Debt Purchase Service Market Size, Share & Forecast | USD 7,579.7 million by 2033
According to the Market Statsville Group (MSG), the global debt purchase service market size is expected to grow from USD 3,714.0 million in 2022 to USD 7,579.7 million by 2033, growing at a CAGR of 6.7% from 2023 to 2033
Over the years, the debt purchasing industry has grown momentously, leading the transformation of companies concerning a customer-centric business. Thus, the verdict is placed across many companies, ranging from startups to tech companies to recognized firms worldwide. With either a challenging or collaborative approach, financial services companies or tech companies have undertaken each other’s lanes and progressed with disruptive and pioneering propositions in an ever-evolving business landscape. The debt-purchase services with technological integrations are helping the institutions deliver higher quality services at a reasonable price point. As a result, they can better align their business strategies to consumer expectations.
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Definition of the Global Debt Purchase Service Market
A debt purchase service is a financial service that involves the purchase of a debt from a creditor by a third-party debt purchaser. The debt purchaser acquires the right to collect the debt and takes on the risk of non-payment by the debtor in exchange for a discounted price. Financial institutions and debt collection agencies often use debt purchase services to manage and reduce bad debt portfolios. By selling these debts to a debt purchaser, the original creditor can recover a portion of the outstanding debt and free up resources for other business activities. Debt purchase services can benefit both the creditor and the debt purchaser, as the creditor can recover some of the outstanding debt without expending further resources on collections, and the debt purchaser can potentially profit by collecting on the debt. However, the practice can also be controversial, as some debt purchasers may use aggressive or unethical tactics in their collection efforts, leading to consumer complaints and regulatory scrutiny.
COVID-19 Impact on the Global Debt Purchase Service Market
The economic slowdown caused by the pandemic has increased debt volumes as more people are struggling to meet their financial obligations. This has created an opportunity for debt purchasers to acquire debt portfolios at discounted rates. The pandemic has also led to changes in the composition of debt portfolios, with a shift towards more consumer debt and a decrease in commercial debt. This has implications for debt purchasers who may need to adapt their strategies and tactics to collect on these debts effectively. The pandemic has further caused delays in debt collections as many debtors have been granted forbearance or payment deferral options. This has affected the cash flow of debt purchasers who rely on timely collections to generate revenue.
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Global Debt Purchase Service Market Dynamics
Drivers: Rising Demand for The Loan in Various Verticals
Today, demand for loans is rising in various verticals, such as healthcare, education, housing loan, business, personal loans, and others, especially in economies due to the low income, rising population, or unemployment factors. For instance, Asia-Pacific accounts for the significant growth for the financial institutes and debt purchase services, owing to the presence of various SMEs base and the geriatric population's rising healthcare-related loans demand, which significantly affects the growth of the debt purchase service market favourably. The rising debt in various verticals hampers the growth of the global debt purchase service market. For instance, according to a 2021 CNBC report, the average American is in debt of $90,460 to consumer debt products, from credit cards to personal loans, mortgages, and student loans.
Further, according to the data from the Federal Reserve Bank of New York's latest Quarterly Report on Household Debt and Credit, In the second quarter of 2021, overall household debt increased by $313 billion (2.1%) to $14.96 trillion. The major component of household debt, balanced by the mortgage, climbed by $282 billion, while auto loans rose by $33 billion. Credit card debt increased by $17 billion, while student loan debt fell by $14 billion. Mortgage originations, which include refinances, were $1.2 trillion in the third quarter, exceeding the previous three quarters' totals. Auto loan originations reached an all-time high of $202 billion, including loans and leases. This will accelerate the growth of the debt purchase service market globally. Further, many countries charge different ways to collect loans, but the results are futile due to economic conditions. The loan debt is accelerating so fast that it has become a burden on any economy, thereby increasing demand for debt purchase services market globally.
Restraints: Data Security & Privacy Concern
The debt purchase service industry is on the verge of rapid growth worldwide. Technological innovations in the financial sector have delivered several benefits to banks and customers alike; however, the use of digitalization raises the vulnerability to system attacks and threats. Thus, the robust data privacy and security regime in these services becomes a borderline exploitative and critical problem across the globe. The security risks related to online services are high due to various technological and other reasons. Data security and privacy concerns arise from the worst data practices in digital debt purchase services. From a privacy viewpoint, the corrupt practices include sharing, unchecked data brokerage, non-consensual or extreme data collection, storage, and failure to de-identify data. Whereas from a security standpoint, corrupt practices involve poor mechanical control, use of frail encryption, centralized data storage, and poor cyber intellect.
Also, debt purchase service and digital initiatives have several benefits, although it possesses privacy risks that harm merchants, markets, nation, and consumers alike. The market is mainly harmed by cyber vigilantism, the growth of informal mechanisms, and the loss of public confidence in digital services. Though, they harm merchants by criminal liability, actual losses arising from indemnities, loss of goodwill, and damages & penalties. This factor causes a negative impact on merchants and the market, limiting the implementation of debt purchase service worldwide.
Opportunities: Introduction of New Technologies and Techniques in Debt Purchase Service Market
Adopting digitalization and advanced technology in debt purchasing services helps provide fast-action services globally. It provides outsourcing services to both national and international clients. With the help of technology, it becomes easy to maintain records of debtors and their respective creditors. Use of technology in developing definite collection strategies to increase recoveries quickly, efficiently, and ethically. Use of end-to-end encryption method to maintain the privacy of each client and customer. This promotes the growth of the overall debt-purchasing market globally in the upcoming years. For instance, the introduction of debt collection software has eased the method of debt collection from various debtors at the global level. Debt collection software integrates tools that helps creditors and third-party debt collection agencies manage credit risk and recover delinquent debt from debtors. The software helps collection agencies have debtor information all in one centralized location, helping creditors effectively contact debtors without having to look up information across various databases.
Further, the rise in the use of technology is influenced by several factors, such as a rise in demand to reduce bad debt & improve cash flow, an increasing need for self-service payment models to speed up the collection process, the surge in need for automation in the accounts receivable process, and rise in multichannel collection models. In addition, the emerging trend of analytics-enabled collections models is expected to strongly impact the debt purchase service market in the upcoming years. Cloud technology also plays a vital role in debt purchase services, which ultimately accelerates the growth of the debt purchase service market during the forecasting period.
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Scope of the Global Debt Purchase Service Market
The study categorizes the debt purchase service market based on type, and application area at the regional and global levels.
By Type Outlook (Sales, USD Million, 2019-2033)
By Application Outlook (Sales, USD Million, 2019-2033)
By Region Outlook (Sales, USD Million, 2019-2033)
Financial services segment accounts for the largest market share by application
Based on the application, the market is divided into a healthcare, student loans, financial services, government, retail, telecom & utility, mortgage, and others. Financial services is expected to dominate the market share in 2022 in the global debt purchase service market. The financial services include debt portfolios from banks, credit card companies, and other financial institutions. These debts are often unsecured and can be sold at a discount to debt purchasers. Further, ongoing digital transactions and consumer dependency and preferecen of consumers over banks and statutory financial bodies have created a significant demand for the debt purchasing services market over the forecast period.
North America is expected to witness the largest market share by Region
Based on the regions, the global debt purchase service market has been segmented across Europe, North America, the Middle East & Africa, Asia-Pacific, and South America. North America is projected to account for the highest market share in 2022. The debt purchasing industry in North America benefits from a well-established legal and regulatory framework that provides clarity and stability to debt purchasers and creditors. North America has some of the highest debt levels in the world, including consumer debt, student loan debt, and government debt. This creates opportunities for debt purchasers to acquire debt portfolios at discounted rates. The North American economy has been growing steadily in recent years, with low unemployment and rising wages, which has increased the ability of consumers to repay their debts. These factors, among others, have contributed to the growth of North America's debt purchasing services market.
Competitvie Landscape: Global Debt Purchase Service Market
The debt purchase service market is a significant competitor, and extremely cutthroat in the sector are using strategies including product launches, partnerships, acquisitions, agreements, and growth to enhance their market positions. Most sector businesses focus on increasing their operations worldwide and cultivating long-lasting partnerships.
Major key players in the global debt purchase service market are: