Debt collection by far is the most debated topic in the banking sector. It is important to collect debts for financial robustness. It is also important to do so without losing focus on the customer. It is even more important to collect debts, retain customer and not land into law suits – a tricky balancing act! The Consumer Financial Protection Bureau (CFPB) handled a 1.08 million consumer complaints as on January 1st 2017.

 

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Debt collection is a constant complaint. Not just that, it is one complaint that has been featuring in the CFPB reports since its inception. A study by Urban Institute and Encore Capital Group says that 35% of Americans have a debt in collection. That’s a huge number of people. This percentage translated into numbers and worked out into dollars will probably be an economy in itself!

 

A closer scrutiny of debt collection complaints will lead you to understand the nature of these complaints. They majorly fall into these categories:-

  • Debt already paid
  • Debt not owned
  • Debt amount not verified
  • Wrong amount collected as debt

 

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On the face of it, these complaints seem not so complicated. They mostly seem like coordination issues. Many times debts are collected by agencies that do not have a first-hand account of these facts. Companies that hire these agencies do not have seamless technology driven processes to ensure accurate facts are passed on.

There is ample room for technology to be the messiah in debt collection. There are enough cases where technology driven approach towards debt collection has left all and sundry happy. Let’s look at some brilliant technologies that have made debt collection a joy ride.

Big Data Analytics

In the case of debt collection information is the most powerful arsenal. Big Data Analytics helps acquire the most pertinent information about a debtor. Simple information like demographic data or behavioral aspects like the time of the day a debtor will respond to a call make a mighty difference to the way a debt collection call will go through. With Big Data, it is possible to acquire and segregate data with laser sharp focus with respect to one singular debtor. An advantage that was hitherto not available to most debt collection agencies. A case in point is the acquisition of Encore Capital by NZ’s Baycorp.

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Big Data opens up possibilities like speech analytics in firming up debt collection calls. Speech analytics helps listen to all calls 100%. A feat that is not humanly possible or advisable. Inputs from speech analytics go a long way in saving dollars on training and operational efficiency.

Predictive Analytics

 

 

Predictive analysis - machine learning, artificial intelligence
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Predictive Analytics, a form of advanced analytics is making breakthroughs in debt collection. It clubs various techniques like data mining, machine learning, artificial intelligence and statistical modelling to make predictions about future events. Though it all sounds enigmatic, it has shown results in the field of debt collection. WNS, a leading utility company employed predictive analytics to increase its debt collection by 50%. The improvement happened in a period of 3 months with no loss on customer interaction. Further focused delinquency management strategies were evolved based on the inputs from predictive analytics.

Process Automation

Process automation in debt collection has been around for a while. Activities that are manually done by humans are replaced by an automated process or a self-service portal. The most common processes of debt collection that are automated are skip tracing, payment follow up and lining up phone numbers for a call. Data science helps source the data and automated processes do the remaining.

Process automation for debt collections
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The latest trend in debt collection is Decision Automation. This involves teaching a machine to think, plan and act like an agent handling the debt collection. Data science is used to build models based on past history of debt collection. These models are then employed to teach machines how to interact, follow up and close pending collections with debtors. The channels employed can range from email, SMS and chat. These channels are private, one and one and provide absolute discretion. 

Mobile Technology

The ubiquitous gadget of modern life, the mobile or the smart phone is a friend for debt collectors. It helps reach debtors wherever they are. It is one of the most resorted way to communicate and close on the field collections. The personal nature of the mobile phone adds to discretion. The concern however is the DnD registry. A debtor can easily mark you as a DnD number. Proactive communication helps arrest this possibility. A recent FICO report says that B2C communications are pretty welcome amongst consumers. This trend is a healthy sign and one that needs to be watched as more and more debt collections happen via mobile technology.

Mobile technology - smart phone for field collections
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Another trend that is becoming increasingly popular thanks to mobile phones is that of debt collection via payment apps. There are all kinds of debt collection apps for both Android and IoS powered mobiles. Debt collection apps like Debt Collector, IOU, Still Waiting are some of the popular debt collection apps. The best part about these apps is elimination of all chances of fraud. The way the apps are designed transactions are directly between you and the debtor or vice versa. Debt collection apps provide absolute transparency, a factor that cannot be neglected.

Big Data Analytics gives access to data that helps personalize debt collection. This is a powerful combination that was not available just a couple of years ago. On field collections are more streamlined and effortless now thanks to the way Big Data is helping personalize follow up actions.

Social Media

Social Media and debt collection is a fiery combination. A huge number of consumer complaints lodge ‘breach of privacy’ cases when debt collection agencies track them through their Facebook and Twitter ID’s. Nevertheless, usage of Social Media in tracing defaulters is a practice that is gaining popularity. Companies and collection agencies definitely need to have clear rules on use of Social Media to trace debtors. That being said, this is one technological channel that will prevail in debt collection. 

Social Media - tracing and profiling of customer for debt collections
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Another trend that is becoming increasingly popular thanks to mobile phones is that of debt collection via payment apps. There are all kinds of debt collection apps for both Android and IoS powered mobiles. Debt collection apps like Debt Collector, IOU, Still Waiting are some of the popular debt collection apps. The best part about these apps is elimination of all chances of fraud. The way the apps are designed transactions are directly between you and the debtor or vice versa. Debt collection apps provide absolute transparency, a factor that cannot be neglected.

Big Data Analytics gives access to data that helps personalize debt collection. This is a powerful combination that was not available just a couple of years ago. On field collections are more streamlined and effortless now thanks to the way Big Data is helping personalize follow up actions.

Technologies do not work in silos. Ideally, they should not too. The technologies discussed in this article can be used in combinations to arrive at best practices that suit your debt collection process the most. Predictive analytics can feed into your social media strategy and mobile collection plans to improve the rate of debt collection. As with all things technology, your options are limited only by your creativity!

Sachin Pratap Singh
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Sachin Pratap Singh

Digitalization Consultant & Digital Marketing Expert

Sachin is a technologist and digitalization consultant. He is an expert in digital marketing. He consults banks, financial institutions and other enterprises  in digital innovation. Currently he is working as chief product evangelist for Enterprise Tiger products.

 

Amarja Purnam
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Amarja Purnam

Blogger and Digital Content Strategist

Amarja Puranam is an experienced blogger and a digital content strategist. She is currently focussing on digital technology with special emphasis on finance as a domain. She writes for Enterprise Tiger and aims to cover all the latest trends in Fintech. When not writing, she spends time reading and baking.

 

 

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