The COVID-19 crisis will force consumers to care more about personal finances, and entrepreneurs to gain a new approach to business. Interview with Krzysztof Krauze, President of Intrum Sp. z o.o.

As the leader of the debt management industry, Intrum has a direct insight into the financial condition of Polish enterprises and analyzes the issue of consumer debts. In your opinion, can we already determine the financial impact on both the B2B and B2C sectors that the COVID-19 pandemic caused?

KK: The restrictions introduced in Poland are very severe for everyone and it seems that the crisis situation has been going on for a very long time. However, these are “only” three months, which means that it is definitely too short a time to be able to determine with certainty what consequences the COVID-19 pandemic will have for Poland in the long term. On the other hand, this is enough time for the business to react. Due to security measures, many industries (e.g. tourist, catering, transport or cosmetics industry) ceased to function overnight. Many companies find themselves in the most difficult financial situation, and many of them will unfortunately not return to the market after the crisis. Companies from other industries are also affected by coronavirus and trying to cope with this situation. They finance their current operations with savings if they any have. Their financial situation, therefore, depends on how long the crisis lasts.

The current situation of companies affects consumers. People who work in firms that have not been affected by the crisis are in the best position. However, employers who wanted to protect their businesses from the recession had to lower salaries or even reduce employment. As a result, part of the society found itself in a really bad financial situation. Savings allow to go through a hard time, but people who had no chance to save money, now have real problems. Estimates for the future are not optimistic: in the coming time, up to 2 million people may lose their jobs, and unemployment, if the worst-case scenario will be confirmed, can rise by up to 10%.

Regarding the impact of this crisis situation on consumers, we are currently investigating this issue. Every year, Intrum Group publishes the „European Consumer Payment Report” (ECPR), which analyzes the financial situation and payment behavior of consumers in Europe, including Poland. However, observing the “new” reality in which we all found ourselves, we wanted to check whether – and to what extent ­– COVID-19 has changed the approach of European consumers to spending money and managing the household budget. The premiere of our report “ECPR COVID-19 White Paper” will take place in June.

Because of the crisis, many consumers have become debtors or have fallen into bigger debt. How does it affect Intrum? Does the debt management sector expect a prosperity-period?

KK: We help in debt recovery and Intrum as a company operating on the free market, we get benefits from our activities, it is obvious. However, the increasing debt level of our society is not profitable for anyone. And I think in this case I can speak on behalf of other companies in our industry. Late payments are already one of the biggest problems of the Polish Economy at the moment. According to our data, customers and business partners who not paying on time is a problem for over 60% of Polish entrepreneurs1. This situation affects us all. Probably the problem will get even bigger “in a moment”.

Because of the financial problems caused by the COVID-19 crisis that consumers and entrepreneurs are now facing, we are actually expecting more cases to flow, but this will happen at the earliest in Q4 this year. What is important – over the past few weeks, the activities of debt management companies such as Intrum have been significantly reduced. Due to the restrictions, the courts were not fully operational, which means that some legal proceedings could not take place. Our activities in the last weeks were similar to “behind the desk” situation. Our field negotiators could not work either. In southern European countries, e.g. Italy and Spain, due to the COVID-19, debt collection has been significantly reduced for some time. It cannot be denied that these facts were not without any impact on Intrum financial situation and certainly other companies in our industry.

This is an interesting topic – in the current situation debt collection is ethical at all?

KK: We always base our actions on four values (Empathy, Ethics, Dedication, and Solutions) which are very important in this context. Contact with debtors should always be based on empathy and understanding of individuals who have found themselves in a difficult financial situation and often go through life’s dramas. Intrum always works in this way, and in the current situation, this approach should become the responsibility of all debt management companies. Due to the loss of income consumers cannot pay their debts on time. What is more, many of them live under permanent stress right now, fearing for their health and their loved ones – for the future in general. As a debt collection company, we must also include these new variables in our approach to debtors. On the other hand, creditors who are looking for support from us in the current situation, they expect us to improve their financial flows, because they want to be able to function and survive this difficult period. Thanks to a hard work of our specialists and negotiators, we can meet these expectations, but we never forget about ethical action. Thanks to it, we present solutions that will be optimal for both sides – creditors and debtors.

Will the COVID-19 crisis, except financial consequences, have a deeper effect, will change something in consumer behavior, e.g. in our approach to spending money?

KK: In this case, the answer is definitely YES, or – should change. The COVID-19 pandemic has shown that nowadays we cannot speak about complete employment stability, and there is not such a thing as „industry that will never collapse”. Many consumers are now struggling with financial problems and, unfortunately, it can be predicted that a similar scenario is probably waiting for another groups – that’s why we should all draw conclusions from this situation.

Paradoxically, the current crisis has its positive sides. Many people understood why personal finance management, saving for a rainy day and making „smart” decisions about money are important. Reduction of income or losing a job motivated many people to act, to plan expenses, and analyze their financial situation, or at least I want to believe that this is a case. Recent weeks have shown that we should always expect the unexpected. All you need is elementary but reliable knowledge of finances, regular household budget management and, if necessary, a small change in spending habits. This will give us a feeling of greater financial security, even when the crisis comes.

What about entrepreneurs? Even when the crisis is over, they will have difficulty to save money.

KK: This is true. Probably a quite large group of entrepreneurs will first have to borrow money to resume operations. But companies can also more consciously take care of their financial liquidity. What I mean is an active “fight” with late payments and make sure that late payments do not appear at all. Entrepreneurs who have a problem with non-paying clients or contractors come to us every day. And usually, it is not about several weeks’ delay but the problem is bigger. Very often creditors delay taking action for so long that they lose financial liquidity and become debtors themselves. Observing the current situation and how business is coping with the crisis, I believe that in the future many companies should change this approach, and therefore the importance of pre-debt collection actions will increase. Generally speaking, it is a set of actions that help to ensure that the problem of delayed payments does not arise at all. Companies can use various solutions to protect themselves against the problem of late payments, such as: verification of contractors, requiring prepayment from customers, insuring receivables, applying bank guarantees, and using professional debt collection. Unfortunately, as the latest edition of Intrum “European Payment Report” shows (in which we analyze the financial condition of polish enterprises), 1/3 of companies do not take any preventive measures. Time will tell whether reality after coronavirus will change this phenomenon also.

Last Updated on December 7, 2020 by Karolina Ampulska