This article is first part of a series on AI and collection
A lot of changes have taken place as digital communication, technology, compliance and other related factors have taken a front seat in the collections’ industry. Collection is finally becoming like marketing used to be 15 years ago, with the advent of social media and digital channels – all integrated with each other.
A new survey finds that responses to COVID-19 have sped up the adoption of digital technologies by several years – and that many of these changes could be here for the long haul. Irrespective of how much profit most of the lenders make from their long years of expertise, but due to outdated processes and little innovation, face to lose the connection to the digital routine in which the debtors are involved.
But before I write about anything further, here’s my advice to the wise: Amidst all this crazy digitization at industry-level and the rat race to a higher ROI, the first thing to realize is that we’re dealing with people, and most importantly, we need to understand how consumer behavior has shifted significantly in the last 18 months.
Driving Empathetic Conversations
For effective collection today, one needs to start with automated digital engagement and adopt technology versus collection agent driven phone based process.
Being delinquent is a highly emotive issue and we need to reflect this in the way we structure our approach to client interactions.
Engaging your customers is the key. But does that stop you from going digital?
Not at all.
Instead, the self-learning algorithm uses a variety of data that is collected continuously before and during the interaction with the debtor. Using insights from the fields of behavioral research and psychology, the collected data is evaluated. This way each debtor is categorized and addressed individually. In addition to the content and tonality of the address, the optimal channel, time and frequency are determined in order to reach the debtor quickly and to convince him to pay. This way the conversation with them is more ethical, relevant and human.
By strengthening collections’ capabilities and embracing digital collection channels, lending firms will be better prepared to address any further increase in delinquencies that might occur with traditional debt collection strategies.
With the competition becoming fierce due to new FDCPA Rules, it is vital for the debt collection companies to accelerate the digitization of their customer and supply-chain interactions and of their internal operations by three to four years.
So what are those first few digitally enhanced offerings that this industry should definitely adopt?
In order to drive superior customer experience, compliance and business outcomes such as higher collection rates (avg. 18 percent higher) and reduced cost (30 percent reduced cost or more), it is imperative to add a digital twist to the already existing legacy systems of an organization and integrate it to the various social channels where the end consumer is hanging out, which brings in the perspective of multi-channel collections.
For instance, a single view dashboard that gives a 360-degree view of customers’ behavior can be leveraged to drive streamlined, more relevant and preferred conversations in collections. Flex your data more than your muscle!
Getting into the Right Technology Partner
The regulatory and compliance concerns at both a federal and state level make the collections industry a complex sector to navigate at the best of times.
With debt collection emails being easily flagged or running into spam, being compliant is just not enough. Investing in off-the-shelf technology will not achieve the desired results either. Most of the vendors struggle with maintaining these technologies over time and have their agents aboard it fully.
If you are a lending company, you need to adapt to a unique collection technology for the shifting preferences of your modern consumers. Using digital channels as email, text, whatsapp, etc., enable businesses to recover and reduce the number of unpaid debts faster and become more customer oriented.
It is advisable to start a partnership with an experienced AI firm dedicated to CollectTech that can integrate its platform seamlessly into your existing systems without disrupting regular operations. Additionally, they should have proven credentials and the capability to get results. Not to mention, I always advise to start with a pilot and with minimum investment of time and effort. A worthy partner would figure out ways to work within your budget constraint or other technology challenges and will create a implementation plan that would be both practical and achievable.
Additionally, the partner should be able to answer implementation and production related questions regarding compliance, technology, AI algorithms performance, recommended engine performance and enhancement and post implementation and ongoing production impact.
Unfortunately, just implementing the technology would not bring value, not even a 10 percent improvement and most likely unsupervised implementation would bring catastrophic disgruntled consumers and become a target of state and federal regulators – leading to term negative impact beyond wasted money, effort and time.
Collections is no more about relying on human instincts, but using logical sequential data to develop predictive analysis and insight-led solutions. This is where having a team to do such tasks is inevitable. More than anybody else, your agents should know how to keep their consumer engaged via different medium and ensuring a seamless end-to-end automation across the consumer lifecycle.
And now addressing the elephant in the room – the right channel and messaging!
Some major industry leaders use ML-driven platform that uses an algorithm to decide how the debtor is asked to pay, learns best practices from implementations and continuously improves over time.
The algorithm not only considers the past payment or interaction summary or the historic loan application data, it also relies on the digital data obtained from cookie and link tracking or the e-mail authentication process, thus providing additional information about the socioeconomic status.
Furthermore, behavioral psychology is also an important component of success in achieving a desired ROI.
Optimum time to reach, multidimensional contact strategies, an intelligent offer, a predictable and consistent engine – all such components build a solid collection model built on in-depth dataset variables.
It is essentially about going beyond payment propensities with consumer contact propensity and consumer preferences along with adapting to the never-ending trends of digital industry.
Artificial intelligence and machine learning gives its users the opportunity to vastly improve debt recovery rates in an ever-changing landscape.
Building and continuing to maintain complex systems like these require a talented team and a stable infrastructure that can support these processes at scale.
Watch for the next article in the Collection AI Series.