The global health crisis has drastically changed consumer behavior. McKinsey data shows that in the wake of the pandemic, consumer adoption of digital catapulted five years in just eight weeks. Consumers are increasingly using digital channels to interact and transact with businesses across industries. The debt collection industry is no exception.
As more and more borrowers prefer leveraging omnichannel communications and self-serve options to interact with organizations, how can debt collection companies meet evolving customer expectations while ensuring regulatory compliance? How can they maintain growth and profitability? The answer lies in transitioning to a Digital Debt Collection and Recovery model that imbues agility and efficiency into your operations, enhancing customer experience and giving customers greater control over their finances.
Digital Debt Collection: The way of the future
Let’s take a quick look at the evolution of customer engagement in the debt recovery industry to better understand where it’s headed in the future. Phone calls and collection letters were the standard form of customer communication not so long ago. With cell phones becoming ubiquitous, consumers began screening calls, resulting in low right party contact rates. For instance, 75% of millennials avoid phone calls as they are time consuming.
Changing consumer behavior calls for new strategies. Digital Debt Collection enables consumers to engage with companies – from the privacy of their homes – on a channel of their choice and at a time convenient to them. Under this model, customer service associates are still available to support consumers, but only if they choose to avail their assistance. Most importantly, the digital approach empowers consumers to manage their debt based on their financial situation, in the way that works best for them, using self-service options and payment portals.
How can businesses future-proof their collections operations using a digital-first solution?
Three effective strategies for the digital age
- Meet customers where they are: It’s clear that as consumers become more tech savvy, user-friendly channels will be top of mind. Omnichannel engagement – spanning Email, Text, and Chat – is therefore a must-have for outbound communication in today’s digital-first world. It enables contextual interaction across channels, allowing customers to seamlessly pick up conversations where they left off. It also ensures privacy. Consumers don’t have to speak to an associate on the phone, if they don’t want, making it easier for them to avoid embarrassment and settle accounts as their financial situation permits.
How to make the most of it: In addition to deploying omnichannel engagement, promote your app or payment portal via text messages, shepherding consumers to where they need to go and driving engagement and interaction in the process. The result: 10X engagement.
- Put customers in control: Providing consumers with a choice of engagement channels is not enough. As businesses across industries such as retail and hospitality raise the bar on digital engagement, consumers have come to expect the same from debt collection companies. This means empowering customers with complete flexibility, including allowing them to build their own payment plans and make incremental changes over time in sync with their changing financial situation.
How to make the most of it: Deploy user-friendly apps and payment portals to create secure, engaging and personalized experiences, making consumers feel like they are in total control of their life. Promote your portal through hot links and text messages, making it easier for consumers to repay their delinquent accounts.
- Serve customers holistically: Don’t stop with putting your customers in control. Take it a step further – envision serving your customers as individuals with unique needs. Empower them with tools that go beyond custom repayment options, helping them better manage their finances and lead a richer and fuller life.
How to make the most of it: Get creative with the types of payment options you offer and offer specialized services such as dispute resolution and special circumstances support. Provide value-added tools such as FAQs, budgeting and credit building to help them better navigate the situation emotionally as well as financially.
Next-gen technologies shaping the future
Over the next five years, the collections industry is going to see an influx of Intelligent Automation solutions – a combination of Robotic Process Automation (RPA), Artificial Intelligence (AI), Machine Learning (ML) and Natural Language Processing (NLP) technologies. These technologies will enable organizations to do more with less, improving outcomes for both consumers as well as businesses. They will further enhance customer-centricity and elevate the customer experience. Here’s how.
On the one hand, RPA will help drive end-to-end efficiency and productivity, including upstream and downstream processes. On the other, AI, ML and NLP will play a key role in gathering insights into consumer behaviors and needs to tailor customer engagement, interaction and solutions.
Outsized impact of Digital Debt Collection
As the collections industry becomes increasingly commoditized, Digital Debt Collection helps businesses drive high impact outcomes. Over the course of the last two decades, we have routinely seen clients realize several tangible outcomes including:
- Reduced cost-to-serve by up to 75% and 62% yield per account, unlocking significant value
- High rates of customer engagement – up to 90% open engagement rate and seven times less likely to generate a complaint
- Self-serve capability – 92% of customers prefer to resolve balances and issues using self-serve options
- Little or no human errors and high operational flexibility and scalability
- Errorless regulatory compliance for safe and sound operations
- Customer journey mapping and transparent reporting for integrated intelligence and superior decision-making
- High account to collector ratios with 24-hour resolution TAT
The collection industry is witnessing disruption not only in customer expectations but also at the Point of Sale (POS) with consumers embracing Buy Now Pay Later (BNPL) and other risk models. Next-gen technologies, including RPA, AI, ML and NLP, will play a key role in future-proofing your collections business, empowering customers, and elevating the customer experience to drive better outcomes.
Forward-looking organizations that create a machine-first ecosystem, supplemented by the human touch, will be strongly positioned to lead the industry in the digital-first era. Now’s the time to identify partners with the right domain and technology expertise to build a road map to the future and drive strategic growth.
To learn more about how Firstsource can help future-proof your collections operations, explore our digital debt recovery solution.