RP Sanjiv Goenka Group

Meeting customers where they are, is the name of the (Collections) game

Arjun Mitra
Arjun Mitra
Head - Collections
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Netflix’s new hit show Squid Game is a dystopian take on the problem of growing debt and income inequality in South Korea. But the desperation of players – to win the grand prize and fix their financial problems – is all too relatable.

Back in 2017, 71 million Americans had at least one debt in Collections. Spurred by the health crisis, the mind-boggling number continues to chart its upward trajectory. According to the Federal Reserve, American household debt hit a record $14.6 trillion in the spring of 2021.

Given this sobering fact, I think the show raises an important question for those of us heading collections operations. What are we doing for consumers in debt who feel like they have run out of options? The answer is ‘not much’ – if we continue to stick with the traditional collections model.

Traditional collections models are no longer fit-for-purpose

The biggest challenge with the traditional call-based approach is that calls are no longer the primary mode of interaction for most people. Not just that. Borrowers do not pick up calls from unknown numbers or collections agencies. 94% of unknown calls went unanswered during 2020, according to Hiya’s 2021 State of the Call report. Receiving unsolicited collection calls accentuates the sense of embarrassment and anxiety many people feel about discussing their financial situation with an unknown representative.

Other challenges of the call-based approach include poor customer experience, poor data sharing mechanisms, and breakdown in communications between consumers and collectors. Covid-19 is further impacting outbound call connections and so is the evolving regulatory environment. Anti-robocall mandates like STIR/SHAKEN,  combined with the proliferation of call authentication apps deployed on cell phones and VOIP blacklists, mean your incoming calls can be labeled as spam or even blocked.

Reduced answer rates lead to ripple effects across your business – from unending phone calls, increased internal expense and looping callbacks to diminished collections and increased compliance risks. We estimate that the revenue impact of calls labeled as spam or blocked in the coming months will result in 10% collections loss. The correlation between the inability to reach debtors and collections revenues is clear.

So, what can we do to make sure we’re supporting consumers while improving recovery? The answer is quite simple really.

We need to meet the customers where they are

Right now, consumers are increasingly on digital channels, not on the other end of a call. We also need to find ways of putting the consumer in charge of their own affairs, giving them flexibility to build their own repayment plans that can adapt as their circumstances change.

The good news is Digital Collections solutions help us do just that. It’s important to note here that Digital Collections is much more than merely sending out emails and text messages. 

A digital-first collections solution empowers both consumers and collectors through:

  • Omnichannel engagement – Enables non-intrusive omnichannel customer communication across Email, Chat, Text, and Inbound Voice . 
  • Customer-centric interactions – Provides associates with contextual customer data and Next Best Actions to enable empathetic customer interactions and right-fit solutions.
  • Self-serve platform – Empowers your customers to stay in control of their finances by allowing them to create custom payment options on a channel of their choice, at a time convenient to them.
  • Customizable digital content – Ensures targeted messaging based on customer profiles, dynamic disclosures, multi-language capability, and the ability to communicate at a time and on a channel when consumers are most receptive.

A large global bank modernized its collections program, improving borrower satisfaction by 10% within a year

Intelligent Automation, powered by next-gen technologies such as RPA, AI, ML, NLP and analytics, is key to segmenting borrowers and understanding channel usage to create customized outreach and payment plans. Such types of interventions enhance the borrower experience and increase the probability of recovery of a particular debt – in its entirety or in part. This is exactly what a large global bank experienced.

Using the digital levers of automation, analytics and AI, the bank designed a dynamic omnichannel outreach plan by leveraging channel effectiveness data, risk-based profiling, and payment rate data to reduce phone contacts in late-stage categories. The AI- and ML-based platform provided insights on customers’ needs and preferences to customize communication, channel, and frequency of outreach. The platform also helped personalize collections strategies based on changing borrower situation, macroeconomic conditions, and business policies.

The bank achieved dramatic results within a year of implementation: 10% increase in borrower satisfaction, 4% – 6% reduction in cost of recovery, and more than $50 million in efficiency gains across portfolios.

Now’s the time to pivot

As the post-pandemic world continues to take shape, the need for collections models to change has never been greater.  More importantly, the ability to do so has never been easier.

Digital Collections solutions are flexible and customizable so you can easily align them with your organization’s structure, strategy, controls, and oversight. They use the best-of breed tools to ensure compliant, safe and sound operations. What’s more, you can deploy them rapidly – in as little as 12 to 16 weeks. And when you partner with experienced providers, you can take advantage of outcome-based models that guarantee results and return on your investment.

So, what are you waiting for?

Featured resource

Download our whitepaper Collections of the future – A study by Everest Group to learn about the key considerations for lenders as they design a future-ready collections model.

Arjun Mitra

Head - Collections

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