The debt collection industry has evolved significantly over the past few years. Courtesy – the change in laws, new communication options, and technology driving the narrative for redefining debt collections. As customers increasingly embrace digital channels to manage their finances, it has become increasingly vital for lenders and debt collection agencies to be in sync with similar mechanisms.
Gone are the days when lenders could rely on the conventional call centre collections model to engage with customers. Such traditional models typically employed a one-size-fits-all strategy that involved making aggressive calls to defaulters and using an intimidating communication manner. Consequently, the lenders would bear the burden of this approach, as customers are less likely to fulfil their obligations after being harassed. Organizations are also prone to face reputational damage if a customer leaves negative reviews or takes a complaint to social media.
Hence, the most ideal step with the collection is choosing a digital-first approach. Whether the goal is to streamline your collections capabilities, boost your efficiencies, scale your operations, increase customer satisfaction, or improve recoveries, a digital debt collection strategy will help. There are various other benefits of leveraging technology in debt collections management; listed below are some of them:
- Personalized, Customer-Focused Solution
The success of any business is highly dependent on its customers. By focusing on improving customer satisfaction levels and overall experience through digital debt collection tools, lenders and debt collectors can overcome the challenge of engaging customers in the payment process. Customers, too, prefer the digital collection option, as it is more convenient and less invasive than agent phone calls, house visits, and traditional letters.
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Before putting a debt collection plan into action, identify what your customers want and what the industry trends are. This allows offering each customer a tailored solution as per their needs, thereby eliminating the potential of receiving complaints from them or regulators. Importantly, customers are more likely to resolve their accounts and stay loyal to the company.
- Maintains Regulatory and Standard Compliance
Prior to the enforcement of regulation F, which employs the Fair Debt Collection Practices Act (FDCPA), most lenders and debt collectors have remained apprehensive of using alternate collection strategies due to fear of lawsuits. Most of the risks existing in the collection space are related to people or processes; for example, a call center operator communicating something they weren’t supposed to, or not sending a legal notice that was meant to be sent.
With the operationalization of digital collection in debt management, collectors have been permitted to use emails, calls, social networks, and text messages to communicate with customers. This means, debt collectors can streamline their collection process, increase recoveries, and regulate the timing of the communication they receive. At the same time, these channels can also be leveraged as preventive collection tools, for identifying potential defaulters or debtors who have consistently delayed payments. This makes interaction and collection easier, faster, and less stressful.
- Higher Recovery Rates
Taking a digital approach to debt collection can reduce friction, promote positive engagement, and offer better service to customers. Digital tools also help garner faster responses and facilitate multiple options to reach different types of customers. Lenders that can provide clients with greater access to digital repayment options, automate conversations, and enable self-service processes are more likely retain customers, resolve accounts, attain a higher percentage of debt recovery, and reduce collection costs.
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- Drives Positive Experiences
The idiom, “customer is king” is more relevant than ever before – and this is applicable to all customers, even those with overdue repayments. Here is where digital debt collection comes into play. Instead of penalizing borrowers for delayed payments or non-payments, the digital collection helps determine customer payment behavior, modify communication strategy, and strike a positive customer relationship. Using AI-powered conversational text messaging allows for a constant, genuine connection with customers and personalized engagement, thereby leading to enhanced customer experience and ultimately better outcomes.
In this digital era, adopting digital debt collection strategies is imperative if you want to improve your recovery success rate. Both, debt collectors and lenders must harness the power of advanced tech tools like Artificial Intelligence (AI) to collect debts. These digital tools will enable lenders and customers to reap several benefits!
By Sidharth Agarwal, Director, Mobicule Technologies. Views expressed above are personal)