Debt & Collections
A court in a Northern China province has developed a mobile app designed to enforce court rulings and create a socially credible environment. The app, which can be accessed via WeChat, China\'s most popular instant messaging platform, is designed to alert users when they are within a 500-meter radius of someone in debt. Users will get personal information about the debtors, including their exact location, names, national ID numbers, and why they have a low score. It\'s the latest innovation to become integrated into China\'s social credit system. What is a social credit system? China\'s social credit system, which will be enforced in 2020, aims to standardize the social reputation of citizens and businesses. It will rank citizens by attaching a score to various aspects of their social life - ranging from paying court fees to drinking alcohol to failing to pay bills. Although there are proposed consequences for low scorers, including travel bans and loan declines, 80% of citizens recently surveyed by the Washington Post support it. While the app seems like it could be a plotline from a \"Black Mirror\" episode, with its emphasis on reputation scoring and location-based activation, there are reasons it makes sense for the rather remote northern province. With many people in China still not having formal access to traditional banks, being able to alternatively assess their trustworthiness and risk could provide them the ability to access loans, rent houses, and even send their children to school. Additionally, to increase their scores, Chinese citizens are displaying improved behavior. China isn\'t the first country to attempt to gain a robust understanding of its consumers through alternative data sources. While U.S. financial institutions have experimented with using social media as a factor in determining a borrower\'s risk, Philippines-based Lenddo, a world leader in scoring and identity verification technology, is doing that and more. The company looks at social media, email, and mobile headset activity to determine repayment ability. Moreover, Discovery Bank in South Africa believes there\'s a correlation between fiscal responsibility and physical health. The South African bank plans to begin tracking the habits of its 4.4 million customers and offering better deals to those who are living a healthier lifestyle. For example, consumers can earn points for visiting the gym, getting a flu shot, or buying healthy groceries. The more points a consumer collects the better deals and savings they\'ll receive. The willingness to share data is not a characteristic unique to South African or Chinese citizens. A recent Accenture study of 47,000 banking and insurance customers showed that consumers are willing to share personal data in exchange for better customer assistance and discounts on products and services. The full extent of the impact on social credit to Chinese citizens is impossible to calculate, simply because the system doesn\'t fully exist yet. However, it does serve as an example of the many ways that credit scoring and the use of customer-permissioned data are evolving. Long gone are the days of mailing checks, ordering from a catalog, or even needing to carry cash. What\'s next?
When it comes to relationships and significant others, debt is topping lists of what people look for - or don\'t look for - in their partner. Where looks, pedigree, or career trajectory were previous motivation drivers for mate selection (or at least companionship), recent studies indicate debt is a deal-breaker for many looking for love. Late payments from lifestyles past, less-than-stellar credit scores, and cancelled credit cards are all exhibits of debt and destruction influencing personal relationships, not to mention the relationship financial institutions have with these consumers. Are certain relationships – or rather, specific partners – more likely to carry debt? Women were found to be more financially vulnerable, according to the Survey of Consumer Finances, conducted by the Federal Reserve, that examined how men and women who had never been married felt about debt. Recent Experian data found that while both men and women share the same amount of revolving utilization at 30%, men carry more debt than women, $27,067 compared to $23,881 for women. Men are also more likely to have larger mortgage debt at $214,908 compared to $198,622 for women. Women have more credit cards and more retail cards but lower balances than men on both. From a generational viewpoint, Gen X and Boomer generations have a higher than average number of credit cards and higher than average number of retail cards (and the highest average balance on credit cards and retail cards). Gen X also has the highest average debt by generation for both non-mortgage and mortgage debt. While Boomer and Silent Generations have lower than average mortgage debt, the boomer generation still has higher than average non-mortgage debt. With nearly 3 in 4 American adults saying they would reconsider their romantic relationship because of their partner’s debt, consumers should consider revamping their balance sheets before updating their online dating profiles. For the hopeless romantics, the star-crossed lovers, and those instead celebrating Singles Awareness Day whose finances could use a little love, perhaps a digital collections portal or personalized options to consolidate debt might speak to their love language. Or, in the meantime, maybe a list of the top cities for singles with the best credit scores could be a start.
Perhaps the most reliable mailbox tenant, thick envelopes splashed with “limited time offer” or other flashy designations offering various card and credit products – otherwise known as prescreen offers – are a mainstay in many households. What is prescreen? Prescreen is a process that happens behind-the-scenes where a lender screens a consumer’s credit to determine whether to extend a firm offer of credit. The process takes place without the consumer’s knowledge and without any negative impact to their credit score. For lenders and financial institutions, a prescreen is a way to pick and choose the criteria of the consumers you want to target for a particular offer – often in the form of better terms, interest rates or incentives. Typically, a list of consumers meeting specific credit criteria is compiled by a Credit Reporting Agency, like Experian, and then provided to the requesting lending institutions or their mailing service. In other words? Increase response rates and conversion by targeting the right consumers and eliminating unqualified prospects. Additionally, prescreening consumers also reduces high-risk accounts, targeting the best prospects in order to reach them at the right time with the right offer for their needs. Important to note: a prescreen is not the same thing as a prequalification. Gone are the days of batch-and-blasting. It’s expensive and a challenge for constantly limited marketing budgets. Prescreen decreases acquisition and mailing costs by segmenting a lender’s prospect list. In one case, a lender experienced a 10% lift in its overall conversion rate with a single campaign by targeting individuals who were most likely to respond to their over. Governed by the Fair Credit Reporting Act (FCRA), lenders initiating prescreen campaigns for credit products must also adhere to certain rules. What qualifies one of these campaigns? A firm offer of credit An inquiry posting is required (though it is a “soft” inquiry) Consumers also have the option to opt out of preapproved and prescreen credit offer lists In addition to acquisitions via direct mail, there are various types of prescreen tailored to the multiple channels where marketing takes place in today’s world. For example, Instant Prescreen can increase new account acquisitions by performing the preapproval process in seconds, while the customer is on your website, on the phone with you or at your business. Similar to how you might screen calls on your cell phone by letting them go to your voicemail inbox or screen candidates’ resumes before inviting them for an interview for an open position at your company, a prescreened credit offer is not much different. Focusing on your audience that is most likely to respond to your offers is an easy way to increase your ROI and should be considered a best practice when it comes to your marketing efforts. Learn More About Prescreen
We’ve popped the bottles at midnight, now it’s time to burst the reality bubble. Countdown: t-minus less than 90 days until what is for many the dreaded April 15 tax deadline. Tax Season - Get Started Coupled with debt consolidation post-holidays, January is a harsh contrast to all the feasting and festivities of the holiday season. However, the tax season doesn’t necessarily have to be synonymous with doom and gloom – many Americans look forward to receiving a tax refund. And of those people expecting a tax refund, 35% of consumers said they would use it to pay down debt, according to the National Retail Federation. Lenders and financial institutions can help their consumers get off on the right financial foot for 2019 by helping them to pay down their debt. Here are 5 tools you need to have this tax season to make the most of your collections efforts: 1. Identify your target market – Tax Season Payment IndicatorTM Did you know the average tax refund in 2016 and 2017 was over $2,760, according to the IRS? Also, during the 2017 tax season, 45 million consumers paid at least $500 and 10% or more of a tradeline balance(s), according to Experian data. Tax Season Payment Indicator examines payment behavior over the past two years to determine whether a consumer has made a large payment to a tradeline balance – or balances – during tax season. 2. Keep up-to-date on consumer information – Clear ProfileTM Skip tracing just got easier. Narrow in on the right contact information for your past-due consumer using Clear Profile. Leveraging Clarity Service’s database, Clear Profile provides the most recent and historical demographic elements associated with your consumer’s previous applications including addresses, phone numbers, employers, emails and banks. 3. Know the right time to collect – Collection TriggersSM Take the guesswork out of how to manage your collections efforts. Track your accounts to notify you of a new contact information and changes that indicate your past-due consumers’ ability to pay. 4. Stay ahead of fraudsters – CrossCoreTM Fraudsters are everywhere, so protect your customers and your organization by monitoring your portfolio to keep fraudulent accounts from being opened. Still wondering how to get tax season ready? Get Your Collections Tax Season Ready
Ben Franklin was wrong. Death and taxes are not the only two constants in life. For many, debt makes a third. And where there is past-due debt, collections is not far from the conversation, if not included in the same breath. While the turn of the new year may mark some arduous work to be done – losing those holiday pounds, spring cleaning, balance transfers and tax filings – there’s also opportunity for lenders, collectors and consumers alike. Just as the spikes in retail trends are analogous with the holiday months, there’s an evident uptick in collections during tax season year after year. As such, successful lenders, financial institutions and collections agencies know that January, February and March are critical months to engage with past-due customers, specifically as they relate to the tax season. The average tax refund for 2016 and 2017 was $2,860 and $2,769 respectively, according to the IRS. And while some may assume that all consumers look at this money as an opportunity for a “treat yourself” splurge, 35% of consumers expecting a refund said they would use it to pay down debt, according to the National Retail Federation. Additionally, during the 2017 tax season, 45 million consumers paid at least $500 and 10% or more of a tradeline balance(s), according to Experian data. So, if past-due consumers want to pay down debt, and the ultimate goal of collections is to recoup over-due funds, and first quarter collections growth appears to be driven by tax refunds, how do we make the connection? Think of the scene from Jerry Maguire – “Help me, help you!” Help consumers help themselves. Experian’s new Tax Season Payment IndicatorTM examines payment behavior over the past two years to determine whether a consumer has made a large payment to a tradeline balance – or balances – during tax season. “Millions of consumers used their tax refunds to pay down debt and many plan to do it again,” said Denise McKendall, Product Manager. “Collectors that leverage previous tax season payment behavior to identify and strategically engage with this group will benefit the most from the tax refund season.” Engaging this information can be like having a collections crystal ball. Targeting consumers that are likely to use their refund to pay down debt can influence messaging, campaign refinement and the timeliness of your touchpoints, resulting in greater collections ROI. This means as the year closes out and planning begins for 2019, collections prioritization strategy is key. And those conversations should be taking place now. Are you tax season ready? Learn More About Tax Season Payment Indicator
Debt. For many it’s a struggle – and a constant one. In fact, one in three Americans today have a debt in collections, according to a recent study by the Urban Institute. And while it might be safe to say the majority find “collections” frustrating – for both consumers and lenders alike – new research suggests a strategy to help lending institutions and collections agencies recoup more costs. How’s that? By playing to consumer preferences. Communication, choice, and control. According to a 2018 Benchmark Study released by Intelligent Contacts and conducted by Marketing Research Firm AYTM, consumers carrying balances and the lenders who are owed, all want the same thing – to pay it off. Most consumers, (including almost 80% surveyed in the study) are willing to be proactive in settling their debt. If lenders can cater to the payment preferences of their consumers – specifically their preferences for communication, they can more successfully retrieve payment. Consumers prefer to be informed prior to discussing their debt giving them greater control over how the discussion takes place. In addition, consumers highly preferred not to speak with a stranger directly when speaking about their debt. When asked if they needed to be reached about a financial issue that might soon negatively impact their credit rating, 42% preferred to be contacted via email. Another finding of the study was that consumers prefer options – choices. If a payment plan is available, consumers of the study were willing to make an ongoing financial commitment to pay off their balance. Nearly 96% would rather start making payments than wait until they could pay the amount in full. Ultimately, the success of collections initiatives relies heavily on how well collection practices are accepted and adopted by the end user. Consumers want to make informed decisions and want to be offered choices – therefore giving them more control in a decision-making process and with their finances. “Consumers have made a monumental shift to digital. To enhance your collections performance, it is critical to engage consumers in the method and channel of their choosing,” said Paul Desaulniers, Senior Director at Experian. These insights span across generations and geographic locations. Even consumers ages 55 and older prefer to communicate through newer channels like email or text, contrary to assumptions about generations suggesting digital-first tactics are only used for younger generations. Those lenders that are able to communicate across all consumer channels will see more success in their collections strategies and according to the findings of the study, digital platforms for collections efforts will see the most success. Are your debt collection tactics and strategies digital-ready? By engaging consumers through their preferred medium of communication, third party collection agencies saw a 10x increase in monthly net revenue compared to the monthly net revenue from digital payments BEFORE implementing a virtual negotiation solution. In summary, by catering to consumers’ communication preferences, giving them control and offering them choices, financial institutions and collections agencies can more effectively reach their customer base, with less effort. It’s a win-win for all. Learn more
In the credit game, the space is deep and diverse. From super prime to prime to subprime consumers, there is much to be learned about how different segments are utilizing credit and navigating the financial services arena. With 78 percent of full-time workers saying they live paycheck-to-paycheck and 71 percent of U.S. workers responding that they live in debt, it is not surprising a sudden life event can plunge a solid credit consumer from prime to subprime within months. Think lost job, divorce or unexpected medical bill. This population is not going away, and they are seeking ways to make ends meet and obtain finances for needs big and small. In many instances, alternative credit data can shed a light on new opportunities for traditional lenders, fintech players and those in the alternative financial space when servicing this specific consumer segment. In a new study, Clarity analyzed the trends and financial behavior of subprime loan users by looking at application and loan data in Clarity’s database, as well as overlaying Vantage Score insights from Experian from 2013 to 2017. Clarity conducted this subprime trends report last year, but this is the first time it factored in Vantage score data, providing a different lens as to where consumers fall within the credit score tiers. Among the study highlights: Storefront single pay loan customers are becoming more comfortable with applying for online loans, with a growing percentage seeking installment products. For the first time in five years, online single pay lending (payday) saw a reduction in total credit utilization per customer. Online installment, on the other hand, saw an increase. While the number of online installment loans increased by 12 percent and the number of borrowers by only 9 percent, the dollar value grew by 30 percent. Online installment lenders had the greatest percentage increase in average loan amount. California and Texas remain the most significant markets for online lenders, ranking first and second for five years in a row due to population size. There has also been growth in the Midwest. The in-depth report additionally delves into demographics, indicators of financial stability among the subprime market and comparisons between storefront and online product use and performance. “Every year, there are more financial lenders and products emerging to serve this population,” said Andy Sheehan, president of Clarity Services. “It’s important to understand the trends and data associated with these individuals and how they are maneuvering throughout the credit spectrum. As we know, it is often not a linear journey.” The inclusion of the Vantage Score showcased additional findings around prime versus subprime financial behaviors and looks at generational trends. Access Full Report
There are lots of reasons why people miss a bill payment. Unfortunately, the approaches for collecting those late payments tend to follow a one-size-fits-all approach. For example, a customer takes a long vacation and forgets to pay his credit card bill before he leaves. When he gets home ten days later he already has five phone calls and two official notices from the collections department. And the calls continue for the next few days until he has an opportunity to call them back to take care of the situation. How does this customer feel? Frustrated? Annoyed? Under-valued? The current collections process is outdated, especially in a world where personalized and relevant communications are becoming the norm. The collections process is driven by the measurement of delinquency and loss. Rarely does it consider the broader customer profile. Too often, this narrow view leads to one-size-fits all collections strategies and overly aggressive processes. Getting debt collection right is about more than the money. It needs to be about the customer. It’s about knowing the difference between a customer who has simply forgotten to make a payment or someone dealing with financial hardship. We recently released a paper on the collections process, looking at how common it is for overly aggressive collections to lead to account closures and erosion of customer lifetime value. In fact, we found 3 percent of 30-day delinquencies in card portfolios closed their accounts after paying their balance in full. Seventy-five percent of those closures came with the payment to bring the account current and the remaining 25 percent closed the account within the following 60 days. Our analysis also showed that people with the lowest balances and the lowest amount past-due had the highest incidence of paying off their debt and closing their accounts. That means that by being too aggressive over a fairly low dollar amount, you can damage the relationship with a customer who could bring a lifetime of more business. We also used our Mosaic® lifestyle segmentation system to do a deeper look into who was more likely to close their accounts. We found the likelihood to close accounts was four times higher in the young, urban, affluent population than it was with others. This particular segment usually has the greatest potential for lifetime value and are the hardest to attract. It seems counterproductive to let overly aggressive and perhaps unnecessary, debt collection end the relationship. However, if we become smarter about the collections process, it could be possible to not only keep the customer, but also strengthen the relationship. Consider this, the customer on that long vacation receives an email that says, “Hey we noticed you forgot to make your last payment. Can you email us back the reason why and when we should expect it?” This creates an opportunity to build the relationship with that customer and get a commitment to settle the payment by a particular date. Ten days later when he gets back from vacation, he receives a reminder to make the payment and takes care of it. Instead of feeling frustrated, annoyed or undervalued, the customer has a positive experience and continues doing business with a company who is focused on building relationships vs. simply collecting money. There is a real opportunity to take best practices around customer experience from earlier stages of the customer lifecycle and apply them to the collections stage. Sure, some situations may require a more aggressive approach, for others, the idea of an email and the option to log on to a virtual platform to handle the debt on their own terms is the preferred approach. Some customers may not need options other than a little more time to pay on their own terms. It comes down to knowing your customer and applying the insights we can uncover from data to handle debt collection. This will allow us to improve the customer experience and strengthen customer life-time value.
“Who Moved My Cheese?” Perhaps you\'ve heard of this popular book, released in 1998. If you haven\'t, it\'s a quick read and one that describes four fictional characters - two mice and two \"little people\" - on their quest to hunt for cheese. On their journey, they have to assess their routines and consider change - that word that makes so many of us uncomfortable. I bring this up because it is no secret that the consumer has changed dramatically over the years. Technology, the need for personalization, the demand for speed. Yes, the consumer has changed for sure, and everyone seems to recognize this but collections professionals. Look at any financial institution and you will hear and see leaders talking about and executing on digital acquisition and account management strategies. After all, digital is the medium that consumers desire when interacting with their financial service providers. Marketers know this and most have adapted, but when it comes to collections, the industry seems to be fixated on utilizing the tactics of the past. Today, collectors largely rely on calling consumers and sending out dunning letters. Right Party Contact rates continue to decline, and with 50 percent of consumers lacking land lines, the contact rates are only going to get worse. I say all this because if you want to see success, you must change. Offering your past-due customers a digital experience will not only increase your collections performance and recoveries, but simultaneously improve your customer experience and reduce costs. This is a huge opportunity if collectors would just embrace a digital collections strategy. And let me note that having a payment portal is not a digital collections strategy. If that was the case, digital marketers would be done with just a simple website, and then they can wish their consumers will land on the site. A digital collections experience is much more. Why stay stuck in the past? Change is good, let someone else look for that old cheese.
As soon as the holiday decorations are packed away and Americans reign in the New Year, the advertisements shift to two of our favorite themes – weight loss and taxes. No wonder the “blues” kick in during February. While taxes aren’t due until April 17, the months of January, February and March have consumers prepping to file. Coincidentally, it is also a big season for lenders to collect after the high-spending months of October through December. “Knowing which of your customers may receive a refund is critical,” said Colleen Rose, an Experian product manager specializing in the collections industry. “This information can help lenders create a strategy to capitalize on this important segment during the compressed collections window.” The industry has become more familiar with trended data and its ability to predict how consumers are faring on the credit score slider, but many don’t know that it has also proven popular in identifying people who may get a tax refund, and who is likely to use a refund to pay down delinquent balances. The past two tax seasons are evaluated to provide a complete picture of a customer’s behavior during tax refund season. Balance, credit limit and other historical fields are incorporated with tradeline-level data to determine who paid down their delinquent balances during this time. According to the IRS, in fiscal year 2016, the average individual income tax refund was about $3,050, so it’s a prime time for consumers to come into some unexpected cash to either pay down debt or spend. It’s estimated that 35% of consumers who get a refund will pay down debt. “Using Experian’s trended data attributes, we’ve identified past-due customers who paid down a delinquent tradeline balance by at least 10% and made a large payment during tax season,” said Rose. “With these specific attributes, we can help clients target a very desirable population during the critical collections months, helping them to refine their campaigns and create offers geared toward this population.” Anticipating who is likely to receive a refund and use it to pay down debt can influence how collections departments develop their messaging, call outreach and mailings. And for consumers who owe multiple debts, these well-timed touchpoints and messages could influence who they pay back first. The collectors with the best data, once again win, with trended data providing the secret sauce for predictions. ‘Tis the season for taxes.
For most businesses, the customer experience is at the heart of every strategy. Debt collection shouldn’t be different. Here’s why: 21% of visits to an online debt recovery system were made outside the traditional working hours of 8 a.m. to 8 p.m. Of the consumers who committed to a repayment plan, only 56% did so in a single visit. PricewaterhouseCoopers reported that 46% of consumers use only digital channels to conduct banking, avoiding traditional offline channels. Conversely, data collected by Gallup between 2013 and 2016 showed that 48% of American banking customers would only consider using a bank that offered physical branches. The debt collection process is an often-overlooked opportunity to build customer relationships and loyalty. Leverage data and technology to replace outdated approaches, minimize charge-offs and create environments that value each customer. Learn more>
It’s no secret. Consumers engage and interact with brands through a variety of channels, including email, direct mail, websites and mobile. And since most organizations work to keep the consumer experience at the core, they tend to invest in an omnichannel approach that caters to the consumer’s preferences. The lone exception may be during the collections process. Often, once an account falls behind on payment, the consumer experience falls behind with it. But should it? While many banks and financial institutions view the collections process merely as an opportunity to collect outstanding debt, the potential is much more. If treated effectively, the collections process can present an opportunity to develop a positive customer relationship that builds loyalty over time. If handled poorly, the collections process could cost an organization a number of lifetime customers. To correct this, banks and financial institutions need to implement the same omnichannel approach in the collections process as they do with every other consumer interaction. Collections can no longer be treated as a linear process that leads from one channel to the next. There needs to be a more personalized touch — communicating with consumers through preferred channels, contacting them at the most opportune times. Sound complex? Sure. But consider a recent Experian analysis that invited consumers to establish a nonthreatening dialogue with an online debt recovery system. The analysis revealed 21 percent of visits to an organization’s website were outside the traditional working hours of 8 a.m. to 8 p.m. Furthermore, of the consumers who committed to a repayment plan, only 56 percent did so in a single visit. Each consumer is different. So is each situation. And banks and financial institutions need to acknowledge those differences. Luckily, technology can address the complexities of an omnichannel and personalized approach. Platforms such as Experian’s PowerCurve® Collections enable banks and financial institutions to simplify the collections process for both the consumer and the organization. By treating the collections process the same as any other stage in the consumer journey, organizations have an opportunity to build a relationship. And to do so, banks and financial institutions need to leverage the data and technology at their disposal. If they do so appropriately, they’ll minimize their charge-offs and also create a lifetime customer. To learn more about leveraging the collections process to build customer loyalty, download our white paper Getting in front of the shift to omnichannel collections.
The collections space has been migrating from traditional mail and outbound calls to electronic payment portals, digital collections and virtual negotiators. Now that collectors have had time to test virtual collections, we’ve collected some data points. Here are a few: On average, 52% of consumers who visit a digital site will proceed to a payment schedule if the right offer is made. 21% of the visits were outside the core hours of 8 a.m. to 8 p.m., an indication that traditional business hours don’t always work. Of the consumers who committed to a payment plan, only 56% did it in a single visit. The remaining 44% did so mostly later that day or on a subsequent day. As more financial institutions test this new virtual approach, we anticipate customer satisfaction and resolutions will continue to climb. Get your debt collections right>
Everyone loves a story. Correction, everyone loves a GOOD story. A customer journey map is a fantastic tool to help you understand your customer’s story from their perspective. Perspective being the operative word. This is not your perspective on what YOU think your customer wants. This is your CUSTOMER’S perspective based on actual customer feedback – and you need to understand where they are from those initial prospecting and acquisition phases all the way through collections (if needed). Communication channels have expanded from letters and phone calls to landlines, SMS, chat, chat bots, voicemail drops, email, social media and virtual negotiation. When you create a customer journey map, you will understand what channel makes sense for your customer, what messages will resonate, and when your customer expects to hear from you. While it may sound daunting, journey mapping is not a complicated process. The first step is to simply look at each opportunity where the customer interacts with your organization. A best practice is to include every department that interacts with the customer in some way, shape or form. When looking at those touchpoints, it is important to drill down into behavior history (why is the customer interacting), sociodemographic data (what do you know about this customer), and customer contact patterns (Is the customer calling in? Emailing? Tweeting?). Then, look at your customer’s experience with each interaction. Again, from the customer’s viewpoint: Was it easy to get in touch with you? Was the issue resolved or must the customer call back? Was the customer able to direct the communication channel or did you impose the method? Did you offer self-serve options to the right population? Did you deliver an email to someone who wanted an email? Do you know who prefers to self-serve and who prefers conversation with an agent, not an IVR? Once these two points are defined: when the customer interacts and the customer experience with each interaction, the next step is simply refining your process. Once you have established your baseline (right channel, right message, right time for each customer), you need to continually reassess your decisions. Having a system in place that allows you to track and measure the success of your communication campaigns and refine the method based on real-time feedback is essential. A system that imports attribute – both risk and demographic – and tracks communication preferences and campaign success will make for a seamless deployment of an omnichannel strategy. Once deployed, your customer’s experience with your company will be transformed and they will move from a satisfied customer to one that is a fan and an advocate of your brand.
It should come as no surprise that the process of trying to collect on past-due accounts has been evolving. We’ve seen the migration from traditional mail and outbound calls, to offering an electronic payment portal, to digital collections and virtual negotiators. Being able to get consumers who have past-due debt on the phone to discuss payments is almost impossible. In fact, a recent informal survey divulged a success rate of a 15% contact rate to be considered the best by several first-party collectors; most reported contact rates in the 8%-range. One can only imagine what it must be like for collection agencies and debt buyers. Perhaps, inviting the consumer to establish a non-threatening dialog with an online system can be a better approach? Now that collectors have had time to test virtual collections, we’ve collected some data points. Conversion rates, revisits, and time of day An analysis of several clients found that on average 52% of consumers that visit a digital site will proceed to a payment schedule if the right offer is made. 21% of the visits were outside the core hours of 8 a.m. to 8 p.m., an indication that consumers were taking advantage of the flexibility of reaching out at any time of the day or night to explore their payment and settlement options. The traditional business hours don’t always work. Here is where it really gets interesting, and invites a clear comparison to the traditional phone calls that collectors make trying to get the consumer to commit to a payment plan on the line. Of the consumers that committed to a payment plan, only 56% did it in a single visit. The remaining 44% that committed to payments did so mostly later that day, or on a subsequent day. This strongly suggests they either took time to check their financial status, or perhaps asked a friend or family to help with the payment. In other words, rather than refusing to agree to an instantaneous agreement pressured by a collector, the consumer took time to reflect and decide what was the best course of action to settle the amount due. On a similar note, the attrition rate of “Promises to Pay” were 24% lower using online digital solutions versus the traditional collector phone call. This would be consistent with more time to agree to a payment plan that could be met, rather than weakly agreeing to a collector phone call just to get the collector off the phone. Another possible reason for a lower attrition rate may be that a well-defined digital collection solution can send out reminders to consumers via email or text in advance of the next scheduled payment, so that the consumer can be reminded to have the funds available when the next payment hits their account. For accounts where settlement offers are part of the mix, a higher percentage of balances is being resolved versus the collection floor. In fact, the average payment improvement is 12% over what collectors tend to get on the collections floor. The reason for this significant change is unclear, but the suspicion is that a digital collection solution will negotiate stronger than a collector, who is often moving to the bottom of an acceptable range too soon. What\'s next? Further assessing the consumer’s needs and capabilities during the negotiation session will undoubtedly be a theme going forward. Logical next steps will include a “behind-the-scenes” look at the consumer’s entire credit picture to help the creditor craft an optimal settlement amount that both the consumer can meet, and at the same time optimizes recovery. Potential impact to credit scores will also come into the picture. Depending on where the consumer and his past-due debt is in the credit lifecycle, being able to reasonably forecast the negative impact of a missed payment can act as an additional argument for making a past-due or delinquent payment now. As more financial institutions test this new virtual approach, we anticipate customer satisfaction and resolutions will continue to climb.
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