The collections and recoveries industry spent much of 2025 confronting an uncomfortable truth. Many operating models that once delivered acceptable outcomes are no longer fit for the environment in which they now operate. Rising consumer stress, more assertive regulators and accelerating technology adoption did not arrive as isolated challenges. They collided.

For organisations still relying on static segmentation, delayed intervention and lightly governed automation, 2025 was not simply a difficult year. It was a warning.

The industry has reached a point where collecting harder is no longer an option. Collecting differently is the only path forward.

A Prolonged State of Consumer Stress Not a Temporary Shock

The dominant assumption entering 2025 was that inflationary pressure would ease and household finances would gradually recover. In reality, the year exposed a more structural issue. Consumer stress has become embedded.

Across major economies, elevated interest rates and sustained cost of living pressure reshaped repayment behaviour. Debt stacking became the norm rather than the exception, with credit cards, BNPL, utilities arrears and unsecured lending converging within the same consumer profiles.

This shift matters. Traditional vulnerability models were built around narrow definitions and visible distress. What emerged in 2025 was a broader and less obvious risk cohort. Middle income consumers began to exhibit stress signals that legacy models simply were not designed to detect.

For collections leaders, the message was clear. Waiting for arrears to age before acting is no longer a viable strategy.

Regulation Has Moved On Many Firms Have Not

One of the most striking developments in 2025 was how decisively regulators reframed their expectations. The conversation is no longer about whether policies exist. It is about whether decisions can be evidenced, explained and justified at scale.

In the UK, Consumer Duty moved from theory into enforcement reality. Firms were expected to demonstrate foreseeable harm, fair value and appropriate outcomes across the full lifecycle of credit and collections activity. Generic forbearance options and blanket segmentation increasingly failed to meet regulatory intent.

In the US, the CFPB sharpened its focus on transparency and data integrity, particularly as BNPL products crossed into mainstream credit reporting. Organisations found themselves managing more disputes, more complexity and greater scrutiny of how different credit products were treated within collections strategies.

Canada continued to raise expectations around third party oversight and consistency, while APAC regulators reinforced that hardship identification must be proactive and embedded rather than reactive and optional.

Across regions, the implication was the same. Compliance is no longer about avoiding breaches. It is about proving good judgement repeatedly and at scale.

Technology Is No Longer Optional But It Is Not a Shortcut

Technology investment accelerated rapidly in 2025, but not always wisely. Many organisations discovered that adding AI to flawed processes simply produces faster and less defensible outcomes.

The firms that pulled ahead were those that used technology to rethink decisioning rather than automate old logic. Analytics driven segmentation began to replace static rules based on balance or delinquency age. Vulnerability identification evolved from reliance on disclosure to predictive insight based on behaviour and context.

At the same time, regulators and risk teams started asking harder questions about explainability and governance. How was a customer prioritised. Why was one treatment offered instead of another. Could the organisation demonstrate that automation improved fairness rather than undermined it.

The uncomfortable truth is that ungoverned AI introduces as much regulatory risk as operational benefit. In 2025, maturity was defined not by who moved fastest, but by who moved with control.

Global Themes Local Consequences

Although regulatory frameworks differ, 2025 revealed striking alignment in direction.

In the UK, firms were forced to reconcile performance pressure with Consumer Duty expectations. In the US, scale and complexity collided with emerging data standards. In Canada, consistency across in house and outsourced operations became a point of focus. In APAC, hardship and vulnerability remained central regulatory concerns with real enforcement weight.

What differed was not the destination, but the starting point. Organisations operating across regions discovered that global playbooks without local nuance increasingly failed both commercially and regulatorily.

2025 Proved That Outcomes Matter More Than Optics

Perhaps the most important lesson of 2025 is that surface level compliance is no longer enough. Regulators, boards and consumers are increasingly aligned in their expectations. Fair outcomes must be real, measurable and repeatable.

Recovery rates alone no longer tell the full story. Sustainable performance now depends on early insight, defensible decisioning and the ability to demonstrate that customers are treated appropriately based on their circumstances.

Those who invested in better data and analytics found they could achieve both stronger outcomes and greater regulatory confidence. Those who did not often faced rising complaints, disputes and scrutiny.

Looking to 2026 The Gap Will Widen

The signals for 2026 are already visible.

Regulators will continue to push for earlier identification of vulnerability and hardship. Alternative credit data including BNPL will reshape segmentation and risk assessment, particularly in North America. Outcome testing and evidence-based governance will move from best practice to baseline expectation.

AI adoption will accelerate further, but only organisations with strong control frameworks will be able to scale it safely. Others will slow under the weight of regulatory challenge and operational risk.

Most importantly, the gap between leaders and laggards will widen. The leaders will be those who treat collections and recoveries as a strategic capability grounded in data, governance and adaptability. The laggards will continue to optimise yesterday’s models for tomorrow’s problems.

The industry is not facing temporary disruption. It is undergoing a permanent reset.

The question for 2026 is no longer whether change is required. It is whether organisations are prepared to move decisively before regulators, consumers and market forces move for them.

Why 2025 Was A Pivotal Year for Consumer Finance and Debt Collection

2025 has been a watershed year for consumer finance and debt collection across major developed markets. Regulators have moved decisively away from narrow, rules‑based compliance and toward a sharper focus on outcomes, data quality, and the real‑world experience of consumers in financial difficulty.

Across the UK, USA, Australia, and New Zealand, firms involved in lending, servicing, debt purchase, and collections have faced a common challenge: adapting operating models and systems while regulatory reform is still in motion.

United Kingdom: From Implementation to Evidence

In the UK, 2025 marked a clear shift from regulatory change design to regulatory change scrutiny.

The FCA rolled out new consumer credit regulatory returns, aimed at improving the consistency and usefulness of supervisory data. For collections and debt‑purchase firms, this has meant far greater attention on how portfolios perform in reality: volumes in arrears, dispute rates, complaint trends, and resolution outcomes. Data lineage and management information are no longer back‑office concerns; they are now frontline regulatory issues.

At the same time, the Consumer Duty entered its embedded supervision phase. The question for firms is no longer “have you implemented the Duty?” but “can you prove it works?” In collections, that translates into clear expectations around vulnerability identification, tailored forbearance, appropriate tone of communications, and demonstrable fair outcomes.

Alongside this, the Government advanced its Financial Inclusion Strategy, with tackling problem debt positioned as a core pillar. The strategy emphasises earlier intervention, better coordination between creditors, local authorities and the free debt advice sector, and a shift away from crisis‑driven recovery toward prevention and sustainable repayment. For collections and recoveries, this reinforces expectations that firms proactively identify emerging financial difficulty, make timely and appropriate referrals to debt advice, and support longer‑term outcomes rather than short‑term recoveries. Over time, this is likely to influence supervisory assessments, policy development and funding priorities, further embedding forbearance, data‑sharing and customer‑centred design into mainstream collections practice.

Looking ahead, the Government’s Consumer Credit Act reform programme introduced further uncertainty. While still in its early phases, it signals meaningful medium‑term change to disclosures, arrears notices, and enforceability. Firms are already under pressure to ensure systems and workflows are flexible enough to adapt as reforms land.

Finally, announced debt enforcement (bailiff) reforms reinforced the direction of travel: enforcement must be proportionate, carefully governed, and demonstrably a last resort—particularly where vulnerability is present.

United States: Uncertainty and Enforcement Risk

In the US, 2025 was characterised less by stability and more by regulatory and legal uncertainty.

The highest‑profile example was medical debt. A CFPB rule intended to remove medical debt from credit reports was finalised early in the year, only to be vacated later after the Bureau itself asked the court to undo it. For creditors and collectors operating in this space, the episode reinforced how politically sensitive and volatile medical debt regulation remains.

More broadly, the CFPB withdrew a large body of interpretive guidance and policy statements, signalling a shift away from guidance‑led supervision toward enforcement grounded directly in statute. For collections firms, this has increased reliance on legal interpretation and raised compliance risk, particularly where historical guidance had been used to shape operating practices.

Operational pressure also increased through FCC changes to TCPA rules, tightening opt‑out and consent revocation requirements for calls and texts. Given the scale of TCPA litigation risk, outbound contact strategies in 2025 demanded more robust consent management and control frameworks than ever before

Australia: Expanding the Regulated Perimeter

Australia’s big story of 2025 was the expansion of regulation rather than its removal.

From June, Buy Now, Pay Later providers were brought into the credit licensing regime, fundamentally changing how BNPL arrears and collections must be handled. Hardship, affordability, and conduct obligations now apply more consistently across these products, with clear implications for collections strategies and tooling.

ASIC also sharpened its enforcement stance on debt management, credit repair, and collections activity, particularly where firms overstated outcomes or failed to treat customers fairly. The message was unambiguous: obligations to act “efficiently, honestly and fairly” extend across the entire customer lifecycle, including hardship and recovery.

At the same time, the dismissal of charges in the Panthera Finance case exposed potential gaps in regulatory definitions, especially where firms own the debts they pursue. While this provided short‑term clarity for some operators, it also increased the likelihood of future legislative or regulatory reform to close perceived loopholes.

New Zealand: Reform with a Long‑Term Lens

New Zealand’s 2025 changes were less dramatic in tone but no less important in impact.

The Credit Contracts and Consumer Finance Amendment Bill progressed through Parliament, reflecting the Government’s effort to recalibrate consumer protection while preserving access to credit. Changes to affordability and disclosure obligations will inevitably flow through into arrears, default, and collections practices.

Alongside this, the Customer and Product Data Act 2025 laid the foundations for a Consumer Data Right regime. While its impact on collections will emerge over time, the direction is clear: greater data portability, higher expectations of data governance, and new opportunities for more informed affordability and hardship assessments.

What Tied 2025 Together

Across all four jurisdictions, several common themes defined 2025:

• A decisive move from rules‑based compliance to outcomes‑based supervision.
• Increased reliance on data, reporting, and management information as supervisory tools.
• Sustained focus on vulnerability, fairness, and disputed debt handling.
• Greater operational and legal complexity as reforms continue to evolve rather than settle.

For consumer finance and collections leaders, 2025 was not about a single regulatory shock, but about adapting to a world where evidence, data quality, and customer outcomes matter as much as formal compliance. That direction of travel looks set to continue.

 From Chasing Debt to Managing Outcomes: Technology Trends in Collections for 2025 and Beyond

Debt collections and recoveries are undergoing a quiet but fundamental transformation. In 2025, technology has moved the function away from being a back‑office, task‑driven operation and toward a data‑led, customer‑centric decision discipline. This shift is being driven as much by regulation and social expectations as by advances in analytics, automation, and AI.

This blog explores the key technology trends shaping collections in 2025 and sets out what they signal for 2026.

AI‑Driven Decisioning Moves into the Mainstream

In 2025, advanced analytics and machine‑learning models are no longer experimental add‑ons. They are increasingly embedded directly within collections platforms, shaping how accounts are segmented, prioritised, and worked. By combining behavioural, transactional, and interaction data, these tools enable firms to move from reactive chasing to proactive strategy selection.

The impact has been material. Collector effort is better targeted, affordability considerations are more consistently applied, and decisions can be evidenced in a way that stands up to regulatory scrutiny. Explainability has become almost as important as predictive power.

Looking ahead to 2026, predictive models are expected to evolve into prescriptive and agent‑assisted decisioning. Rather than simply scoring risk, systems will increasingly recommend – and in tightly governed scenarios execute – next‑best actions aligned to customer outcomes and policy constraints.

Automation Becomes Adaptive

Automation was a defining theme of 2025, particularly through robotic process automation and workflow engines that handle reminders, promise‑to‑pay tracking, escalations, and referrals. For many organisations, this delivered rapid efficiency gains and reduced operational cost.

More importantly, automation has driven consistency. Policies and treatment paths are executed the same way every time, reducing conduct risk and reliance on individual judgement for routine decisions.

In 2026, this model is expected to mature into adaptive, self‑learning workflows. Instead of following fixed paths, workflows will adjust dynamically based on customer responses, vulnerability indicators, and real‑time risk signals – with human intervention focused where judgement genuinely adds value.

Conversational AI Changes How Customers Engage

Conversational AI became mainstream in collections during 2025. Chatbots, messaging agents, and voice bots are now routinely used to handle inbound queries, support self‑service payments, and manage straightforward repayment arrangements.

For firms, the benefits are clear: round‑the‑clock availability, higher engagement rates than letters or outbound calls, and reduced pressure on frontline staff. For customers, interactions are quicker, less confrontational, and more flexible.

The next step, likely to accelerate in 2026, is the emergence of agentic AI. These systems will be capable of managing multi‑step conversations, negotiating simple arrangements, and escalating seamlessly to human agents where empathy, discretion, or complex judgement is required.

Compliance Moves ‘Into the System’

As regulatory scrutiny has intensified, 2025 has seen a decisive shift toward compliance‑by‑design. Rather than relying on post‑hoc monitoring, collections platforms increasingly embed controls directly into decisioning and communications – from consent and contact‑frequency management to vulnerability flags and auditable decision trails.

This approach has become essential in an outcomes‑based regulatory environment, where firms are expected to evidence fair treatment in real time, not just after the event.

By 2026, compliance logic is likely to become increasingly machine‑readable and rule‑driven, allowing AI‑led interactions to validate themselves against regulatory and policy constraints before actions are taken.

Digital‑First Engagement Becomes the Default

In 2025, digital channels overtook letters and voice as the primary means of engagement for many customer segments. Secure portals, SMS, email, chat, and apps now form the backbone of most early‑stage collections strategies, supported by self‑service payment and arrangement tools.

The results have been higher engagement and cure rates, particularly where customers are given clarity, control, and choice early in delinquency.

Looking forward, omnichannel strategies in 2026 are expected to become orchestrated rather than channel‑specific, with systems automatically selecting and sequencing channels based on individual customer behaviour and preferences.

Cloud Platforms Enable Speed and Change

A major enabler of these trends in 2025 has been the continued move away from legacy, on‑premise collections systems toward cloud‑native SaaS platforms. These platforms have allowed firms to deploy new features faster, integrate more easily with analytics and payment providers, and respond more quickly to regulatory change.

In 2026, this is likely to evolve further toward modular, API‑first architectures, where organisations assemble best‑of‑breed ecosystems rather than relying on single monolithic systems.

Earlier Intervention Through Distress Analytics

Technology attention in 2025 has increasingly shifted upstream. Early‑warning analytics are being used to identify emerging financial stress before accounts formally default, using behavioural signals, transaction patterns, and external data.

This supports earlier, more supportive intervention – aligning with financial inclusion agendas while also improving long‑term recovery outcomes.

By 2026, these capabilities are expected to trigger preventative engagement and structured hardship pathways, further blurring the boundary between servicing, collections, and financial support.

Ethical AI and Scaled Quality Assurance

Finally, 2025 has seen growing use of AI‑driven quality assurance tools to analyse sentiment, tone, and policy adherence across calls and digital interactions. This supports fair‑treatment objectives while scaling oversight without linear growth in QA teams.

As these tools mature, ethical‑by‑design AI – with bias testing, explainability, and human‑in‑the‑loop controls – is likely to become a differentiator rather than a compliance afterthought in 2026.

What This Means for 2026

Taken together, these trends point to a clear conclusion. Collections technology is evolving into a strategic decision platform, not just a recovery engine.

By 2026, leading organisations are likely to treat collections as part of end‑to‑end customer lifecycle management, rely on AI for prioritisation and engagement, and design operating models that assume digital‑first, assisted‑by‑exception interactions. Those that fail to modernise risk falling behind not just on efficiency, but on regulatory resilience and customer outcomes.

What This Means for Operating Models

As collections technology evolves, operating models must change with it. The shift is not simply about deploying new tools, but about rebalancing people, process, data, and governance around a different way of working.

1. People – From Volume Handling to Judgement and Support
   Routine activity will increasingly be handled by automation and AI. Human roles will concentrate on complex cases, vulnerability, dispute resolution, and oversight of automated decisions. Skills in judgement, empathy, and regulatory awareness will matter more than call volumes.
2. Process – Policy-Led, Dynamically Executed
   Static treatment paths will give way to policy-driven processes executed dynamically by workflow and decision engines. Processes will need to be designed for change, with clear escalation points and human-in-the-loop controls.
3. Data – A Core Asset, Not a By-Product
   High-quality, timely data becomes mission-critical. Operating models must treat data governance, lineage, and explainability as first-class capabilities, underpinning decisioning, compliance evidence, and regulatory reporting.
4. Technology – Platform Thinking Over Point Solutions
   Collections systems will increasingly sit within modular, API-driven ecosystems. Firms should plan for integration with analytics, payments, communications, and servicing platforms rather than relying on monolithic tools.
5. Governance – Outcomes, Not Just Adherence
   Governance frameworks must evolve to oversee automated and AI-assisted decisions. This includes clear ownership of models, controls over bias and drift, and metrics that focus on customer outcomes as well as recoveries.

In short, technology change in collections demands an operating-model reset. Organisations that align structure, skills, and governance with these trends will be better placed to deliver sustainable recoveries, regulatory resilience, and improved customer outcomes in 2026 and beyond.

A Standout Year at Arum

2025 has been a fabulous year for Arum. We’ve had the opportunity to work with clients across the globe and across multiple sectors, from utilities and financial services to government and specialist lenders. Despite very different operating contexts, many of the challenges our clients face are strikingly similar.

Across these engagements, the focus has consistently been on helping organisations navigate a period of significant change; tighter regulatory expectations, evolving customer behaviours, rising operational complexity, and rapid advances in technology. Our work has ranged from strategic diagnostics and operating model design through to hands-on support with system selection, implementation readiness, and regulatory alignment.

How We’ve Been Supporting Clients

A recurring theme in our work this year has been the shift away from viewing collections as a purely reactive, back-office function. Instead, we’ve been helping clients reposition collections and recoveries as a data-led, customer-centric decision discipline.

In practical terms, that has meant working alongside clients to:

• Design outcomes-focused operating models that balance recovery performance with fair treatment and vulnerability support
• Prepare for and implement modern SaaS collections platforms, with a strong emphasis on data readiness, governance, and integration
• Embed advanced analytics, decisioning, and automation in ways that are explainable, controllable, and regulator-ready
• Strengthen compliance-by-design, ensuring policy, technology, and MI work together rather than in isolation
• Support earlier intervention and more sustainable customer outcomes, aligned to financial inclusion and hardship agendas

Technology has been a major enabler, but never the end goal. The most successful programmes we’ve seen are those where technology, people, process, and governance evolve together.

Reflections on 2025

Looking back, 2025 feels like a year where a lot of ideas became real. AI-driven decisioning moved into the mainstream. Automation stopped being about efficiency alone and started to support consistency and control. Digital engagement became the default rather than the exception.

At the same time, regulatory expectations became clearer. Across jurisdictions, supervisors are asking not just whether firms have the right rules and processes in place, but whether they can evidence good outcomes for customers in difficulty. That combination of technological acceleration and outcomes-based regulation has made this a defining year for collections and recoveries.

Looking Ahead to 2026

What I’m most looking forward to in 2026 is helping clients take the next step.

We’re moving into a phase where collections technology becomes a strategic decision platform, not just a recovery engine. That brings opportunities, but also responsibility. AI, automation, and analytics need to be deployed thoughtfully, with strong governance, clear accountability, and human judgement firmly in the loop.

For Arum, that means continuing to partner with clients to:

• Turn technology investment into measurable, sustainable outcomes
• Build operating models that are resilient to regulatory change
• Use data and analytics to support earlier, fairer, and more effective intervention
• Help organisations move confidently from experimentation to embedded, business-as-usual capability

Ready for the Break – and the Year Ahead

So yes, I’m looking forward to a well-earned break, but I’m even more excited about what 2026 holds. The challenges facing collections and recoveries are complex, but the opportunities to improve outcomes for organisations and customers alike have never been greater.

Huge thanks to our clients, partners, and, most importantly the whole Arum team for making 2025 such a strong year. Roll on 2026.

How we can help

Organisations don’t need to navigate this alone. Many benefit from an independent view of their current collections environment, from call listening and skills analysis to identifying gaps, strengthening processes and supporting training delivery.

With the right expertise behind them, teams can embed these behaviours quickly and confidently, creating lasting change for customers and the organisation.

Take a look at our helpful resources below or contact us directly to discuss your needs.

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About the author

Forid joined Arum in 2019 as a senior consultant and is now our Head of Global Advisory Services. He has over 25 years’ experience delivering transformational change and performance improvement in both small and complex organisations, across multiple industries and geographies. Forid draws upon the full range of Arum’s skills and capabilities to support organisations in improving every aspect of their collections and recoveries.

Forid Meah
Head of Advisory