smith: There's been some huge changes over COVID in our industry. 15 00:00:48,479 --> 00:00:54,869 Andrew Smith: Lots of industries led by regulatory change, or just ESG 16 00:00:54,870 --> 00:00:58,590 Andrew Smith: type changes, made the decision over COVID not to refer 17 00:00:58,590 --> 00:01:02,340 Andrew Smith: work out to third party collection agencies. So there was 18 00:01:02,340 --> 00:01:07,170 Andrew Smith: definitely an impact on the industry. But what we're seeing 19 00:01:07,170 --> 00:01:11,490 Andrew Smith: now is led by, let's just say, the ATO, an 20 00:01:11,490 --> 00:01:15,180 Andrew Smith: influx of additional work because it's sort of coming time 21 00:01:15,180 --> 00:01:19,080 Andrew Smith: to, I guess, pay for bills. So we're seeing changes 22 00:01:19,440 --> 00:01:24,300 Andrew Smith: across the industry where the energy regulators had moratoriums where 23 00:01:24,300 --> 00:01:27,869 Andrew Smith: you weren't actually able to outsource collections. They've all now 24 00:01:27,870 --> 00:01:31,620 Andrew Smith: been lifted. So you were seeing local government, councils, essential 25 00:01:31,620 --> 00:01:35,790 Andrew Smith: services now referring higher volumes of debt. And that's been 26 00:01:35,790 --> 00:01:38,400 Andrew Smith: reflected in our numbers. But not only that, is the 27 00:01:38,400 --> 00:01:41,639 Andrew Smith: average debts that are being referred have dramatically increased as 28 00:01:41,639 --> 00:01:44,250 Andrew Smith: well, over 200% in some instances. 29 00:01:44,940 --> 00:01:47,340 Sean Aylmer: Okay. So are we back to more normal levels or 30 00:01:47,340 --> 00:01:49,860 Sean Aylmer: it's actually above pre- COVID levels because there's a catch- 31 00:01:49,860 --> 00:01:50,430 Sean Aylmer: up effect. 32 00:01:50,640 --> 00:01:54,210 Andrew Smith: It is way back above pre- COVID levels. And I 33 00:01:54,210 --> 00:01:55,860 Andrew Smith: suppose if you look at the ATO as a litmus 34 00:01:55,860 --> 00:01:59,309 Andrew Smith: test, the debt levels at the ATO are exponentially higher 35 00:01:59,309 --> 00:02:02,340 Andrew Smith: than they were pre- pandemic. So a lot of credit 36 00:02:02,340 --> 00:02:06,750 Andrew Smith: providers, whether it be telcos, utilities, are sitting with a 37 00:02:06,750 --> 00:02:09,989 Andrew Smith: larger number of accounts on their books. 38 00:02:10,350 --> 00:02:13,500 Sean Aylmer: Okay. So for people not familiar with the process, how 39 00:02:13,500 --> 00:02:16,860 Sean Aylmer: does debt collection or payments management, shall we call it, 40 00:02:17,219 --> 00:02:20,940 Sean Aylmer: actually work? When does a company call you in? What's 41 00:02:20,940 --> 00:02:24,179 Sean Aylmer: the process you go through to try and get the money? 42 00:02:24,570 --> 00:02:27,150 Andrew Smith: Well, whenever I go out in town and I let 43 00:02:27,150 --> 00:02:29,850 Andrew Smith: people know I'm a debt collector, I get very strange 44 00:02:29,850 --> 00:02:32,669 Andrew Smith: looks. And the next question I get asked, " Do you have 45 00:02:32,669 --> 00:02:36,179 Andrew Smith: a baseball bat?" So I'm very glad to hear that... 46 00:02:36,179 --> 00:02:37,950 Andrew Smith: You know what, you'd be glad to hear that that's 47 00:02:37,950 --> 00:02:40,440 Andrew Smith: not the way debt collection's done these days. And we're 48 00:02:40,440 --> 00:02:44,040 Andrew Smith: going through a big shift in the way organizations collect 49 00:02:44,040 --> 00:02:47,490 Andrew Smith: money from their customers. And that shift is away from 50 00:02:47,490 --> 00:02:50,759 Andrew Smith: traditional methods, which are typically letters and phone calls, into 51 00:02:50,760 --> 00:02:55,079 Andrew Smith: more digital methodology, which can be underpinned by artificial intelligence 52 00:02:55,320 --> 00:02:58,410 Andrew Smith: and you'd use a net promoter score to actually manage the 53 00:02:58,410 --> 00:03:02,370 Andrew Smith: engagement with customers. So what will happen is, you can 54 00:03:02,370 --> 00:03:04,770 Andrew Smith: have an organization that has an overdue account, might be 55 00:03:04,770 --> 00:03:08,190 Andrew Smith: a telecommunications organization, they have an internal team that sort 56 00:03:08,190 --> 00:03:10,229 Andrew Smith: of will try to resolve that account within the first 57 00:03:10,230 --> 00:03:12,508 Andrew Smith: sort of 30 or 60 days. And they might get to the 58 00:03:12,508 --> 00:03:15,119 Andrew Smith: point that they say they need to outsource that work 59 00:03:15,120 --> 00:03:18,209 Andrew Smith: or escalate it. Now for the record, Credit Clear don't 60 00:03:18,360 --> 00:03:21,120 Andrew Smith: buy any debt. So don't confuse us with say Credit 61 00:03:21,120 --> 00:03:24,089 Andrew Smith: Corp, who is another listed company with a similar name, 62 00:03:24,330 --> 00:03:28,620 Andrew Smith: who predominantly buy debt. So we are assisting clients collect 63 00:03:28,620 --> 00:03:32,159 Andrew Smith: money from their customers. So the fundamental and most important 64 00:03:32,160 --> 00:03:35,399 Andrew Smith: part there is to ensure that the relationship with that 65 00:03:35,400 --> 00:03:38,190 Andrew Smith: customer is preserved and those individuals who can't pay, because 66 00:03:38,190 --> 00:03:42,660 Andrew Smith: of whatever reason, cost of living, vulnerability, financial hardship, they're 67 00:03:42,660 --> 00:03:45,300 Andrew Smith: treated very well. So what you want to make sure 68 00:03:45,300 --> 00:03:49,139 Andrew Smith: you do is outsource and streamline that process to ensure 69 00:03:49,139 --> 00:03:52,890 Andrew Smith: that you are helping your clients engage with their customers 70 00:03:53,490 --> 00:03:57,150 Andrew Smith: in a respectful way, as opposed to those traditional methods 71 00:03:57,150 --> 00:03:59,520 Andrew Smith: that people used to think about debt collection. 72 00:04:00,630 --> 00:04:04,049 Sean Aylmer: So you use digital means, is it normally... let's say 73 00:04:04,139 --> 00:04:06,990 Sean Aylmer: someone internally at a telco spend 60 days, hasn't been 74 00:04:06,990 --> 00:04:09,569 Sean Aylmer: able to get it, says, " Credit Clear, can you help 75 00:04:09,570 --> 00:04:12,450 Sean Aylmer: out?" I mean, is it about emailing them? What is it 76 00:04:12,450 --> 00:04:14,220 Sean Aylmer: about? How do you extract it? 77 00:04:14,640 --> 00:04:20,130 Andrew Smith: Yeah, look, it largely starts with using someone's personal device, 78 00:04:20,130 --> 00:04:23,010 Andrew Smith: whether it be an Apple iPhone where you can get 79 00:04:23,010 --> 00:04:25,979 Andrew Smith: a message. And we've found that 87% of people who 80 00:04:25,980 --> 00:04:28,859 Andrew Smith: get a message to their iPhone will engage with you, 81 00:04:28,859 --> 00:04:31,620 Andrew Smith: as opposed to only 3% will answer a phone call 82 00:04:31,620 --> 00:04:35,729 Andrew Smith: these days. So people are moving away from looking in 83 00:04:35,730 --> 00:04:39,748 Andrew Smith: their mailbox for a bill or checking their email for 84 00:04:39,750 --> 00:04:41,940 Andrew Smith: an invoice to be sent through, and they'd rather deal 85 00:04:41,940 --> 00:04:45,029 Andrew Smith: with that easily and quickly on their phone where there's 86 00:04:45,029 --> 00:04:47,129 Andrew Smith: not the friction of having a phone call at an 87 00:04:47,129 --> 00:04:51,029 Andrew Smith: awkward time. So what we're seeing in this digital transformation 88 00:04:51,029 --> 00:04:54,990 Andrew Smith: within our sector, is more and more customers wanting to 89 00:04:54,990 --> 00:04:57,389 Andrew Smith: engage with their credit provider in a digital way rather 90 00:04:57,389 --> 00:04:58,290 Andrew Smith: than a traditional way. 91 00:04:58,950 --> 00:05:01,229 Sean Aylmer: Okay. And I mean, you do have the reputation of 92 00:05:01,230 --> 00:05:04,530 Sean Aylmer: your customers, of Credit Clear's customers here too, because if 93 00:05:05,549 --> 00:05:09,630 Sean Aylmer: I owe money and Billy Blogs is ringing me, I 94 00:05:09,630 --> 00:05:11,430 Sean Aylmer: don't really think of it as Credit Clear, I actually 95 00:05:11,430 --> 00:05:12,420 Sean Aylmer: think of it as the telco. 96 00:05:12,720 --> 00:05:15,450 Andrew Smith: Of course. I mean the most important part is preserving 97 00:05:15,450 --> 00:05:17,940 Andrew Smith: the brand reputation of our customers. Right? 98 00:05:17,941 --> 00:05:18,750 Sean Aylmer: Yep, yep. 99 00:05:19,349 --> 00:05:21,000 Andrew Smith: So being able to engage with them in a way 100 00:05:21,000 --> 00:05:24,869 Andrew Smith: that is respectful, empathetic, and ensuring that there's not this 101 00:05:25,320 --> 00:05:29,610 Andrew Smith: harassment type feeling within those end customers. And that's a 102 00:05:29,610 --> 00:05:31,980 Andrew Smith: big change in paradigm with the whole industry. You think 103 00:05:31,980 --> 00:05:36,238 Andrew Smith: about the Hayne Royal Commission into banking and insurance, a 104 00:05:36,240 --> 00:05:37,889 Andrew Smith: lot of things that came out the back of that 105 00:05:37,889 --> 00:05:41,669 Andrew Smith: was making sure that those customers are treated really well. 106 00:05:41,940 --> 00:05:47,130 Andrew Smith: And what we've seen post- COVID is that real move 107 00:05:47,130 --> 00:05:50,368 Andrew Smith: away from selling the debt, necessarily, and making it someone 108 00:05:50,370 --> 00:05:54,779 Andrew Smith: else's problem, to saying, " Actually, they're our customers throughout the 109 00:05:54,779 --> 00:05:57,450 Andrew Smith: whole life cycle and we need to treat them respectfully 110 00:05:57,509 --> 00:05:59,639 Andrew Smith: throughout the whole life cycle, even when they don't pay 111 00:05:59,639 --> 00:06:02,790 Andrew Smith: us." So making sure that you can do that in 112 00:06:02,790 --> 00:06:07,080 Andrew Smith: a way that preserves your brand reputation, but also is 113 00:06:07,080 --> 00:06:11,219 Andrew Smith: efficient at collecting money, is critical. And not only that, 114 00:06:11,219 --> 00:06:14,880 Andrew Smith: the experience of the end customer is positive. 115 00:06:15,420 --> 00:06:17,430 Sean Aylmer: Stay with me, Andrew, we'll be back in a minute. 116 00:06:23,339 --> 00:06:26,789 Sean Aylmer: My guest this morning is Credit Clear CEO, Andrew Smith. 117 00:06:27,599 --> 00:06:31,950 Sean Aylmer: Okay. So on Credit Clear's side, you make money, do 118 00:06:31,950 --> 00:06:35,100 Sean Aylmer: you get a retainer from the telco, in this example, 119 00:06:35,100 --> 00:06:37,320 Sean Aylmer: or do you actually get a percent of what you collect? 120 00:06:37,890 --> 00:06:40,500 Andrew Smith: It's a good mix. I mean, we're in a transformation 121 00:06:40,500 --> 00:06:42,990 Andrew Smith: phase and a lot of our competitors would charge a 122 00:06:42,990 --> 00:06:47,789 Andrew Smith: commission, similarly to Credit Clear does charge a commission model. 123 00:06:48,089 --> 00:06:51,359 Andrew Smith: But when you're sort of moving in terms of digital 124 00:06:51,360 --> 00:06:55,320 Andrew Smith: software solutions, which a customer can completely outsource their whole 125 00:06:55,320 --> 00:06:58,320 Andrew Smith: collection function to us, and we can send messages that 126 00:06:58,320 --> 00:07:01,650 Andrew Smith: don't say Credit Clear, they actually might say Vodafone, for 127 00:07:01,650 --> 00:07:04,950 Andrew Smith: example. So you can use a digital white label solution 128 00:07:04,950 --> 00:07:08,730 Andrew Smith: that's usually under a licensing agreement or a fee- for- 129 00:07:08,730 --> 00:07:12,750 Andrew Smith: service, whereas, later stage collections are more around a commission 130 00:07:12,990 --> 00:07:16,530 Andrew Smith: on performance. Although there's lots of big companies like say 131 00:07:16,530 --> 00:07:19,290 Andrew Smith: the Commonwealth Bank that are moving away from commission- based 132 00:07:19,290 --> 00:07:24,389 Andrew Smith: incentives for third party collection agencies because of reasons publicized 133 00:07:24,389 --> 00:07:27,000 Andrew Smith: during the Hayne Royal Commission. Or in fact, you've got 134 00:07:27,509 --> 00:07:30,390 Andrew Smith: large federal government agencies making a statement to say, we're 135 00:07:30,990 --> 00:07:33,750 Andrew Smith: no longer going to outsource collections to our third parties. 136 00:07:34,080 --> 00:07:37,050 Sean Aylmer: Yep, yep. I understand that one. Okay, so now you mentioned 137 00:07:37,050 --> 00:07:39,690 Sean Aylmer: earlier on that the average debt had increased significantly. How 138 00:07:39,690 --> 00:07:41,370 Sean Aylmer: much has it increased and why? 139 00:07:41,969 --> 00:07:47,730 Andrew Smith: The increase has gone from, on our books, was $ 589 to $997. 140 00:07:47,730 --> 00:07:47,939 Sean Aylmer: Oh, wow. 141 00:07:47,939 --> 00:07:52,440 Andrew Smith: So we're seeing a 69% increase across our portfolios this 142 00:07:52,500 --> 00:07:55,890 Andrew Smith: year, compared to the same period last year. And the 143 00:07:55,890 --> 00:07:58,920 Andrew Smith: volume of files has increased by 85% as well. So 144 00:07:58,920 --> 00:08:02,549 Andrew Smith: we're seeing, not only an increase in the amount per 145 00:08:02,549 --> 00:08:05,789 Andrew Smith: customer that they're owed, but also the volume of customers 146 00:08:05,789 --> 00:08:08,580 Andrew Smith: that have been referred on to us as well. And 147 00:08:08,580 --> 00:08:11,340 Andrew Smith: that is indicative of clearly the cost of living going 148 00:08:11,340 --> 00:08:14,670 Andrew Smith: up, the average bills are going up. But there's been 149 00:08:14,670 --> 00:08:19,079 Andrew Smith: a tendency for our clients, who originate the debt, holding 150 00:08:19,080 --> 00:08:21,509 Andrew Smith: onto accounts for longer because they're trying to work with 151 00:08:21,509 --> 00:08:23,850 Andrew Smith: their customer. And by the time it gets to us 152 00:08:24,270 --> 00:08:27,030 Andrew Smith: it's like, as I said, almost a thousand dollars. 153 00:08:27,570 --> 00:08:31,950 Sean Aylmer: Okay. What about the sectors, be it telcos or banking or 154 00:08:31,950 --> 00:08:35,848 Sean Aylmer: whatever, where there are a large number of case files? 155 00:08:36,870 --> 00:08:40,559 Andrew Smith: Yeah. I think the people who we're seeing struggle the 156 00:08:40,559 --> 00:08:42,780 Andrew Smith: most, is in the essential services space. So we'll talk 157 00:08:42,780 --> 00:08:47,610 Andrew Smith: about water, gas, electricity, even council. So what you're seeing 158 00:08:47,610 --> 00:08:53,220 Andrew Smith: is those essential services where everyone's entitled to gas, electricity, 159 00:08:53,820 --> 00:08:56,639 Andrew Smith: we're seeing a large cohort of those customers flow through 160 00:08:56,639 --> 00:08:59,819 Andrew Smith: to us, with a greater propensity to have people who 161 00:08:59,820 --> 00:09:02,640 Andrew Smith: are vulnerable or struggling to actually... they just can't pay 162 00:09:02,640 --> 00:09:05,910 Andrew Smith: the bill. And I believe that we're going to see 163 00:09:06,120 --> 00:09:09,480 Andrew Smith: a great deal of those customers flow through as we 164 00:09:09,480 --> 00:09:12,720 Andrew Smith: really feel the pinch of the rate rises. And perhaps, 165 00:09:13,049 --> 00:09:17,848 Andrew Smith: individuals that have enjoyed only low interest rates and high 166 00:09:17,850 --> 00:09:24,510 Andrew Smith: property price growth, suddenly they're faced with higher inflation, higher 167 00:09:24,510 --> 00:09:28,320 Andrew Smith: interest rates and they can't pay their bill. You know what I mean? 168 00:09:28,320 --> 00:09:31,978 Andrew Smith: So they're a new cohort of customers. Not your sort 169 00:09:31,980 --> 00:09:35,609 Andrew Smith: of typical person that you'd expect to be experiencing financial 170 00:09:35,609 --> 00:09:37,650 Andrew Smith: hardship. But maybe your mom and dad who's both working, 171 00:09:38,070 --> 00:09:40,350 Andrew Smith: they bought a property three or four years ago, they 172 00:09:40,350 --> 00:09:43,439 Andrew Smith: might have a young family and they can't pay their 173 00:09:43,559 --> 00:09:45,630 Andrew Smith: house loan, they can't pay their car loan, they can't 174 00:09:45,630 --> 00:09:48,179 Andrew Smith: pay their electricity bill. So I think we're going into 175 00:09:48,179 --> 00:09:51,299 Andrew Smith: a phase of a really challenging time, and this is 176 00:09:51,299 --> 00:09:53,280 Andrew Smith: going to be a bigger problem for a lot of companies. 177 00:09:53,670 --> 00:09:56,039 Sean Aylmer: You must get some horror stories, Andrew? 178 00:09:56,999 --> 00:10:01,348 Andrew Smith: Yeah. It's a pretty important role we play in the 179 00:10:01,590 --> 00:10:04,439 Andrew Smith: whole ecosystem. And one of the reasons why I started 180 00:10:04,440 --> 00:10:07,530 Andrew Smith: a collection business, when I went into a traditional collection 181 00:10:07,530 --> 00:10:11,129 Andrew Smith: company, was I believe that the collection agencies didn't necessarily 182 00:10:11,129 --> 00:10:15,270 Andrew Smith: have a great reputation when threatening, harassing people to pay. 183 00:10:15,270 --> 00:10:18,358 Andrew Smith: And I'd never worked in debt collection myself. I just 184 00:10:18,360 --> 00:10:19,800 Andrew Smith: thought there's got to be a better way to do 185 00:10:19,800 --> 00:10:22,710 Andrew Smith: it. If you speak to someone, you listen to why 186 00:10:22,710 --> 00:10:26,399 Andrew Smith: they haven't paid, and you take that philosophy around helping 187 00:10:26,400 --> 00:10:29,729 Andrew Smith: them through that situation, most people in Australia, that we 188 00:10:29,730 --> 00:10:33,660 Andrew Smith: engage with, are likely to come through that. And if 189 00:10:33,660 --> 00:10:35,940 Andrew Smith: you can work with them respectfully, they're more likely to 190 00:10:35,940 --> 00:10:37,890 Andrew Smith: stick to an arrangement that they make a promise to. 191 00:10:38,220 --> 00:10:40,559 Andrew Smith: They're more likely to talk to you if they can't 192 00:10:40,559 --> 00:10:43,708 Andrew Smith: make a payment. And quite frankly, it feels a lot 193 00:10:43,710 --> 00:10:46,409 Andrew Smith: better when you're helping someone rather than putting someone into 194 00:10:47,129 --> 00:10:48,449 Andrew Smith: more financial stress. 195 00:10:48,840 --> 00:10:51,180 Sean Aylmer: Absolutely. Andrew, thank you for talking to Fear and Greed. 196 00:10:51,510 --> 00:10:52,950 Andrew Smith: Oh, it's been a pleasure. Thank you very much for 197 00:10:52,950 --> 00:10:53,280 Andrew Smith: having me. 198 00:10:53,790 --> 00:10:56,819 Sean Aylmer: That was Andrew Smith, Chief Executive Officer of Credit Clear. 199 00:10:57,090 --> 00:10:59,340 Sean Aylmer: This is the Fear and Greed daily interview. Join us 200 00:10:59,340 --> 00:11:01,529 Sean Aylmer: every morning for the full episode of Fear and Greed, 201 00:11:01,530 --> 00:11:05,369 Sean Aylmer: Australia's most popular business podcast. I'm Sean Aylmer. Enjoy your day.