Breaking Down Debt Recovery Barriers: 6 Solutions for Success

The collections industry has evolved significantly over the past decade, with the introduction of the cloud, omnichannel communication channels, and artificial intelligence (AI) all having a profound impact on the sector. 

But many collections departments still face significant challenges on a daily basis.  

1. 56% of departments will be working on an increasing number of accounts during the coming year (2022). 
2. A staggering 21% of departments (over 2 in 10) still do not use any form of collections management software. 
3. Collections departments are still using outdated strategies that lead to subpar results. 94% of departments use letters to communicate with customers and 87% ring them on the telephone.
4. Only 57% use email, 31% text, and 3% communicate via social media. This is despite the fact that contacting customers via digital channels doubles the likelihood that they will repay in full. 

This blog post will examine 6 of the most pressing pain points in the collections industry before outlining how collections departments can overcome each of these issues with confidence. 

The most common collections issues

The following pain points plague collections departments of all shapes and sizes.

1. Inefficient processes

Too many collections departments rely on manual processes to create, send out, and analyse their dunning strategies. These manual processes are incredibly error-prone—while they’re also time-consuming to complete. Departments that ignore automation will rapidly fall behind their more technologically-minded competitors. 

2. Lack of unified recovery systems

Agents need a single source of truth for all their collections operations. When they are forced to work with multiple tools and disparate data, they struggle to piece everything together. Most importantly, collections managers are unable to gain a unified view of who their customers are and how they behave to customise their recovery strategy moving forward. 

3. No queuing capabilities

Many call centre agents spend all day, every day on the phone with their customers. However, too many departments lack advanced queuing capabilities that automatically update call queues based on how high/low-priority each past-due customer is. By failing to prioritise, call agents end up spending too long speaking to low-risk, low-value past-due customers.

4. Overly dependent on the IT department

Too many collections departments rely upon email tools that require advanced coding knowledge. This leaves agents unable to create, or edit dunning messages by themselves. They therefore have to ask their IT department for help—and to put their dunning approach on hold until the IT team has the time to make all requested changes. Agents cannot act quickly. Neither can they react to the data as it comes in nor can they constantly fine-tune their strategy on an ongoing basis. 

5. Implementation time

Collections departments may well recognise that better tools exist on the market, but they are often dissuaded from implementing these tools due to the lengthy implementation time involved. Debt collection teams need to urgently address existing debts—there’s not a second to waste. Hence, they are often reluctant to try and implement new software. 

6. Providing a poor customer experience (CX)

When collections departments use traditional dunning tactics (such as sending endless letters through the door or constantly ringing up customers on the phone), their CX suffers. Unsurprisingly, so do their repayment rates. No past-due customer wants to be bombarded by letters or phone calls. In fact, customers might even refuse to repay on purpose so that they can assert control over proceedings, a phenomenon known as ‘reactance’.

6 ways to overcome debt recovery pain points

Fortunately, collections departments can indeed overcome the 6 challenges listed above. Let’s explore how. 

1. Custom collections workflow

Build complete, custom collections workflows based on how each of your customer segments behaves. Use drag-and-drop tools to easily link strategies together in straightforward visual flows, leveraging AI- and ML-based triggers. If you ever want to tweak a strategy, you can do so in real-time by adding or removing steps, sparing your collections agents time and manual effort.

2. Unified platform

An all-in-one debt collection platform lifts the burden on both collections agents and debt recovery managers’ shoulders. These tools drastically increase efficiency, ensuring that they don’t have to use multiple tools for their collections operations. What’s more, unified platforms give collections managers a unified view of each individual, which will help them choose the appropriate strategy for every single past-due customer. 

3. Collections scoring

Collections scoring allows debt recovery managers to customise or adapt their debt scoring rules by utilising AI and data-driven segmentation. Collections managers are therefore able to identify low/high-risk customers based on their own standards, prioritise tasks, and make informed decisions. With collections scoring, call centre agents will spend more of their precious time with high-risk and high-value customers.

4. Drag-and-drop content builder

Drag-and-drop tools allow collections teams to tweak the design and content of their dunning strategies themselves—rather than having to wait around for the IT department to respond to their requests. Collections employees can freely build templates for every segment, test them out, and optimise the results based on how each template performs. 

5. Cloud-native software

Collections departments need to leverage cloud-first solutions with plug-and-play capabilities, slashing implementation time and allowing collections departments to quickly get to work. Cloud-native software also allows collections teams to effectively work remotely, ensuring they can always access their customers’ financial data whether they are in the office or at home. 

6. BI Dashboard

Analyse your complete collections operations in one single data-driven dashboard. Identify how each segment is responding to your dunning strategies, normalise data from third-party APIs, and continually monitor your department’s overall performance. By examining your business intelligence data, you will gain a deeper understanding of your customers. This will help you create tailored solutions for each segment, which will increase your overall CX.

A data-driven approach to collections

Collections departments must respond to today’s novel challenges with fresh solutions. In other words, they need to leverage automation-based enterprise collections management software that utilises both AI and ML technology. 

With receeve’s solution, for example, collections departments achieve:

• 47% higher contact rates by utilising omnichannel communication methods
• 89% loans paid within the first 30 days
• 30% reduced call resolution times
• 50%+ more time to focus on higher-value claims and activities
• 100% control of their strategy configuration
• 14% increased cash flow through digitisation

Looking to learn more about the potential benefits for your businesses? Book a demo today.