Best Practises for Debt Recovery Emails

Emails are a key tool in a collections department’s armoury. By sending personalised emails, financial institutions can keep consumers engaged in the dunning process, enhance their customer experience (CX), and increase their repayment rates.

Consider the following statistics:

• Companies that send out tailored, personalised emails can increase their click-through rates (CTR) by as much as 139%;
• This is hardly surprising when you consider that personalised calls to action (CTAs) perform 202% better than those that aren’t personalised;
• In fact, an estimated 71% of consumers say that personalisation influences whether or not they decide to open and read branded emails.

This blog will demonstrate how debt collection managers can master their debt recovery email strategy. It will dive into the 4 different touchpoints that they need to be aware of, outline the 5 tools/capabilities that all financial institutions need to improve their debt recovery email operations and provide various templates that they could use.

The 4 different collections email touchpoints

Financial institutions need to send out different emails for their past-due customers depending on where customers are in the dunning process. However, there are four main touchpoints that they need to be aware of. These touchpoints all lean on common human behavioural patterns that have been widely accepted by leading psychologists and behavioural scientists. 

1. Loss aversion

Loss aversion emails highlight that customers will lose money if they don't take immediate action to pay back what they owe. This is a crucial touchpoint. It reinforces that customers will be worse off if they ignore your email—which increases the likelihood that they will engage in the dunning process. 

2. Social proof

The idea behind social proof emails is pretty simple. These emails basically reinforce that since everybody else is responding and repaying their debts, then you should too. Most people want to fit in—which is why social proof is such a powerful concept. 

3. Anchoring

You’ve probably come across anchoring before during negotiations. If somebody starts a negotiation by putting a figure on the table (e.g. “I think I should be paid €100,000 per year”), then that number influences how the person they are speaking to will respond. They’re not going to respond by saying the person is only worth €50,000 per year, for example. The initial number sets a benchmark that will be followed throughout the discussion. 

4. Reciprocity

As a general rule, people are predisposed to be reciprocal. If somebody does something nice for us then we’ll return the favour at a later date. Therefore, if you offer to waive some of your customers’ fees provided they pay you back in a timely manner, they will be more likely to repay their debt. Use the power of reciprocity to your advantage going forward.

How to improve your debt recovery email operations

There are 5 major tools/capabilities that will allow your organisation to master its debt recovery email operations. 

1. Automation

When facing hundreds of thousands of customers, you need a collections software that allows you to create automated custom workflows for each segment. Once you have segmented your past-due customers, you can then rely on those workflows to send out different email templates to the appropriate segment. 

2. Drag-and-drop email builder

By using collections software with easy drag-and-drop functionality, collections agents can modify emails themselves. They can white label emails, tweak the design, and change the copy without having to ask the IT department for help. 

3. Multi-armed bandit algorithm

The multi-armed bandit algorithm automatically A/B tests your emails. It then analyses the results before prioritising the templates that are performing best. What’s more, it will even work out the optimal delivery time for your past-due customers. 

4. Customer self-service

Direct customers towards self-service landing pages where they can take control over their own repayment processes. Allow them to schedule instalment/repayment plans themselves, using their preferred payment provider. 

5. Business intelligence (BI) dashboard

Your BI data management dashboard will clearly show your emails’ open rate, CTR, payment attempt rate, rate of successful payments, and more. These behavioural insights will give you all the information you need to optimise your debt recovery email strategy moving forward. 

Examples of collections email template

1. Loss aversion email template

Hello {{first_name}},

We hope you are well! Unfortunately, you still have an open payment of {{Amount_Due}} with us. This amount has been overdue since {{Due_ Date}}.

Please transfer this amount as soon as possible to not lose the opportunity to resolve the claim without dunning fees.

You can view your options here and settle the open amount conveniently online:

  < Pay Now >    

Alternatively, the classic bank transfer to the following account is also possible: {{Transfer_Details}}

2. Social proof email template

Hi {{first_name}},

Unfortunately, we still haven’t received a payment of {{Amount_ Due}} from you. This has been due since {{Due_Date}}. If there is a reason for this delay, please let us know.

We have contacted you in the hope that we can resolve this request with you. Almost all customers react at the latest after the second reminder. Therefore, please transfer the outstanding amount again as soon as possible.

You can view your options here and settle the open amount conveniently online:

  < Pay Now >    

Alternatively, the classic bank transfer to the following account is also possible: {{Transfer_Details}}

3. Anchoring email template

Hello {{first name}},

Despite multiple requests, we still haven’t received any feedback from you. Your outstanding payment of {{Amount_Due}} is still pending.

Ignoring it only makes the problem worse. Delaying payment can increase an initially small amount by 200% and more due to dunning fees that continuously pile up. You can easily prevent this by being proactive!

Just conveniently pay the open amount here online or select options to help you go through financial hardships:

  < Pay Now >    

Alternatively, the classic bank transfer to the following account is also possible: {{Transfer_Details}}

4. Reciprocity email template

Hello {{first name}},

After several contact attempts on our part, your open payment of {{Amount_Due}} is still pending with us.

So far we have waived reminder fees for you because we assumed that you did not willfully withhold payment. If there are any extenuating circumstances, please extend us the same courtesy, and help us clarify them together. Otherwise, please transfer your payment as soon as possible.

You can conveniently pay the open amount via this link online:

  < Pay Now >    

Alternatively, the classic bank transfer to the following account is also possible: {{Transfer_Details}}

Remember: it’s an ongoing process

There will never be a point when you have truly ‘mastered’ your debt recovery emails. Instead, you need to continually adapt to how your past-due customers are behaving—tweaking and refining your templates accordingly. 

By keeping a close eye on your email performance data, you can fine-tune your processes on a continual basis. Not only will this reduce unnecessary manual effort, but it will also increase your repayment rates going forward.