RP Sanjiv Goenka Group

Digital Debt Collection: An effective collection strategy for the digital age

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A quick guide on best practices in debt recovery with automated solutions

Why is everyone talking about Digital Debt Collection services?

Consumer debt in the US has increased nearly $2.3 trillion since the peak of the Great Recession in 2009—increasing across almost all debt products to top $14 trillion in 2019. Since 2015 millennials—ages 24 to 39 saw the largest increase in their total average debt: 58%. Generation Z—adults ages 18 to 23—witnessed the second-highest jump of 22%.[1]

Generation Average Debt 2015 Average Debt 2019 % Change
Generation Z
$7,866
$9,593
+22%
Millenials
$49,722
$78,396
+58%
Generation X
$123,521
$135,841
+10%
Baby boomers
$104,824
$96,984
-7.5%
Silent generation
$44,342
$40,925
-7.5%

Average total debt change by generation
Source: Experian

Traditional Receivables Management models are like the hare in the Tortoise and Hare fable – racing off the start line, hitting the phones hard, and pushing for a customer response. But, as Aesop’s fable shows, faster is NOT always better.

Millennials & Gen Z consumers prefer communicating with financial service providers through text messaging, E-mail, & IVR payments preferring self-service digital channels. They do not appreciate & respond to intrusive collections phone calls—a channel approach further complicated by stricter regulatory compliance.

By strengthening collections capabilities and embracing Digital Debt Collection services, lending firms will be better prepared to address any further increase in delinquencies that might occur with traditional Debt Collection strategies.

How can Digital Debt Collection drive success?

A digitally enabled collection environment can not only enable compliance and address changing customer demands but also contextualize and optimize customer interactions. Some of the major benefits of deploying a Digital Debt Collection solution to drive success include the ability to drive superior customer experience, compliance, and business outcomes such as higher collection liquidation rates and reduced cost of collection.

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How digital debt collection can transform results for lenders

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How digitalizing debt collection can transform results for lenders

Keys to success

  • Customer-Centric Collections
    Identifying customer needs and preferences to optimize collection efforts using the best possible channels with an omnichannel approach
  • Maintaining Regulatory Compliance
    Creating compliant communication designed to meet requirements of debt collection laws and regulation
  • Customized Insight-led solutions
    A 360-degree view of customer’s behavior in a single-view dashboard to push relevant repayment options, recommend plans, and streamline communications for improved customer retention

How Intelligent Automation improves your receivables management

By harnessing the powers of Artificial Intelligence (AI), Machine Learning (ML), Analytics, and Automation in debt collections, creditors and customers can reap rewards alike. Here we outline the top ways automation helps reduce debt avoidance.

  • Using data to better collection rates
    Data Analytics is the key to identify trends, anomalies, and opportunities. Traditional debt collections companies rely on human instinct, instead of using logical sequential data to develop insight-led solutions. AI / ML can identify early potential defaulters using predictive modeling to alert collectors to proactively reach out to at-risk customers and offer credit counseling support, restructured payment plans, etc.
  • Applying behavioral science to personalize the experience
    Basing insights on demographic & socio-economic data, debt collection strategies can be tweaked using the salary, profession, and historical interactions of a customer, to ensure the right-fit channel where you’re likely to get a positive response.
  • Effortless repayment experience
    Driving smart dialogue between businesses and customers via Email, SMS, or Messenger to reach exactly where the customer visits several times a day and can pay the outstanding debt online that in turn delivers receivables faster.
  • Debt collection and recovery process automation
    Automating collection process can help eliminate error-prone manual administrative tasks and improve productivity by freeing up human resources. Also, deploying decision-making automation helps in leveraging data such as credit scores ,income and net worth to determine settlements.

How does it support your Customer Lifecycle Management

A winning Debt Collection strategy is one that leverages extreme automation across the customer lifecycle.

Acquisition

AI is increasingly emerging as the focal point where AI-driven systems can help Financial Services Providers define accurate buyer personas, score, and qualify leads based on Propensity-to-Pay models built using AI & predictive analytics.

Conversion

Leveraging Marketing Automation, conversion rates can be measured by a combination of email engagement metrics and the collection liquidation rates (total cash collected vs total value placed) with the desired outcome of a fulfilled payment.

Retention

A unified customer view improves the ability to readily access historical information and help customers devise their own repayment model placing the power in their hands which increases long-term engagement with the borrower and retains brand loyalty.

How to evaluate your Digital Debt Collection services partner

A methodical approach should be applied to evaluate the operations partner in 3 significant areas as a duly selected partner could be the defining factor in your Digital Debt Collection strategy.

Skill Sets

With technology in the ever-evolving space, your digital debt collection outsourced partners need to build and reskill their talent base in a way that prioritizes new-age solutions consistently driven by analytics.

Integration & Cloud Expert

You must check if your partner can integrate their platform seamlessly into your existing systems without disrupting regular operations. The right partner will offer in-depth cloud solutions to accelerate business workflows, ascertain business continuity, and provide increased security.

AI-powered CX Provider

The right partner should be able to leverage sophisticated Bots using Artificial Intelligence and Natural Language Processing systems to define the right collection strategy for customers, mitigate loss, and draw up an efficient financial recovery strategy.

How can Firstsource help you

Firstsource’s Digital Debt Collections platform are underpinned by our ‘Digital First, Digital Now’ approach that leverages diverse technologies including automation, AI/ML, and cloud-based services through a people & technology transformation framework for decoding your customer interactions and personas, reducing your cost of collections to as low as 3% and delivering better recovery rates for you.

Our debt recovery outsourcing solutions enable your customers the flexibility to choose where, when and how they manage their debt. With the ability to configure bespoke journeys, provide flexible repayment options and enable customers to adapt their plan to suit their changing circumstances, our receivables management service ensures your customers are happier.

Get a Free Demo of Firstsource’s Digital Debt Collection Platform to realize the real potential of debt collection process automation and reduce your cost of collections to as low as 3%.

How digitizing debt collections can transform results for lenders

How digitalizing debt collection can transform results for lenders

Author
Arjun Mitra is President of Global Collections at Firstsource Solutions. Arjun oversees Firstsource’s collections division and is responsible for client engagement and business performance. Arjun’s role involves assisting clients through a wide range of challenges, from data migration to handling changes to reporting.

Reference:
[1] https://www.experian.com/blogs/ask-experian/research/consumer-debt-study/

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