Collections activities have been growing across North America, manifesting in automotive lending and other areas. According to a recent Fox News report, the amount of auto borrowers who were at least 60 days late on their payments increased to 6.11 percent this past September, creating the highest default rate in close to 30 years. The combination of climbing interest rates, run-away inflation, and higher vehicle prices have all contributed to this scenario.
Inflation and cost of living issues are playing out in a lot of portfolios right now, and lenders are unprepared for the staffing and operational demands that have developed. When economic hardships are due to factors like inflation as opposed to unemployment (which is currently at historic lows), the determination is that people are “cash flow poor,” despite many of these customers having respectable credit ratings. They are stretched for the funds to make their payments, but want to protect their credit scores and assets. Lenders, of course, want the same thing.
So what’s a lender to do if collections balloon to double or triple their previous levels, and their customers are dealing with a depletion of cash flow that has been beyond their personal control? Financing companies are negotiating the same uncertain economy as the public at large, so many can’t afford to add staff to handle this increased workload and deliver a service level that achieves results while not alienating essentially good customers.
Leveraging BPO Services to Meet Operational Demands
Lenders need a cost-effective way to deal with the acceleration in collections. One way to quickly address staffing needs, even in complicated industries like finance, is to utilize business process outsourcing (BPO) services. Finding the right partner that is experienced in these specialized tasks is crucial for success. Traditional outsourcing, which typically addresses front-office contact center and customer service tasks, doesn’t necessarily provide the level of nuance and expertise required for collections.
However, intelligent outsourcing—also known as smartsourcing—is a unique strategy where BPO teams use highly trained, career-oriented agents with deep knowledge of the financing and automotive lending space. An effective smartsourcing team will be able to quickly assimilate into any professional lending environment. Working with no more input than a data file of customers, these experienced agents would have the knowledge and background to hit the ground running in servicing the lender’s additional collections business. This includes tasks such as customer outreach and communication, escalation processes, refinancing offers, and if necessary, asset retrieval.
Utilizing Technology to Save Jeopardized Borrowers
Borrowers who were once comfortable with a certain payment structure now might find their monthly payments unaffordable, which leads them toward delinquency. However, those same borrowers may be able to continue to reliably pay their loans if they were simply restructured.
An effective outsourcing team can utilize cutting-edge, AI-driven technological tools to manage these customers, identifying those at risk of delinquency due to cash flow issues. Sophisticated platforms can empower agents to identify these borrowers and devise a refinancing plan. This is yet another benefit that lenders can gain from the use of intelligent outsourcing services. Advanced technology will flag a borrower whose payment patterns have begun to change, such as those who begin to pay late after a long history of on-time payments. AI-based tools can even pull data from third party online sources to identify customers who have lost their employment due to a contraction in the market.
Conclusion
A nimble BPO team can not only step-in and augment a lender’s in-house collections team to address the increased activity, it can also introduce technology to help that lender’s customers get back on financial track. The end goal of financial services, after all, is to keep the customer financially viable—and happy with their lender. Any outsourced team that can help accomplish all this certainly earns the right to call itself “intelligent.”
