WHITE PAPER. Tech Trends in Debt Collection Software that are Personalizing the Debt Collection Process and Helping Enterprises Protect Their Brands

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1 WHITE PAPER Tech Trends in Debt Collection Software that are Personalizing the Debt Collection Process and Helping Enterprises Protect Their Brands

2 DIGITAL TECHNOLOGY AND CHANGE IN DEBT COLLECTION The New Era of Debt Collection For the last two decades, one of the most prevalent industry disrupters has been digital technology, and the debt collection industry has not been exempt from its transformative power. In fact, almost all aspects of the debt collection process have undergone transformations, spurred by tech innovations that have leveled the path for debt collection software and firms that have very little semblance to the traditional actors of the past. The seismic shifts that have been taking place in debt collection industry have been inevitable for some time, as the evolving needs of enterprises that have to collect on delinquent accounts have been ill-served by conventional debt collection methods and tools. Whether it is for a business that handles its own collection efforts for past due accounts receivables or a debt recovery firm that provides third-party collection services, the catalysts for the transformations remain the same: Increasing pressure to simultaneously and proficiently manage multiple types of debts and improve cash flow Collection goals that require an increase in the rates of debt recovery and a decrease in the number of bad debts Adherence to stringent regulations at the federal, state and local levels The transformation of the debt collection industry and its processes may be most evident in the evolution of debt collection software solutions. The developers of debt collection software are addressing the need for accommodating interfaces that enterprises can use to efficiently execute workflow processes in all stages of debt collection, allowing them to optimize their collection efforts and expenses. These software solutions are highly sophisticated tools with which complex collection strategies can be implemented to achieve collection goals. Collecting Debts While Maintaining the Customer Experience and Protecting the Brand However, one of the most important factors in the debt collection industry s embracement of digital technology and the transformations it has produced is the realization that the cultivation of a sustainable and productive relationship with the delinquent customer, coupled with the mechanisms that can give those consumers autonomy when addressing their debts, can be an effective approach to collecting debts. The debt collection process is a critical aspect of business operations, but is routinely executed at the expense of alienating delinquent customers, souring their perception of the brand. Enterprises should consider the debt collection process as part of the consumer lifecycle and use it as part of their strategies for enhancing the consumer experience and preserving their brands. This means that consumer service personalization should not be abandoned if an account becomes delinquent. In fact, it may be the very situation in which it may be the most useful. Debt collection software solutions that feature the technologies that can provide an understanding of consumer behaviors can help preserve the customer experience and allow enterprises to interact with delinquent consumers without impairing their brands or sacrificing consumers loyalty. Enterprises can accomplish this by using these software solutions to execute collection strategies that are better suited to their individual customers. So, what are the trends in debt collection software that are making it easier to connect with delinquent consumers, cultivate and sustain productive relationships and protect an enterprise s brand?

3 STRATEGIC PREDICTIVE ANALYTICS: MAKING THE RIGHT MOVES Predictive analytics is a mathematical science that converts raw data into actionable information that can be used to inform the decisions regarding the pursuance of delinquent accounts. Mathematical algorithms are used to analyze the relationships between past and current account data to identify links in complex human behaviors and to calculate a predictive behavior score. The variables related to consumer behaviors, as well as the market trends affecting those behaviors, are used to determine the optimal way to handle each consumer and consumer interaction. The score serves as a predictor of consumer behavior during delinquency periods and prioritizes strategies that can maximize recovery and reduce costs. Strategic predictive analytics builds upon this traditional approach by harnessing the processing of account data to conduct operations like costbenefit analyses and the construction of real-time strategy models within the software platforms. The data processing is also used to calculate risk scores and collection-specific scoring needed to prioritize collection activities. FICO reports that within a global telecommunications carrier s first year of using a analytics-based collections software solution, it yielded $70 million in savings and reduced its net bad debt by 25 percent. 1 The use of strategic predictive analytics in their collection software allows enterprises to enhance key aspects of the debt collection process, including: The Selection of Delinquent Accounts. For many enterprises, it is not feasible to attempt to collect on Understanding Predictive Analytics. May every delinquent account, as such efforts require a significant investment in personnel and finances that is highly likely to exceed any returns. Instead, the delinquent consumers who are most likely to pay can be targeted and prioritized and the collection cycle accelerated, avoiding the waste of resources used for pursuing accounts that are uncollectible. Choosing the Appropriate Channels of Engagement. Enterprises have many options with which to interact with delinquent customers, the implementation of which can be costly. Strategic predictive analytics can be used to monitor the responses to the methods of outreach and identify the means of communication that will garner the most productive responses. Deciding When to Act. Enterprises can pinpoint exactly when in the delinquency period it is best to take action, or if any action is needed at all. For example, some consumers may not require multiple telephone calls; instead, an ed or mailed reminder of their outstanding balance may be sufficient. In other cases, data analysis may indicate that communication or intervention is unnecessary, as the consumers will resolve the balance on their own in a timely manner. There are also situations in which it may be necessary to reallocate resources from early stage recovery to the late stages of the collection process in order to obtain better results.

4 OMNI-CHANNEL COLLECTIONS PLATFORMS: GIVING THE CONSUMERCHOICES The omni-channel collection strategy is an increasingly popular and highly effective form of debt collection that uses a communication approach that centers the consumer, using the behavior of the consumer to determine which methods of interaction should be used. Debt collection software solutions that provide omnichannel collection platforms allow enterprises to engage in both traditional and modern means of communication to suit the preferences of their customers. Just as importantly, the online-based platforms allow enterprises to seamlessly integrate their critical decision-making and automated processes, resulting in resourceful tools that provide the consumers with an enhanced consumer experience, no matter the type of device or channel they use. The typical omni-channel collection platform will allow an enterprise to manage communication channels that include: Text messaging Voic drops Social media Website Landline Mobile phone Sixty-four percent of consumers use over four devices each day, while 26 percent use more than six. 1 most impact and avoid investing time and effort in channels that are underutilized. Self-service is a particularly important feature of omni-channel collection platforms, as it provides consumers a secure and private way to resolve their debts. Consumers are afforded a sense of control during their interactions with the enterprises that they may not otherwise experience during the collection process. Consumers are afforded flexibility, choice and autonomy in how they address and resolve their delinquencies. With omni-channel collection platforms, enterprises have the tools to implement debt collection campaigns that: Provide consumers with timely information about their delinquent accounts Allow consumers to communicate and respond through the channels of their preference Permit the movement between different communication channels without interrupting the continuity of the conversation Enterprises are able to establish a foundation from which all communication with their consumers will originate, personalizing every interaction in order to nurture the consumers through the collections process until their debt has been resolved. Whether or not their accounts are delinquent, consumers expect a certain level of accommodation when it comes how they are able to interact with enterprises. It has become the norm for consumers to be able to easily communicate with enterprises using their preferred method of communication, which has increasingly becoming digitized. Enterprises can use their customers channel preferences to focus financial and personnel resources where they are most likely to have the 1 Getting in Front of the Shift to Omnichannel Collections Experian Information Solutions, Inc.

5 DEBT COLLECTION MOBILE APPS: STREAMLINING TRANSACTIONS Across all industries, an increasing number of enterprises are integrating mobile technology into certain aspects of their business operations. The developers of debt collection software understand that the use of mobile devices for business applications present many opportunities to integrate a high degree of convenience in the debt collection process for both enterprises and consumers. Specifically, the prevalent use of the smartphone among consumers means that the collection process can be enhanced by using debt collection mobile apps. Statistics underscore how at ease consumers are with the merging of banking and digital communications and reinforce how important it is for enterprises to implement an approach to debt collections that center the consumer and is technology-based: 77 percent of Americans have a smartphone 1 By 2020, consumers will handle 85 percent of their relationship with an enterprise without interacting directly with a human 2 According to one study, 50 percent of consumers rely use only their mobile devices to manage their banking tasks. 3 Fifty-six percent of consumers who use smartphones would be more likely to use the device to make a payment on their debt if doing so required only a single click. 4 USING THE RIGHT DEBT COLLECTION SOFTWARE TO GET RESULTS When considering which type of debt collection software solution is needed, whether it is to be a private-label product, a stand-alone solution or a solution to be integrated into their existing technologies, enterprises should focus on acquiring software that features the technologies that allow them to gain an innate understanding of the behavior of their customers. Being able to personalize the debt collection process can not only help enterprises recover as much debt as they can, but it can also result in brand equity that will continue to yield dividends long after the debt has been resolved. Enterprises and consumers can benefit from transparency of using the technology, as the transactions that take place on the apps are conducted directly between the consumer and enterprise. Both parties can also have secure access to real-time consumer account and transaction information. Consumers can use the debt collection mobile apps to: Keep themselves up-to-date with debt accounts Use online negotiation tools Request a payment arrangement Be reminded to make payments Make payments with credit cards, debit cards or ACH, or learn where to make a payment in person Track how long will it take to clear a debt based on specific details about the debt and the amount of payments 1 Mobile Fact Sheet February 5, Garner Consumer 360 brochure, March Mobile s Hierarchy of Needs. 4 Focus Financial Services white paper, by Oxygen.