While financial enterprises have been in the digital race lately, the industry hasn’t been able to efficiently leverage technologies in default management and subsequently improve efficiency and customer experience. In the post COVID-19 world, loan delinquency has increased at an alarming rate. So, how lenders can focus on reducing delinquencies and loss due to charge offs but without compromising customer experience. Solution is Digital Debt Collection
Here we’ll discuss how lenders can bridge this gap by effectively mapping customer segments, helping collection agencies and lenders gain some traction on data and get insight as to what motivates individuals to pay or default their outstanding debt.
Traditional debt collection challenges
Traditional debt collection is driven by focus on delinquent accounts. Led by aggressive targets, the priority is to ensure the repayment of as much of the outstanding debt as possible. Traditional debt collection methods may be putting the relationship with the entire portfolio of delinquent accounts at risk due to lack of understanding of customer behavior and inaccurate risk segmentation.
In most cases, the intensive collection strategies are just measures to overcompensate for unknown and perceived risks posed by the ever-increasing delinquent portfolio. At the core of this problem is the inability to identify risk accurately. This is a big gap and the reason for the phenomenon, primarily, lies the inhibitive cost of conventional methods of risk modeling that a lot of times overweighs the returns. Additionally, there are costs associated with model governance and maintenance of the model.
Top challenges:
- Lack of customer data
- Increased burden of regulations
- Failure to track and reconcile accounts
- Inability to execute
AI revolution in debt collection
Accurate customer risk segmentation achieved with the help of AI helps financial organizations enhance customer experience with personalized collection and communication strategies. The growing use of AI and Machine Learning is ushering in a new era in debt collection, one that includes an early warning for delinquency, refined methods of categorizing borrowers and optimized strategies for customer engagement to reduce defaults.
AI and ML can transform the debt collection practice in two ways:
(a) Embedding intelligence into their collection strategies
(b) Enhancing contact strategies through intelligence
AI-driven collection strategies
Early warning system: Advanced AI/ML analytics will translate some insights into actions such as identifying early potential defaulters using predictive modeling, notifying collectors to check on at-risk debtors proactively and provide credit counseling support, and restructuring payment plans.
Categorizing borrowers: Debt collection strategies can be modified using insights based on customer’s demographic and socio-economic data, salary, occupation, and historical interactions. This will ensure the right channel and follow-up actions where you will probably get a positive response.
Optimized customer engagement: Artificial intelligence solutions with automation bots can carry out smart dialogues between businesses and customers via email, SMS, or any social media platform. This will enable collectors to reach exactly where the customer logs in several times a day and can pay the outstanding debt online, resulting in faster delivery of receivables
Being risk positive with Insight Consultants
Insight Consultants solution can help you accurately identify customers in different risk categories early in the cycle and follow up by creating personalized resolution strategies, considering the financial disposition and behavioral aspects of the borrower. This will help in striking an early deal, thereby reducing the inconvenience and hassle the customer go through.
Key benefits of our digital debt collection solution
Reduced delinquency rates and charge offs – Through early delinquency prediction models clients can create proactive plans and prevent delinquencies
Enhance Customer Experience – Personalized recommendations for time, channel and tone of communication with the borrowers along with recommendations into right resolution strategy ensure most desired outcomes for both borrower and the lender
Improves Operational Efficiencies– Improve process efficiencies, productivity and compliance, based on intelligent prioritization of accounts along with prime time recommendations
Intuitive Experience – Visualize key insights with the help of configurable dashboards
Hyper personalization– Understand personality traits, negotiate and connect well with customers, based on analysis of e-mails, texts, public posts, blogs and tweets
Efficient recovery strategy – ML-based prioritizations help focus on accounts with higher likelihood of recovery and suggest appropriate channels and time for contact
With a looming risk of financial meltdown of the economy, the financial institutions will soon find themselves in the dilemma of having to choose between managing the risk and minimizing losses vs customer experience.
Insight Consultants can help achieve the balance between alleviating risks and elevating customer experience and create an edge over the competition using digital debt collection strategies.
