Alternative commercial models for fairer outcomes

How can alternative commercial models support fair outcomes for all?

- An opinion piece by a TDX Group colleague

At TDX Group our vision is to “make the debt industry work better for everyone”. And when we say “everyone”, we mean it.

In the Third Party Commercial team this means that remuneration, rewards and incentives should be aligned with achieving a resolution for the consumer and the client, but that’s not where it ends. We want commercials that reward our agencies for the excellent work that they do too!

You could argue that current commercial models do not entirely support that vision, mainly because the outcomes measured by the payment-by-results mechanism is biased towards cash collected. This is standard across the collections industry but the tide is changing. Not only are we seeing an increase in outcomes that are right and fair but don’t necessarily result in payment – identifying vulnerability being just one example – but all this means increased work for the agencies for which there is no direct reward. So change is needed.

Clients and agencies alike are interested in measuring other outcomes and agree that there needs to be commercials in place to support this. However, alternative commercial models seem complex and risky, so how do we move from a commission-only model to one which ensures that the consumer has a resolution to their debt problem, rewards agencies for achieving fair outcomes, and provides the client with the remuneration for services/goods provided?

The answer may lie in getting smarter upstream with data, and that’s where TDX Group comes in. We are currently working on new style segmentation using Equifax data which will enable us to identify segments of debt where the right outcome might not be collecting cash. This is where we will select the right commercials based on the work involved and the outcome desired. But what about where the objective is still to secure payment in a fair manner?

This is where payment-by-results still works – but we need to take the emphasis off cash as the only result which is rewarded. The “result” can be a multitude of positive outcomes which lead to a resolution of the debt. A scorecard approach to commercials seems to work particularly well in this scenario. The payment element is aligned to ensure that agencies are incentivised for providing fair outcomes and better consumer treatment. This also enables us to define what a good outcome looks like, and reward this appropriately. At TDX Group, we’re working on a commercial scorecard which ensures that consumers get a resolution to their debt in a fair way, and even when that doesn’t mean paying the debt, agencies are rewarded for the part they play in the resolution. All it means is that the process of resolving debt becomes fairer for all and TDX Group can continue our journey to “make the debt industry work better for everyone”.