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  • Writer's pictureshobhitprakash

The future of Debt Collections

Collections industry which was perceived to be slow in adapting the latest technologies has completely transformed itself in the last one year.

In the early 2000’s, majority of tasks in the collection industry were manual. Almost 99% of the accounts that were submitted for debt collections came in by Fax and Snail Mail i.e. regular postal mail. These accounts were then manually processed by data entry operators or clerks into their internal desktop systems, which were then processed by Mainframe systems or other customized apps.

Today, nearly all large to medium sized Collection Agencies have their own website to accept collection accounts. It is way cheaper and faster. The collection activity starts the very next day the accounts are submitted online. This is a win-win situation for both Clients and the Collection Agencies. Clients can have their accounts serviced faster and get real time online performance reporting; at the same time, the Agencies have been able to reduce their back-end costs which were earlier manual in nature.

Due to digitization of data, it is a lot easier to perform batch operations on many accounts efficiently and accurately and ENCollect has made it a lot easier to do allocations by batches. If a financial institutions or agency has a high volume of accounts and latest technology by their side, they can easily cut their costs.

Technological advancements in debt collection has radically transformed the industry, with evolving debt collection regulations and the advent of the tech-savvy consumers are making traditional methods of debt collection redundant. Whether it is a small agency, a multinational corporation or a financial institution planning to improve the account receivables management, the future of debt collection is digital, and it is time to get on board.

As consumer debt rises, for example according to the Federal Reserve for US the outstanding consumer debt at was at US$3.34 trillion as of February 2015 i.e. One in three Americans had some type of debt in collection. It had become more important than ever before to have effective debt collection. With the help of technology, agencies and financial institutions can employ a customer-centric approach that utilizes multi-channel communication strategies to connect with consumers – in a way that empowers and motivates them to pay their debts instead of alienating them.

Whether millennials or baby boomers, consumers today are choosing mobile technologies, which means implementing a debt collection solution that understand how to employ data-driven technology to contact your customers, the right time to contact them, and how to provide easy payment options that resonate with them. Responsive websites, payment portals, and mobile-friendly access to all their vendor accounts are just a few of the thing’s customers expect to have served up digitally, today.

Consumers want to pay off their debt in a way and at a pace that is convenient for them, that allows them flexibility, and a better user experience. This means investing in technology that allows a personalized, consumer-focused approach, which leads to improved compliance. For example, an automated and data-driven system like ENCollect allows debt collection agencies to structure the communication according to strategy or consumer preferences. Rather than calling a consumer during their workday, the ENCollect’ s digital platform allows the consumer to manage their debt online 24/7. The consumer is empowered to view their account balances, set up and manage payment plans and track their progress at the times that suit them – so they are less likely to feel embarrassed or harassed. Whether text, email, or chat, communication is multi-channel with ENCollect. Consumers can also quickly alert an agency if they have been victims of fraud or have filed bankruptcy, saving debt collections agencies and financial institutions both time and money.

As per the CEB Tower Group there are four ways the technology is helping in shaping the future of collections and enabling the financial institutions and agencies to capture the highest ROI from loan collections technology, these four are:

  • Process Automation

  • Collections Analysis

  • Self-Service Portals

  • Third Party Portals

Let us tell you what each one is and why it is important, and the benefits they have for the organization

Process automation facilitates end-to-end automation of processes in the collections to help banks manage large volumes of loans.

Process automation integrates the tools, systems and data used by banks across the cycle into one cohesive system, as otherwise compared to the collection process which is managed with siloed departments and technology separated by organizational (and often geographic) boundaries

Process automation should cover any and all of the following activities:

  • Bankruptcy

  • Customer service inquiries

  • Delinquent loan collections letters

  • Foreclosure

  • Loan write-offs

  • Payment collection

  • Payment reminder calls

  • Pre-delinquency

  • Recovery from customer

  • Recovery from insurer / guarantor

Across these categories, process automation delivers several organizational benefits:

  • Complete key tasks in less time or automate them entirely.

  • Gain insight into the whole collections and recovery cycle at once.

  • Cut costs by eliminating wasteful, lengthy, or repetitive actions.

  • Simplify each stage of the collections and recovery cycle.

  • It’s no longer enough to perform processes faster.

Collection analytics have always been a challenge, and to make intelligent collections decisions, one must properly monitor performance. Earlier monitoring used to be a challenge thanks to the legacy systems that did not talk to one another.

ENCollect enables the financial institutes to gather insights on different stages of collection cycle inside one system which is free from errors and provides clarity.

Data on customers, accounts, payments, actions, assignments, transitions and more can be used to provide a real-time pulse on organizational collection performance.

The right collections analytics functionality gives adopters significant advantages:

  • Better assess your organization’s liabilities.

  • Prevent accounts from becoming delinquent.

  • Gain insight into customers and collector activities through every stage of the collections process.

  • Focus on keeping customers happy and maximizing revenue generation thanks to flexible insights.

Too often, interacting with a debt collector is an embarrassing, undesirable task for a consumer. Even if it was enjoyable (an unlikely scenario), these interruptive calls from companies looking for restitution do not map to modern customer behavior.

Consumer behavior today has changed, they prefer the option to see, monitor and resolve their debts on their own, without the involvement from a debt collector. Self-service technology makes this possible, and many of ENCollect customers have used it to build collections programs that perform better.

These portals enable the Consumers with the ability to say why they cannot pay, customized terms so they can pay what they can afford at the moment, and features that open up a possible conversation about refinancing or other products.

The self-service portal lets you

  • Align with how customers buy and interact online.

  • Scale collections capabilities quickly and cost-effectively by providing self-cure features to more customers without higher costs for the organization.

  • Free up internal resources to work on higher priority tasks.

  • Improve transparency since the debtor has access to a complete picture of his or her financial situation 24/7.

  • Increase an organization’s ability to reach customers, since there is no limit to the number and size of segments in the system.

Collections and recovery software should include features that lets the partner organizations also use the portal you work with. These partner organizations can use the technology to capture better results, too and the use of technology by them will impact and improve the organization’s performance.

Organizations your collections department works with break down into two categories compliance and outsourcing.

The ENCollect Platform lets you provide the right information in a timely fashion to the legal teams or government agencies that may regulate your activities. It also enables you to manage the third-party debt collection agencies.

In both cases, the third-party portal allows the financial institutions to monitor and provide compliance and outsourced partners limited access to your collection’s operations in a centralized location. Using a portal makes sure each party can access the information, documents and data they need to do their job. This results in better compliance and performance for your organization thanks to the following benefits:

  • Transparency of services and results.

  • Better monitoring of third-party involvement with your organization’s accounts.

  • Better compliance monitoring, both for your organization and third-party debt collection agencies.

  • Increased adherence to bank policies and approach.

  • Improved collaboration between all parties.

At the end of the day, Ultimately, the tech is a tool and in the case of debt collections, it’s a tool that is to be used to facilitate warmer relationships between collectors and debtors. In an industry that has historically suffered from negative press and sour customer relationships, tech has proven something of a lifeline - a chance for the industry to shake its bad-boy image and reframe the narrative surrounding collections culture.

For a Financial Institution adopting the right technology from the emerging loan collections technology landscape is very important. This landscape has changed dramatically in recent years, which has profound implications on how banks collect and recover. There now exists market-ready technologies like ENCollect that can streamline and improve each stage of the collections cycle, from managing documents to preventing delinquency.


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