Intelligent Debt Collection Techniques PROFESSIONAL DEBT COLLECTORS

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Intelligent Debt Collection Techniques

2016 South African debt statistics 23.8 million South Africans are credit active consumers Outstanding consumer credit balances increased by 2.3% since last year and now stands at R1.66 trillion Impaired accounts increased slightly since last year to 20.2 million currently 53% of consumers who take out debt are between the ages of 31-45 75% of consumers owe about 75% of their salaries to creditors

012000 062000 112000 042001 092001 022002 072002 122002 052003 102003 032004 082004 012005 062005 112005 042006 092006 022007 072007 122007 052008 102008 032009 082009 012010 062010 112010 042011 092011 022012 072012 122012 052013 102013 032014 082014 012015 062015 112015 042016 092016 022017 South African debt statistics Civil Summonses Issued for Debt 2000-2017 200000 180000 160000 140000 120000 100000 80000 60000 40000 20000 0

012000 062000 112000 042001 092001 022002 072002 122002 052003 102003 032004 082004 012005 062005 112005 042006 092006 022007 072007 122007 052008 102008 032009 082009 012010 062010 112010 042011 092011 022012 072012 122012 052013 102013 032014 082014 012015 062015 112015 042016 092016 022017 South African debt statistics Judgments Granted for Debt 2000-2017 120000 100000 80000 60000 40000 20000 0

012000 062000 112000 042001 092001 022002 072002 122002 052003 102003 032004 082004 012005 062005 112005 042006 092006 022007 072007 122007 052008 102008 032009 082009 012010 062010 112010 042011 092011 022012 072012 122012 052013 102013 032014 082014 012015 062015 112015 042016 092016 022017 South African debt statistics Judgments Granted for Debt 2000-2017 Value R'000 1200000 1000000 800000 600000 400000 200000 0

South African debt statistics 6000 Number of Insolvencies 5000 4000 3000 2000 1000 0 2011 2012 2013 2014 2015 2016 2017

National Debt US$ 25000 20000 15000 10000 5000 0 RSA Russia Greece India UK China Japan US National Debt Debt per Citizen Debt as % of GDP

National Debt as % of GDP 250 200 150 100 50 0 RSA Russia Greece India UK China Japan US

Average Debt Per Citizen in US$ 80000 70000 60000 50000 40000 30000 20000 10000 0 RSA Russia Greece India UK China Japan US

Advanced Debt Collection Techniques Data Validation Dynamic Workflow Data Interaction Interactive Channels Voice Communications Secure Payment Processing Speech Analytics Behaviour, Psychological & Encouragement Analysis Automated Communication

Advanced Debt Collection Techniques Data Validation Automated data validation, reconciliation and appending at point of loading ensures data accuracy and uplifts the levels of customer engagement. ID Number validation: Date of birth, Sex, Citizenship, Deceased status Company registration no: API via CIPC, together with correct registered name Telephone Number Validation: Cell Phone > 059 Landline < 060 086, 087, 080 Separation Removal of non Numeric characters Removal of 27 Insertion of 0 Confirmation of length = 10 if Local Email Address verification: API email validators give no guarantee as to the correctness

Advanced Collections Techniques Dynamic Workflow Achieve the right outcomes fast by using customised dynamic workflows. Type of Debtor Type Of Debt Status Eg. Judgment Date Of Cause Of Action Pre Legal Stage Legal Stage Payment Arrangement

Advanced Debt Collection Techniques Continuous data interaction ensures optimal results. Data Interaction API s CIPC CPB TransUnion Communications Cleansing Heuristic Algorithms

Advanced Debt Collection Techniques Interactive Channels Channels enable debtors to communicate with us and self-serve without the need to speak with our team. SMS, IVR (Interactive Voice Response) & IVM (Interactive Voice Messaging), web access and email. Debtors have the ability to load their own debit order online. Voice Communications Maximised contact centre effectiveness is achieved in our blended, automated and predictive dialling environment. Speech Analytics Software that studies the tone of voice used by a call centre agent. Red-flags excessive tone of voice and makes supervisor aware for further analysis. Software also red-flags certain keywords used to rule out unnecessary future confrontation. Monitors customer s reaction and behaviour towards certain keywords used, to improve future collection success. Deliver insight into voice communications with debtors to provide assurance of compliance, identify trends and direct training activities to help serve customers better.

Advanced Debt Collection Techniques Secure Payment Processing Advanced software is used to match payments automatically from trust accounts, debit order processing an client declaration, thereby eliminating possible errors. Automated Communication Debtors find it easy to understand our written communications and know exactly what to do as a result of our clear calls to action. All language and visual cues have been designed by applying behavioural sciences, as well as ease of access.

Implementing effective debt collection strategies Debt collection systems and techniques start with good planning and end with constant review. Strategy differs, dependent on: Type of credit Sector of commerce/industry Terms of sale Liberal or restrictive credit policy Type of customer Location of target market Product Value

Using behaviour analysis to improve debt collection performance Behaviour, Psychological & Encouragement Analysis Years of research have given us the advantage of studying the reasons for debtors making payment. This ongoing research is applied in our collection procedure based on behavioural, psychological and encouragement criteria and changing statistical models. The benefit is that it not only leads to the fastest possible route to payment, but also the highest eventual success. Research on behaviour in relation to type of action is on-going.

Robotic Process Automation (RPA) RPA can automate numerous tasks usually performed by full-time employees. Companies want alternative opportunities that reduce cost and improve efficiency and production by removing repetitive and manually demanding tasks such as balance enquiry or telephone calls to remind the customer to pay as previously arranged. Collection departments need to cleverly maintain quality of customer experience, by investing in the right communications to achieve the best level of understanding, and balance it alongside robotisation. With the extensive levels of data available, and the different systems used to access it, organisations now require a great deal of intelligence. This intelligence will give a full picture of each customer s journey from the opening of their account through to their current situation. This can be achieved using several different sources including white credit data, account history, trace information or feedback they provide to a collections agent. Having these capabilities is important to create a single customer view allowing accurate understanding of customer situations to provide the right outcomes.

Building sustainable bad-debt reserve models How much are you writing off in bad debt? Scoring models are essential to building bad debt reserve model. Calculate DSO per customer sector Calculate the cost of internal collections Calculate the cost of not outsourcing Include true cost of finance per sector

Building flexible and sustainable bad-debt reserve models Actual model building steps Objective & Portfolio identification Customer score vs. account score Exclusions Observation point and/or window Validation plan and samples Segmentation Bad definition Performance window Variable Selection Model Building Scoring and Validation Score Implementation

Building a Self-Cure Strategy If a customer is as likely to make a payment when they are called on day one as they are when called on day five, then there is no cost in a self-cure strategy for those first five days. Therefore, no call should be made until day six regardless of how small the probability of receiving a payment from the self-cure strategy actually is. This is because, with no costs, any recovery made is value generating and any recovery not made is value neutral. However, if after the first five days a customer who has not been contacted begins to become less likely to make a payment when eventually called, costs start to accrue. The customer should remain in the self-cure strategy up to the point where the probability of payment from the self-cure strategy is expected to drop to a level lower than the associated drop in the probability of payment from the next best strategy.

Building a Self-Cure Strategy

Worldwide Trends US consumers are the most indebted in the world Both countries consumers owe more than one year GDP US Delinquency Loans 4.9% Bank Cards 7.1% Real Estate 4.2% US Debt Collection Collections saves more than $400 per household per year 500 000 debt collectors in the US Average account size: $1380 $513 Billion written off in last quarter 2016 Management spending most of their time with compliance Largest problem - predatory law firms CFPB complaints rises from 271,600 (2015) to 291,400 (2016) (higher than any other industry) Debt collectors change communication to vanilla Worldwide Commercial market is lamenting, putting pressure on consumer collections

Credit management is a value chain if any element of the credit extension process is defective, the entire process could (and usually does) collapse. Schuldturm in NUREMBERG, Germany