5 Fundamental Practices Necessary to Achieve Collections Agility

In a market fraught with uncertainty, financial institutions are being forced to address their methodologies and prioritise process efficiency. But significant macroeconomic factors and long-held industry conventions can cause added complexity.  

The pace of change is rapidly accelerating every year, with major global events shifting the financial landscape even further. The covid-19 pandemic brought about two years’ worth of digital transformation in just two months, changing how consumers behaved, and what they expected from their financial institutions. Now, the Ukraine-Russia conflict is having a significant impact on global markets and creating longstanding supply chain issues, coupled with a cost of living crisis and mounting inflationary pressures.

Only the most agile of financial institutions can hope to keep moving forward, adapting and refining their operations to meet consumers’ evolving requirements and the needs of an unstable market.

Consider the following statistics:

1. According to the PwC Pulse Survey: Executive views on business in 2022, 56% of executives say that increasing agility to better operate in a turbulent business environment is very important to them. 
2. McKinsey research has found that: “Highly successful agile transformations typically delivered around 30 percent gains in efficiency, customer satisfaction, employee engagement, and operational performance; made the organization five to ten times faster; and turbocharged innovation.” 
3. What’s more, 65% of companies that had “highly successful transformations” reported that this newfound agility had a significant impact on their financial performance.

This blog will examine how collections teams in particular can stay agile. We’ll delve into the 5 top practices they must follow, outlining the tools guaranteed will help them along the way—and the results they can expect if they get their approach right. 

1. Implement new approaches 

Agile organisations don’t just expect the unexpected—they welcome it. 

Collections teams therefore need to adopt an experimental mindset if they want to keep up with an increasingly data-centric industry. No strategies will last forever. What worked last year might not work this year. With this in mind, collections agents need to continually re-examine how their consumers are behaving before refining their dunning approach accordingly.

Take, for example, self-service. 10 years ago, most past-due customers would happily call up an agent to sort out their repayments. After all, this was what everybody did. Today though,, many past-due customers won’t even engage in the dunning process if they have to deal with another person. They want to be in charge themselves; they want to be able to self-cure their debts.

By providing self-service options, collections departments can adapt their own ways of working around changing consumer behaviours. This will help them boost their repayment rates while also providing a superior customer experience. 

2. Keep pace with financial trends and disruptions

Financial services don’t exist in a vacuum. Instead, they evolve due to wider societal trends and pressures. New technologies influence how consumers behave, which then impacts how they engage in the dunning process. As a result, financial institutions must keep pace with large-scale trends and disruptions that will eventually impact the collections sector.

Another fundamental example to consider: the rise of smartphones. Consumers can be contacted at all times, no matter where they are in the world. They always have their phones on them, so they are always accessible. Rather than sending letters through the door (that may never even be opened and are impossible to track), collections departments stand to significantly reduce the repayment period by adapting their dunning approach.

Now, leading departments are using omnichannel tools to send out SMS messages, emails, and social media messages to past-due customers. These messages can be read–and responded to–at all times on a user’s smartphone, making it easier for consumers to engage in the dunning process. This digital approach also empowers financial organisations to track customers’ behaviours – and to develop new debt recovery strategies accordingly. 

3. Embrace change

Financial institutions are often wary of overhauling their existing legacy systems, due to concerns over implementation times and their costs – as well as potential maintenance issues. This means they sacrifice short-term convenience for long-term gains. By persisting with inefficient legacy systems, however, they continue to serve up often ineffective communications and repayment experiences that produce subpar results.

Agile institutions that embrace change, however, typically welcome the adoption of future-proof solutions to update their systems and improve their debt recovery efficiency and effectiveness. This helps them unlock greater results with ease — and provides them with a genuine competitive advantage.

4. Gain visibility into your customers’ behaviour

Creating the perfect dunning strategy is no easy task. Every customer segment responds to different messaging, on different channels, at different times. Therefore, the best collections tools should provide recovery teams with visibility into their customers’ behaviour.

Agents need to track whether customers ever engaged with their dunning processes. By sending digital messages that direct consumers towards online payment landing pages, you can check your customers’ open rate, clickthrough rate, payment attempt rate and payment success rate.

These insights will help you understand which messaging templates are working (and which aren’t) for which segment. You can also clearly see if customers are running into technical problems when trying to repay their debts online—for instance, if your payment attempt rate is higher than your payment success rate. 

With this data, you can then work to create the ideal strategy for each segment, refining and tweaking your approach on an ongoing basis. 

5. Align your team members

Agile collections departments need to move as one. Heads of collections must ensure all agents are on the same page, maintaining uniform access to the same key insights and established processes based on department-wide best practices. Otherwise, you might have different members using suboptimal outreach strategies. This will result in a disjointed, confusing customer experience, which could negatively impact repayment rates and your brand’s reputation over time. 

A solution: collections departments can benefit by implementing all-in-one collections management systems with advanced data-driven dashboards and individualised case management capabilities. These dashboards will reveal key details about customers’ payment history and their interaction with collections agents. Collections employees and heads of collections will then be able to examine overall collections performance by simply logging into their collections management system. 

Using this single source of truth, heads of collections and collections agents can work together more effectively. They can create unified, department-wide strategies according to the last data and insights that they have gathered.

Amongst a landscape of widespread flux, preempting future market trends is difficult. But there’s perhaps one easy prediction financial institutions should bank on: continued change is likely.

By implementing cloud-first debt management software, businesses can make their entire collections department as agile as possible, operating iteratively and with scope to refocus their efforts when required. The access to data-driven insights and how consumers are behaving gives financial organisations the power to ensure their core functions are moving in lockstep, safeguarding profitability and ultimately offering an edge in a competitive market.