5 Collections Industry Challenges Keeping Banking & Finance CIOs Awake at Night

With inflation on the rise and the median household income not keeping pace, American consumers are paying more for everything from housing to food to gasoline, causing many families to fall deep into the red. During the COVID-19 pandemic’s most severe period, many Americans relied on pandemic-related forbearance, financial assistance, and stimulus programs to stay afloat, but those programs have now largely dried up or decelerated.

According to NerdWallet’s 2021 American Household Credit Card Debt Study, the average household with debt owes a staggering $155,622 (more than $15 trillion altogether). This debt includes credit cards, mortgages, home equity lines of credit, auto loans, student loans, and other obligations. That’s a 6.2% increase in total debt/household from only a year ago.

High inflation, debt, and the ongoing pandemic implications all increase the odds of consumers falling into at-risk or delinquent status with debtors. If you’re a glass-half-empty person, the next era in the Collections space might seem daunting. If you’re able to take a more optimistic look at the landscape, however, it’s easy to get excited by advanced, ai-powered technology and processes designed to transform how Collections teams generate and recover revenue while preventing at-risk and delinquent statuses.

Here are the top 5 Collections industry challenges keeping banking & finance CIOs awake at night (and how you can use modern technology to solve them)

Challenge #1: Inefficient, Outdated Strategies & Processes

Many Collections teams still operate using inefficient, outdated strategies and processes created years ago. In the dynamic, ever-changing digital world of consumers, something that worked five years ago likely won’t be effective today. Technology moves quickly, so to keep up, your Collections strategy should be reviewed monthly (or quarterly at a minimum).

In fact, according to a 2021 collections industry report from TransUnion, 94% of collections departments still use letters to communicate with consumers, while 87% make phone calls. Manual processes for creating and sending out these communications are often time-consuming and prone to errors. On top of being time-consuming, error-prone, and simply inefficient, 78% of Collections leaders view postage as a moderate or major expense, making these methods costly, too. All of this further demonstrates the need for a more digitally-driven approach to Collections strategies.

Challenge #2: Lack of a System of Intelligence

Collections agents need a system of intelligence that’s integrated with their CRM (or other system of record) and features real-time, advanced business analytics that feed all operations and processes. When agents have to use multiple or disparate databases, lists, or tools, they waste time, struggle to make sense of the data, and inefficiently piece together customer journey information. More importantly, it’s common that Collections teams lack a unified view of consumer data, behaviors, and preferences they need to customize personalized Collections strategies for increased debt recoveries.

Challenge #3: Long Implementation Times

Forward-thinking banks and financial institutions know that improvements are necessary for sustained success. They know there’s a rabbit hole of technological solutions that all claim to solve the most pressing challenges they face. They have the budget, demand, and approval at the highest levels to invest in technology to make the necessary improvements.

Digital transformation and digitalization are priorities, but the reality of long, complex, and cycle-burning implementation times to deploy these solutions often deter them from taking action. As a core part of the revenue generation strategy, any hiccup or deceleration in current Collections processes can mean not hitting revenue goals.

Challenge #4: Perpetuating Poor Customer Experiences

When handled with empathy and a personal touch, even the Collections process can create positive customer experiences and strengthen brand relationships. But if Collections teams rely on traditional contact and outreach strategies, customers experience panic, frustration, and annoyance instead of satisfaction. Past-due customers don’t want to be bombarded with repeated phone calls or letters.

How customers are treated during the Collections process has a significant impact not only on actual collection rates but also on long-term customer retention and loyalty outcomes. Research from Forrester reveals that 76% of people who have a positive experience with a brand stay with that brand and 80% of those who have had a positive experience spend more money with that brand. However, only 18% of people who have a bad customer experience stay with the brand and only 18% spend more money.

Challenge #5: Staying on Top of Changing Collections Laws

Maybe the most unpredictable and complicated variable of any Collections strategy (aside from the intricacies of human behavior and psychology) is the rapidly evolving regulatory landscape. Not only do businesses have to comply with Federal laws such as the Telephone Consumer Protection Act (TCPA) and Fair Debt Collection Practices Act (FDCPA), but additional laws vary from state to state, and once one state implements a regulation, other states often follow suit with their own version. Penalties for noncompliance can be as steep as a $500-$1,500 fine per call that violates the TCPA Act, so avoiding them is non-negotiable.

Tackling the Top Collections Challenges

Invest in a System of Intelligence

Companies who’ve mastered the Collections game have done so by implementing a strategy fed by a system of intelligence featuring real-time advanced business analytics. By integrating their CRM or other systems of record with real-time customer analytics, they’re able to capture all customer data in one place. This includes transaction histories, payment records, and past interactions—all of which feed agents the vital information they need to engage with customers empathetically and on a personal level.

When armed with historical data, agents are empowered to create 5-star experiences for customers and increase the likelihood of payment.

This 11-step workflow illustrates how the entire Collections process (and the ensuing outcomes) are improved using a system of intelligence like Acqueon’s leading Conversational Intelligence platform:

  1. Using AI, customers are segmented based on the value recovery opportunity
  2. Delinquent accounts are further segmented in Days Past Due buckets
  3. Performing accounts are placed in reminder campaigns based on behavior & channel preference
  4. Agents are allocated to delinquent accounts based on the value recovery opportunity
  5. Voice drops with self-pay option to segments likely to react to reminders
  6. AI predictive models identify best channel and time-to-contact
  7. Real-time check of the latest payment information before triggering a contact
  8. Context, payment history, and customer sentiment are surfaced to the agent
  9. Collector guided through recovery/assistance steps
  10. Customer promises to pay is captured
  11. Next best action is chained for follow-up

Create Custom Workflows

Custom workflows based on customer behaviors and preferences are proven to improve the customer experience and positively impact key Collections metrics, including:

  • Debtor Days
  • Percentage of Written Off Debts
  • Percentage of Outbound Calls Resulting in Promise to Pay
  • Right Party Contacts (RPC) Rate

Additionally, modern technology enables Collections teams to replace outdated communications and outreach methods with omnichannel workflows supported by AI- and ML-based triggers. Leveraging a mix of voice + digital communications channels not only improves connection rates but also makes it easy to refine approaches and strategies based on customer responses. By increasing the number of Right Party Contacts (ROC), custom workflows like those supported by Acqueon Engagement Cloud also reduce the number of files that go to Collections.

Customers want to be contacted using the channels they prefer most; developing workflows (and campaigns) based on these preferences increases the likelihood of getting paid on time and in full. When a new strategy materializes or a workflow needs to change on the fly, customizable software solutions make it painless to update campaigns in real-time, while maximizing connection rates and payment outcomes.

Tackle Your Collections Challenges with Acqueon

Outdated technology, communication, and campaign strategies have no place in the modern Collections ecosystem. Adopting a fresh approach, AI-powered technology, and solutions that enable Collections to optimize their outreach processes is critical for any forward-thinking Enterprise. Failure to do so will only exacerbate the struggle to collect payments and outstanding debts.

Acqueon’s cloud-based Conversational Intelligence platform, Acqueon Engagement Cloud, offers an advanced Campaign Manager with built-in, AI-powered intelligence capabilities and a Customer Engagement Data Platform; the result is a truly omnichannel and highly sophisticated outbound campaign management solution for proactive revenue generation and customer retention/service uses cases.

See how you can improve customer experiences and retention today by exploring Acqueon Engagement Cloud.