During the 13 years he spent in banking, Tomasz Borowski’s career spanned operations, risk management, and product management, where he also witnessed the brutality and unprofessional methods that conventional debt collection agencies adopted to retrieve outstanding balances.
He observed the same thing when he moved to Ukraine in 2005 to continue his banking career. He did his own research on alternative methods and came to know about two digital debt collection companies—US-based TrueAccord and Polish debt collection agency Kruk SA—both worth over a billion US dollars today.
“I decided to move to Southeast Asia and began exploring the market here. It was obvious to me that the situation here was similar to Ukraine. I decided to utilize my experience in finance and create a professional credit management services company to help change this market,” Borowski told KrASIA.
In 2016, Borowski launched his company AsiaCollect in Vietnam, aiming to change the norms surrounding debt collection in Asia.
Debt collecting method: Technology over coercion
Borowski’s first challenge was to convince financial institutions that outsourcing non-performing loan (NPL) collection to their startup would not create a reputational issue for these institutions. “We had to convince them that we could collect debt without threatening people, that they could rely on our professional and efficient service,” he explained.
Today, the company is headquartered in Singapore and serves three markets in Asia, namely Indonesia, Vietnam, and India. According to Borowski, the company manages over 250,000 non-performing loans for clients in these markets.
AsiaCollect helps bank and non-bank lenders to recover their NPLs by contacting debtors via automatically generated SMSes, interactive voice recordings, and predictive dialing systems. “We can do this with around 90 call center operators in those three markets. Most of our processes are fully automated, so we don’t really rely on the operator calling the debtors. We rather rely on the automated processes we are using or automated campaigns,” he said.
The company uses artificial intelligence and machine learning to profile debtors. For example, it utilizes speech recognition technology to create profiles of debtors. The company’s system is able to recognize the language that debtors employ, including their tone and expressions. It generates profiles that help operators identify positive or aggressive debtors.
AsiaCollect chief sales officer and Indonesia country manager Guillermo Martin provided some comparisons between conventional debt collection and AsiaCollect’s methods. “A typical debt collection agency in these markets involves greenfield collectors, a person looking scary and being aggressive, to the extent of carrying weapons on a motorcycle. This person can visit a maximum of four debtors a day in places like Jakarta in Indonesia, or Ho Chi Minh City in Vietnam. Our operators, meanwhile, can make 200 collector calls per day.”
According to Martin, AsiaCollect needs about one-third of the number of agents that conventional agencies employ for the same volume of debt collection. For instance, one agent can handle up to 1,000 cases in less than 180 DPD [days past due] portfolios and 2,000 cases for more than 180 DPD, he said.
“In conventional debt collection agencies, it is about 500 cases per agent in a call center and 200 cases per agent for field collection. For us, up to 30% of the amount collected comes from automation, with zero agent interaction”, he said.
Borowski added that the success rate for recovery differs depending on the type of cases they work with.
“With AI and automation, we collect either more or the same with less operational costs involved. We have fewer agents but more SMS and interactive voice response. A simple example—for every dollar collected, 15 cents is the cost on average,” he added.
Different markets, different challenges
Borowski shared that some markets are more challenging than others, due to various regulatory requirements. Vietnam and India are more tightly regulated than Indonesia, for instance.
Market practices are also different, he recalled. In Indonesia, the first question from banks was if AsiaCollect would purchase debt portfolios from them. India however, is different as the lenders outsource their debt portfolios to outsourcing agencies.
Nevertheless, some similarities exist between the three markets, Martin said. “There are parts that are similar across Southeast Asia and India, like the fact that they still believe the approach to collection has to involve aggression and harassing clients. When we come in with a new paradigm of ethical collection, it is hard [for banks] to comprehend.”
In Vietnam and Indonesia, the main challenge is actually reaching debtors, as it is easy to change phone numbers in those countries, Martin said. “There are different challenges that you have to address and you need to react to them accordingly.”
The changing debt-collection market
Borowski believes that in the long run, regulation of the collection market is inevitable. “This is good because this would hopefully regulate unethical suppliers. On the other hand, I think that we should be more involved, we should have more partnerships with responsible vendors, because it’s a two-way process.”
AsiaCollect plans to forge long-term partnerships with lenders and shape rules for ethical lending and collection methods. The company has already taken steps in this direction. In Vietnam, Indonesia, and India, they have partnered with fintech associations to help define standards and practices across the industry.
One area that Borowski reckons holds great potential is debt purchasing. Debt purchasing involves buying debt from lenders at a discounted rate and it is a lucrative industry which he wants to explore further.
He expects debt purchasing to “explode” in Vietnam in the near future. “That’s another challenge for us because we need to raise funds for that and then invest around USD 2 million this year into purchasing debt, while in the next five years it will be more than USD 40 million across three markets,” he said.
Fund-raising and future plans
Borowski claimed that his company is profitable in Vietnam, where they broke even in 2018. The plan is to do the same in Indonesia and India this year.
In 2018, the company raised USD 4.5 million in a Series A funding round led by SIG Asia Investments, with participation from its existing investor Dymon Asia Capital. To date, it has raised close to USD 8 million, and is in the middle of another fundraising round, which it hopes to close in February.
“We are selective and we try to engage with industry partners that can bring value to our portfolio of clients,” Martin said of their preferred investors, without disclosing names or details.
Borowski reckons that five years from now, most of AsiaCollect’s revenue will come from purchasing debt. “Now we are mostly outsourcing, but that will shift to purchasing. Secondly, we will probably expand to the Philippines and Thailand, and that’s what we will execute in two to three years’ time. Thirdly, we hope to fully automate our processes by 2022 or 2023. As of today, 60% of all our processes are automated,” he said.
This article is part of KrASIA’s “Startup Stories” series, where the writers of KrASIA speak with founders of tech companies in South and Southeast Asia.