Third party administration - a market of choice

07 November 2018

The third party administration (TPA) market continues to remain strong, driven by both the launch of new lenders and in some cases the expansion of existing financial services businesses diversifying into new lending businesses.  

Whereas lenders in the 1980’s and 1990’s had very little choice when it came to third party administrators, the last 12 years or so has seen the successful launch of many new servicers adding healthy competition to what was once a fairly monopolised market. The creation of these new servicers has been driven by many factors, ranging from lenders wishing to service their own portfolios through to there still being a very buoyant portfolio acquisition market that lending books need to be serviced on.

With the amount of portfolio purchases going on in the market, a servicers’ capability in the area of migration is also a very important area to explore. If migrating portfolios (either into or away from a servicer) is a possibility, both the experience of the servicer and also their servicing software provider should be examined.

Whereas historically adherence to service level agreements was the main key performance indicator of interest to a TPA’s clients, today there is a lot more interest in the technologies that service the actual portfolios. Automation is key in any operation to drive efficiency and keep staff costs low, so a workflow capability is a must, ensuring that only cases that need manual intervention are looked at. Statements and other event driven correspondence should be sent automatically. , Only queries received from a customer, on the back of the receipt of such documentation should need to be dealt with on a proactive basis. Obviously investing in a digital self-service capability can also mean that call and correspondence volumes are also kept to a minimum.  

Today, with the expiration of the Funding for Lending and Term Funding schemes, another major factor of choice is in the ability of third party servicers to offer securitisation and deal with other funding models. Whereas twenty or thirty years ago there were only a couple of viable options, most of the more recently formed servicers have this capability and so, again, there is no longer the monopoly of just a few players in this area.

Of course, all of the above needs to be underpinned by the fact that we also need to work with businesses we believe we can trust and build solid relationships with. Often deals are done between those who have worked together before, but, there is far more choice in the market today than previously and so the opportunity to undertake more due diligence before making a supplier selection should be undertaken if going down this route.        

 

Media contact

Debbie Staveley
Director and Owner,
bClear Communications

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+44 (0)1275 542 511

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