The debt collection process can be an unpleasant experience for borrowers who are constantly hounded by calls, texts, and emails. According to the Consumer Financial Protection Bureau (CFPB), in 2017, 39% of all debt collection complaints in the US were related to being contacted for debts they said they did not owe. Aggressive communication tactics and threats of legal action were the other major complaints. For borrowers, all this trouble could soon be a thing of the past as digital technologies pave the way for smoother and hassle-free debt collection. The global debt collection software market is expected to grow to US 3.73 billion by 2023 as lenders switch to digital debt collections to improve customer experience as well as business outcomes.
How digital debt collection benefits debtors
Digital debt collection platforms enable customers to interact with an intelligent assistant/chat bot or a conversational analytics program to reschedule payments or negotiate and resolve an outstanding debt.
The three key benefits of digitised debt collection are:
1) Friction-free, non-intrusive process
Today’s digital-first consumers prefer to manage their debts online as it affords superior privacy. For 34% of borrowers, online is the most commonly used means of making first contact. Often, borrowers may simply have forgotten to make a payment or may need help in rescheduling their payments due to financial hardship. A digital debt collection platform automates the process of providing relevant information, alerts, and advice to keep borrowers current on their payments. It also removes the ‘human’ element from the equation, making the process more neutral and non-intrusive. Debtors are spared an uncomfortable exchange with human agents and this makes them feel less-judged.
2) Personalised collection strategies
Modern consumers also demand speed and personalized engagement on a channel of their choice. An AI-driven debt collection platform, for instance, can analyze consumer behavior and learn various best practices – such as when to ping them for a resolution, on which channel, and in what language – thereby personalizing the experience. Machine Learning algorithms also provide consumers the much-needed flexibility to adjust repayment plans online, change the amount week to week, or cancel a payment with no extra charges. By 2020, it is expected that 80% of all customer interactions will be handled without a human agent.
3) Lifestyle alignment
In recent years, there has been a significant rise in the number of debtors who prefer to be contacted only via digital channels such as email, web chat, or text. 75% of debtors are under the age of 45 and digitised debt collection fits into their overall behavior and lifestyle. Online access to their debt account empowers debtors to make repayments anytime and from anywhere, thereby increasing the efficiency and consistency of payments. Digitising debt collections also enables collectors to engage with debtors after hours, when it would be illegal to call, ensuring compliance.
Driving greater customer-centricity with digitised debt collection
By improving customer experience, eliminating long-standing challenges, and increasing the consistency of payments, digital debt collection helps borrowers improve their credit scores. A better credit score, in turn, helps individuals by preserving/improving their borrowing capability. Surveys show that borrowers who were provided access to an online collections platform were 18% more likely to apply for another loan.
Rather than punish borrowers for non-payment or delayed payment, digital collection promotes good payment behavior through an informative approach, timely advice, and flexible payment options. This is a win-win for the entire financial ecosystem as greater financial inclusion means happier borrowers and wider business opportunities for providers.