Technology is Key to Compliance & Self-Service: An Interview with Finvi

Erin Kerr: Hi everyone, and thank you for joining me for this episode of Executive Q&A. I am here today with Ray Peloso from Finvi. Ray, why don't you tell me a little bit about yourself and a little bit about Finvi.

Ray Peloso: Great Erin. Thanks for having me here. It's great to spend time with you. Myquick background is that I had a full career in consumer lending. I worked at places like Citibank Capital One, World Bank of Scotland, where I had a variety of credit and collections roles. In 2014, I made a move over into the technology side of collections and recovery, and I joined a company called Katabat where I was CEO for approximately seven years, and about a year ago in August of 2021, Ontario Systems, which is now called Finvi, acquired it. For the last 14 months, I've been part of the Finvi team, which is essentially the old Ontario Systems Company, combined with several key acquisitions that have come together.

[EK]: All right, Ray, well, thank you so much for that background. We're going to have a discussion today about the economy and the regulatory environment and some of the challenges that the third party collections industry is facing. Let's jump into it. Why don't you set the table and describe the economic and regulatory environment for me?

[RP]: Sure. We have a phrase over the last couple of years that, in this business, you have to be a patient fisherman.  My interpretation is that the credit and delinquency performance in consumer lending has been at multi-generational lows, quite frankly, since the 2008 crisis. So there's been a long period of relatively low inventories, really strong economic performance, all of which is essentially, we think, coming to an end. There was a big covid spike for a quarter or two, but if you look at the longer term patterns, the economy obviously is headed for a recession, in my view, headed into next year, which will actually be quite a change from the 12, 13, 14 year pattern of significantly below long term average delinquency and charge off. That is actually an opportunity, if you think about it, for this industry, where inventories should probably turn and come back up. I would couple that with obviously a really challenging regulatory environment that never changes. I think the industry fully understands the complexities and the requirements of being compliant, and so we see obviously the CFPB and other regulatory agencies remaining active within the industry framework. That doesn't change.

[EK]:  For sure. I think, as we see an increase in delinquencies and charge offs, we're going to see an even more active regulatory body.

[RP]:  [And the] elections probably…

[EK]:  True. But sort of like we saw post 2008 with the CFPB. So with all of that being said, can you describe for me the three biggest challenges your clients are seeing right now?

[RP]: Sure. For a number of years now, I think the first major challenge that the industry is not just grappling with, but I think addressing, is this notion of omnichannel moving beyond dialer and using technology quite differently. I think over a multi-year period there has been a major focus for the industry, which is, at a simple level: customers generally aren't answering their phone as much as they used to. Customers prefer to interact on their own terms through digital channels. I think that pattern has been going on for a number of years, and continues to be a major priority. I would add to that emerging technologies like RPA (Robotic Process Automation). All of these tools and techniques and segmentations have continued to influence and be a major focus for the industry. That’s bucket number one. 

I think bucket number two is always the regulatory agenda. To the extent that there's volatility around what's mandated by the CFPB, like the recent court ruling, does that change the agenda? I think the industry always has regulatory (concerns) on the top of the list, and I think the third is growth. Our clients, I think, are all interested in growing. It's been a tough environment and I suspect there's optimism that the industry will face growth challenges in the future versus different challenges.

[EK]: Thanks for outlining those challenges, Ray. They definitely correspond with what I'm hearing on a day-to-day basis with the folks that we talk with here. How is Finvi helping to solve or alleviate some of those current challenges?

[RP]: We're a technology company, so I suspect the angle here will be more around the technology side. The first thing I would say before I jump into technology is Ontario Systems, with its third party agency business last year, actually invested quite significantly in bringing the market a CFPB compliant version of its products. If I look back to 2021 it actually was a pretty significant body of work for Finvi to address priority number two, which is to make sure that the industry and our clients are compliant with CFPB regulations. That's in the rear view mirror. 

What we're doing more recently around omnichannel digital is, Finvi has actually invested very heavily over the last number of years, including the Katabat acquisition, in building out essentially an integrated, omnichannel payment experience to help our clients meet what their customers are asking for. We've made acquisitions in payments functionality. There's an acquisition of Katabat which had a whole suite of digital omnichannel capabilities. There's been an acquisition in advanced segmentation and scoring. When you zoom out, what I think Finvi has done quite substantially is invest in either building or buying assets to help our clients deliver a digital omnichannel experience.

[EK]: Thanks, Ray. It sounds like you guys really have the pulse on what your clients need at this time. We talked about what's going on right now. What do you think will be the biggest challenge that your clients face in 2023, and then beyond that?

[RP]: I'm a bit of a pessimist on the economy, so I'm flavored by that bias. I suspect the recession will be a little bit steeper than some forecast. I think the terms of success have absolutely shifted. The first party lenders, I believe, are going to be demanding and expecting a level of sophistication and omnichannel expertise from the industry. I think there's plenty of industry players who are ready for that, who will probably thrive and succeed, but I think the expectations of the clients are going to be perhaps higher than they might have been in the past because their customers expect it. I think that the sort of growth with the right technology and solutions is going to be the challenge that the industry's going to have to deal with next year.

[EK]: All right. Thanks. Right. So how is Finvi planning to guide your clients through those challenges?

[RP]: Think product roadmap. Last year we spent significant time and energy making sure the foundation of CFPB compliance is in place. We continue to tune and optimize that module and that suite of service. Our roadmap now is squarely focused on the payment experience for the client, including integration with dialers and non dialer channels, making sure that we've got a positive experience for the consumer that will make sense for our clients. If you’re thinking about the product roadmap, that's where our investments are and will continue to be for the foreseeable future.

[EK]: That makes total sense to me. We've been a little bit pessimistic through the course of some of these questions. I want to ask you a little bit more of an optimistic question, which is: what will be the biggest opportunity for accounts receivables companies in 2023?

[RP]:  I've been in and around the industry for a really long time, and I love the narrative and the way the industry insiders describe how they're actually a really important part of a functioning economy. The industry helps consumers make their repayments, helps debtors resolve their past due status, and helps banks have successful operating performance.  I actually think, while often misunderstood in general cocktail party talk, there's an important role that the industry plays. It's actually amplified in a recessionary environment, right? So I think, given the right tools and technology, I think there’s a really experienced industry that understands the role that credit plays in a functioning economy. I’ve been around this industry for a while. The approach, the tools, and the techniques today versus 10, 15, 25 years ago are totally different. The optimist in me says it's actually important for a functioning economy when you're powering through a recession to have this kind of expertise and capability within the industry.

[EK]:  I think that makes a ton of sense. Thank you for  closing us out on a little bit of an optimistic note. Do you have any closing thoughts for the folks watching?

[RP]: It remains an exciting time. It remains a really interesting industry, A factoid that I love to share is that there's something like $84 billion repaid every year by American consumers around past due or charged off accounts. That's really important. Very often it's [a scenario like] Ray fell down, he might have lost his job, now he's got a job and he's getting back on his feet. It remains a really important component of the consumer experience and the US economy.  I'm proud to be part of the industry and I think many industry players are as well. It's an exciting time to be in the industry.

[EK]: Well, thank you so much, Ray. I agree with you a hundred percent. It is an exciting time. We're going to have to be really, really good at what we do to keep going through the next couple of years. Thank you for spending time with me today and answering my questions. Thanks everyone for tuning in to this Executive Q&A. I'm Erin Kerr, I'm director of Content for Collections and Recovery, and I will see next time.