Pathfinder Interview: John Moscicki

Editor’s Note: John Moscicki is no longer the CEO of Columbia Ultimate. Fred Houston is now the CEO of the firm (updated July 2005). 

Q. Your career trajectory has never wavered since earning a Ph.D. in Communications Technology at Columbia, but what led you to apply your technology expertise to the collections industry?

A. I started off doing R&D for Xerox with a focus on computer and video media applications. But since then I’ve done a lot of consulting work, helping companies improve their business processes. I managed a successful business turnaround, which led to its eventual sale, and gained a lot of international business experience, working with corporate clients in Europe, Latin America and Canada. I directed the design, development and launch of a claims estimating system for Automatic Data Processing as Vice President of Product Development and Marketing. That was ADP’s PenPro, an interactive, graphically-based product which ultimately won the Bronze Medal of Excellence in Software Design award from Business Week magazine and the Industrial Design Society of America.

Q. From a technology perspective, what key changes in the collection industry have you observed during the past few years?

A. The biggest change is the increasing demand on management/owners to meet competitive pressures and client requirements, while remaining productive and profitable during an economic downturn. We need to deliver technology that enables proactive management of resources, meets current requirements, and provides a clear and dependable path for the future. In order to do this, we need to understand the changes in the market and business environment, and the new mandates related to privacy, data connectivity, security and responsiveness in the entire collections and recovery arena.

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Q. What are some of the market factors affecting the industry? For instance, what impact has the increase in the sub-prime market — credit card, auto and mortgages, for instance — had on collection agencies?

A. Since there are more accounts, it is more difficult to identify the debtors that are likely to pay. According to the August 2002 issue of Card Talk, at mid-year 2002 some of the issuers of "sub-prime" cards were writing off losses in the 15% to 17% range versus the average industry loss rate of 6.5%. Also, delinquency rates among sub-prime card issuers were averaging about 10% at mid-year compared to 5% for the rest of the industry. Debt increases as the economy contracts and bankruptcies are at high levels. A key indicator of an economic turnaround will be an increase in revenue at collection agencies.

Q. How are collection agencies becoming specialized?

A. We find national companies emerging that specialize in a particular type of collections, such as credit card specialist Account Solutions Group. Pending government regulations (HIPAA), combined with the complexity of collecting both insurance and self-pay, are driving some agencies out of healthcare collections. Large corporate collection agencies are creating separate groups or offices to handle specific types of collection in order to achieve economies of scale with training and meet client needs.

Q. Is there any relationship between where the debt originates and where the collection agency resides?

A. In the past most collections were local or regional, but geographic constraints have been eliminated. Today, you have smaller agencies focusing on regional accounts including check collection, small commercial accounts, small physician groups, etc., with performance measured primarily on the ability to collect the debt. Large agencies service large companies and specialize in a specific type of paper, particularly credit card, auto and checks — a good example would be national check collections like Telecheck. Due to the nature of the client’s business and the large volume of accounts, a variety of factors, in addition to liquidation rates, become important, including ease of file transfers, reporting and agency expertise, and offshore outsourcing to countries like India, Jamaica and the Philippines.

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Q. What technological changes are necessary to meet the needs of a more specialized, geographically disbursed marketplace?

A. Connectivity and security needs are driving technological changes. Originators need to be able to send and retrieve accounts electronically from any location in the world. With large agencies transferring 7,000-10,000 files per month with up to one million records, there is a need for frequent, seamless transfer of data; this cannot be a manual process. There is a need for interfaces to a growing number of systems, which may be constantly changing. Geographically disbursed call centers, the transfer of data to and from clients and interfacing with service vendors all require system flexibility and scalability.

Q. Do the different markets have unique strategies to increase revenue?

A. Yes. Credit card originators push their financial expertise to manage and monitor agencies more closely to maximize revenue, while creating a consistent cash flow. Healthcare originators seek outside expertise to expedite both insurance and self-pay revenue. Companies that sell products and services to other businesses are becoming aware that they can increase cash flow by hiring an expert (agency) to perform collection activities prior to the bill becoming delinquent. As government agencies — city, county, state and federal — seek to reduce budget shortfalls, they are seeking expertise to collect unrealized revenue.

Q. How will new technologies affect the industry employee base?

A. There is a good level of technological sophistication in the workplace. Workers are accustomed to using computers, including the Web. They expect an easy-to-use interface and access to additional tools, such as skip tracing software, from their desktop — and connectivity to move an account to someone across the room or across the world.

Q. And what are you hearing from management/owners about technology needs?

A. Productivity is always the priority. Agency owners are becoming more sophisticated when analyzing account treatment strategies to maximize profitability. As a supplier of technology to the industry, this is a key component of our emerging software.