The Global Insights Report from information services company Experian has found that 49 per cent of businesses are concerned about collections in a post-COVID-19 era.
As a result, 71 per cent of businesses said they are putting plans in place to help their customers pay off debt, and investing to improve business operations to better assist their customers.
Experian general manager of decision analytics Mathew Demetriou said various government support programs have enabled Australians to avoid overdue debt throughout 2020.
However, Mr Demetriou noted some possible concerning trends as these programs begin to come to an end.
He pointed to data from Experian’s credit bureau that revealed an increase in the rate of new defaults against newly opened credit accounts over the past year.
As payment pauses gradually rolled off, average credit scores receded to 737 at the end of the last quarter — a drop from 754 in July 2020, according to the data.
“Although last year’s data may not be indicative of what’s to come in 2021, until more data on payment delay roll-offs and hardship is available, businesses are right to prepare for a period of uncertainty and help their customers navigate potential repercussions of previous payment pauses,” Mr Demetriou said.
The research also revealed that only 58 per cent of businesses feel confident in their credit risk analytical models, a 14 per cent drop since October, and that 75 per cent are looking to either recalibrate and improve their existing models or rebuild them from scratch.
“The pandemic has altered the way we assess consumer credit risk and this will continue to evolve this year as government stimulus ceases,” Mr Demetriou said.
“So, it’s understandable that businesses are less confident in the effectiveness of their analytical models for credit risk now — it’s a much more fluid environment.”
Further, 86 per cent of business decision-makers said they will be implementing on-demand cloud-based decisioning applications this year, while 83 per cent reported they are now looking to integrate an automated decision management solution this year.
“The implementation of these enhanced decisioning applications will help businesses alleviate the expected repercussions of this buoyancy period that has been shaped by COVID-19 and government assistance,” Mr Demetriou said.