It’s time to shine a light on debt data.

Debt fuels economic growth and is one of the earliest concepts predating money, but it’s not free of danger and must be handled carefully.

Attempting to buy a house is now almost impossible without a mortgage and businesses regularly take loans out to fuel new ventures at the point of need. In these instances, the assurance a creditor has against these debts is that they are secured against an asset or by personal guarantee. However, in the case of unsecured debt – £300bn total at last count in the UK – the means of repayment are less clear.

The increasing cost of bills and unstable employment contribute to consumers struggling to make ends meet. Even small variations in household bills mean that many families are forced to resort to overdrafts and credit cards. Whilst for some this is a viable financial strategy when money is tight, for many, particularly the most vulnerable in society, this approach leads to multiple lines of credit and debts spiralling out of control.

At the point of applying for a credit card, lenders perform consumer credit checks which only provides a snapshot of risk. However, it’s only when a consumer sees no way out of their debts and seeks professional help does the full situation become apparent. An average of 12 credit products per consumer can be recorded by insolvency practitioners.

Does this come as a surprise to creditors? At the macro level, creditors have built their business models around the fact that not all debt is repaid, and it is likely that this is factored into many interest rates.

Debt Portfolio Managers understand which credit products are an asset to their business and which credit products are a liability and need to be sold to minimise losses. However, many consumers are not aware that their debt has been sold multiple times. The middle ground is held by the debt recovery industry where insolvency firms help consumers consolidate their debt and negotiate new repayment terms with creditors with the hope that creditors will see some of the outstanding debts repaid.

But how much of this debt is actually repaid? Privately, creditors tell us that the statistics are not good.

UK insolvency practitioners deliver a vital service to consumers who cannot cope with their debts and need support, but insolvency firms are at the behest of consumers meeting their repayment commitments.

Can creditors identify which insolvency firms are the most effective and therefore the most likely to maximise recovery rates for creditors, whilst supporting best practice processes and excellent case management? The answer is no. The lack of unifying data between insolvency practitioners and creditors means that organisations are operating in silos.

Why try and operate in the dark when data can shine a bright light on the problem, deliver transparency and support stakeholders to work together to support the consumer to pay back what is owed in a more sustainable way?

Open banking now allows third party connections to banks. This is opening up a standardised and regulated service, creating a flow of usable data that informs financial service products and drives value in the market.

Consider a future where industry data and insights flow between insolvency practitioners and creditor organisations, allowing a better understanding of consumer behaviour, analysis of repayment best practice, faster case processing on both sides and highly accurate predictions of default and recovery valuations.

Cerebreon is making this future real with robotic process automation, predictive analytics and data transfer, powered by proprietary deep learning technology.

Cerebreon’s data management platform has been built specifically to meet the most urgent needs of insolvency practitioners and creditors.

Insolvency firms are feeling the burden from backlogs of cases and the realisation that the time and resources to manually process each case exceeds the regulated cost allocated to complete the work.

Creditors are laser focussed on increasing recovery and understanding how they, alongside insolvency practitioners, can better support consumers to help them avoid defaults on arrangements and meet more sustainable and suitable repayments.

With Christmas debt a hot topic in the news and recent data published by the Government’s Insolvency Service highlighting the record number of insolvencies in the UK, there is an urgent need to find a more effective way to manage the £300bn mountain of unsecured personal debt.

It’s time to flick the data switch to allow creditors, insolvency practitioners and consumers to operate in the light.