Islamic banks are growing fast. They saw 17.6% annual growth in the past several years, as noted by professional services firm EY. But with growth comes challenges.
EY identified three major challenges faced by Islamic banks as they transition from regional operations to truly global firms:
1. Sustainable growth. To maintain profitability, Islamic banks must quickly expand into key markets but maintain the product, service, and operational quality as they grow.
2. Increased complexity. Customers are increasingly complex, and Islamic banks must adapt to their changing preferences, which include a desire for online solutions and multiple communication channels. In addition, Islamic banks are growing so fast (some are doubling in size every four years) that they need to scale sensibly to meet customer demands.
3. Need for operational transformation. As Islamic banks expand their footprint, they come under increased regulatory scrutiny from financial regulations like Basel III. They must also adapt to significant digital transformations (such as mobile banking) that customers increasingly expect.
The way forward presents both obstacles and opportunities. But there is one mistake Islamic banks are in danger of making that could undo their profitable growth in light of the above challenges.
Ignoring the need for modern collections and recovery operations.
Why Is Modern Collections and Recovery So Important?
The relationship between banks and their customers is central to profitable growth. But how banking customers do business has changed. They have multiple payment obligations, use more communication channels than ever and aren’t shy about switching to competitors if their needs go unsatisfied. This is especially true when customers owe payments to their banks. It takes just one bad experience to send them into your competitors’ arms.
Improving and deepening the customer relationship is central to modern collections and recovery. Without it, Islamic banks may still grow, but they risk customer retention.
A robust collections operation leads to sustainable growth, better customer relationships, and operations that stay compliant and adaptable to customer needs. Here’s how.
Sustainable Growth Through Better Collections
One advantage of modern collections and recovery is that it generates more revenue from a business you already have. Collection work is a competitive game. Positioning your firm to collect the most and collect first can have dramatic results.
Even an increase of a few percentage points collected on existing business is enough to significantly impact profits. And many firms using collections best practices and tools do far better, doubling or tripling the amount collected.