In today’s economic and regulatory environment, transforming collections capability is high on organisations' strategic imperatives. It can no longer be the poor relation to acquisition or customer servicing.
With consumer and regulatory expectations being more intense than ever, the question of whether to build a custom system in-house or buy an off-the-shelf platform is central to any organisation looking to optimise collections, reduce unit costs, and maintain a strong brand reputation by delivering positive customer outcomes and minimising detriment.
This blog post dives into the pros and cons of each approach. By the end, you’ll have a clearer roadmap for deciding which path is best for your organisation’s needs, compliance requirements and long-term goals.
It’s not that binary.
With the evolution of modern technology, the buy vs. build conundrum is much more nuanced. Here are the main options we see organisations evaluate:
Option 1: Buy – Off-the-shelf collections platforms
Buying an off-the-shelf solution is the most common decision we see, owing to the lead time and cost in building comparable functionality in-house. The solutions include C&R Software Debt Manager, Experian PowerCurve Collections, CGI CACS X, Exus EFS, Flexys Control+, Qualco QCR, Telrock Optimus, Tietoevry Collection Suite Nova, as well as many others.
Typically, this involves:
- Documenting requirements and business outcomes – the most important stage. This step sets the key foundations on which the entire collections and recoveries system solution is developed. It ensures that the solution is aligned with the organisation’s needs and mitigates the risk of misalignment between expectations and delivery, which often leads to inefficiencies or costly rework.
- Identifying suitable suppliers and then engaging through RFI and RFP stages, with the required pre-built capabilities (e.g. decisioning, workflow, case management, customer portals, integrations, reporting etc).
- Shortlisting and selecting the best collections software, then negotiating commercials and contracts to secure best value.
- Implementing the product, most commonly with the support of a specialist third party implementation partner, dovetailed with the vendor’s implementation team to design, configure and test the solution.
- Managing the solution on an ongoing basis, to drive continuous improvement via configuration changes that maximise ROI and also support testing and adoption of vendor driven updates/releases.
Option 2: Build - Native development
Building an in-house collections system is a big ask, however many organisations have navigated this challenge successfully. This is most commonly used by early-stage, technology-focused organisations or those with highly complex or unique product needs.
Typically, this involves:
- Documenting requirements and business outcomes – see above.
- Assembling product development squads, each with their own domain focus (e.g., decisioning, workflow, payments, digital servicing), working collaboratively to build and then integrate services together. Depending on size and scale, this can be anything from 5-20 squads.
- Planning and overseeing, as with any material software engineering endeavour, are required to ensure teams are working toward common, outcome-based goals.
- Defining an ongoing support model to enable effective support and change driven from business, regulatory and customer requirements.
Option 3: Build - Customisation of developable technology
In addition to straight buy or build, it is also possible to develop on top of an established platform which already has some of the core capabilities required to support an effective collections system. The most common examples we see are Salesforce, Pega and Microsoft Dynamics.
Typically, this involves:
- Identifying suitable suppliers where the underlying capabilities support your organisation’s key requirements (e.g. workflow, decisioning, data integrations, UI etc).
- Developing customisations which leverage those capabilities to achieve your collections and recoveries requirements, often involving specialist resources that know how to develop on that specific platform.
- More detailed assessment of TCO (Total cost of Ownership) due to the licences for the underlying platform requiring deep understanding of vendor price models now and with scale.
Option 4: Build - Developing around a CRM or Account Management platform
A further variation of the build option is to leverage the capabilities of the core CRM or account management platform.
These platforms often have severe limitations, so organisations choose to either manage collections processes ‘off system’, bolt on different capability (e.g. communications), or invest in building specific capabilities to bridge gaps.
This presents many more risks in terms of compliance, customer experience and performance outcomes. However, depending on the use case, does have its merits.
8 key questions to ask yourself
Making the buy vs. build decision to get the best debt collection software for your organisation requires careful, detail-oriented analysis. Here is a checklist to help you weigh up the options:
- Internal expertise and capacity – Does your team have the right experience or domain knowledge? Can you create the required capacity internally to support your chosen option, or do you need to source this from a third party?
- Opportunity cost – Is your scarce internal resource better deployed against other critical initiatives that might create more value or be more pressing? If collections isn’t your primary unit economics driver, this opportunity cost could be significant.
- Competitive advantage, customisation and control - Are you happy to be somewhat dependent on a vendor’s roadmap to support the evolving customer, regulatory and business functionality needs? Does your competitive strategy hinge on a distinctive approach to customer engagement? Will developing your own capability serve to enhance overall enterprise value or offer alternative commercialisation options?
- Internal systems complexity - How easy will it be to integrate with your internal systems (e.g. account management, data and reporting)? How does this impact your strategy?
- Data security and compliance - How will you or your vendor’s solution meet your data security and privacy standards (ISO certifications, SOC audits, etc.)?
- Time-to-market pressure - Is regulatory compliance or collections performance currently suffering or creating risks outside of tolerance due to outdated technology or manual processes? How quickly do you need to solve these? Do you have the runway to mobilise the required resources if selecting the build option? Do you have the required information to evaluate implementation time and cost?
- Total Cost of Ownership (TCO) - What is the TCO for buying vs. building? How soon do you expect to see a Return on Investment (ROI) through improved collections performance or efficiency gains?
- Maximising ROI, maintenance and upgrades - How will you resource the ongoing system enhancements, maintenance, and patching? How much effort is required and what will this cost over time, considering internal costs, annual licence fees, vendor maintenance contracts?
Summary
The buy vs. build decision for a collections system is more than just a technical or financial consideration, it’s a multi-faceted, strategic choice that can shape your organisation’s profitability, regulatory compliance and customer experience.
On the one hand, building allows for deep customisation, control and potentially transformative competitive advantages, but demands major investments in time, resources, and ongoing development with high opportunity cost.
On the other hand, buying off-the-shelf offers faster time to market, lower initial risk and access to vendor investment in product roadmap, though it may come with limitations around customisation, internal integration and potential vendor lock-in.
Not sure where to start?
Arum has a global team of specialists in collections and recoveries that can assist you with your buy vs. build decision. Take a look at our helpful resources below or contact us directly to discuss your needs.
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About the author
Matt Trueman
Managing Director
Matt has over two decades of experience in financial services, specialising in credit and collections, technology deployment and business transformation. His previous roles include leadership positions at Oakbrook Finance, Indesser and TDX Group. Matt’s role at Arum is to lead the company strategy, strengthen client relationships and oversee day-to-day operations.