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Intelligent Debt Collection – A Fresh Perspective To Recovery

What is the relevance of Intelligent Debt collection?

Banks or finance companies always have challenging time when it comes to loan collection or debt collection. The investments made for customer acquisition, branding etc. are getting compromised during the process of recovery activities.

The question is, is there a way to make an Intelligent Debt collection process which helps increasing your recovery along with enhancing your customer loyalty.

Artificial Intelligence and Machine Learning (AI/ML) technology is used widely for adding intelligence to the debt collection operations. It is interestingly seen that they are achieving better results in terms of collections as well as customer loyalty and retention.

Debt collection efforts leads to Loosing customer loyalty

In many cases while the customer face difficulty in repaying the Debt, the lender or debt collection agency will be doing their follow up more and more aggressively. The count of follow up calls, the strong languages used by the agency during the conversation, the kind of information the agent shares with the customer – all of these contributes to make the matter worse and customer gets unsatisfied or irritated.

Some Debt Collection Statistics

In US, FDCPA Act (Fair Debt Collection Practices Act) was passed in 1977. According to FTC (Federal Trade Commission) harassing customers to collect a debt is illegal. a financial solution provider company comes out yearly with statistics report on complaints on debt collection. They says that,  13% of the complaints received threatened to take legal action. 10% of the complaints claimed wrong amount. Among 40% of complaints claiming debt not owed, 23% tells that they already paid off the debt.

The situation in other countries are also more or less similar in nature.

What is the impact of this?

Loosing customer loyalty is the prime result and it comes with loosing your brand reputation too. Out of the delinquent cases many of the cases will have genuine reasons.

If analyzed properly with right information there can be many options to solve the delinquency. Based on the profile of the customer – the current situation in which he is, the anticipated plan of the customer to manage the debt – all can give you various insights or way outs.

Many customers are in need of financial advisories too to manage their debts and funds.

Mckinsey & company study report on collection operations.

In this report Mckinsey claims that, “the collection managers across the world are facing rising delinquencies and the cost to manage the collections is on the rise”.  They also highlights that  “lenders need to invest in smarter and more effective collection operations”.

Adding Intelligence to collection process using Customer segmentation

Segmenting your customers based on their profile and approach for collection. In current scenario, the Financial institutions are sitting on huge volume of data all related to their customers. Thanks to digitization.

Analyzing these data using AI/ML tools will give you lot of insights about the profile of the customers. Segmenting your Customers based on their various data points and device collection strategy is one major step that is recommended.

This avoids “one size fits all” kind of approach. It helps to bring in specialized view point and can decide reasonable approach on each collection case.

Deloitte in “A fresh perspective collection strategies for the digital age” explains in detail about segmentation strategy in implementing an intelligent Debt collection system.

Segmentation helps you to identify best communication medium for each customer segment, best alternative to manage debt, best time and best way to approach etc. Analytical insights are available so that you can do a continuous improvement and tweak your strategy to get best results.

Adding Intelligence to collection process using Prediction of Delinquency

Prediction of delinquency of loans is one another solution in adding intelligence to your loan collection. Machine Learning(ML) capabilities to forecast the delinquency of a customer is a widely used tool in making the Debt collection process more productive. Knowing who is likely to default is a good tool in the hands of the lender.

Using this information, right strategy can be formulated by the lender who helps the customer avoid the situation. Deloitte stresses that “banks or financial institutions have greater incentives to maintain brand loyalty so that when the customer is in better financial health, they will consider returning to that lender”.

Introducing Intelligent Debt collection solution From Speridian Technologies

Speridian Technologies is the leading Global IT solution provider in Financial segment with specialized solutions on Collection and recovery.

BEACON  Delinquency Management solution comprises of various tools and techniques capable of providing  an Intelligent Debt collection solution for your organization.

The solution is successfully implemented in various Banks, NBFCs across multiple geographies. It helps customers not only improve their collection but also keeps the customer loyalty intact.

For further details and demonstration of capabilities visit our contact page.

Creating collection scorecards, Risk segmentation are another tools to enhance your recovery practices. I will be back with more details on these topics. Visit this location to see more about Intelligence in Debt collection and many more in upcoming days.

Vinod Puliyakote

Vinod Puliyakote

Vinod Puliyakote has 28 years of experience in building software products in the banking domain with the motto “Do not compromise on Customer satisfaction”. Vinod is an ISACA member, CISA Certified Auditor and ISO 27001 lead auditor.

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