As much as the debt recovery industry has been undergoing a major overhaul in the last few years, 2024 has been even bigger. Artificial intelligence (AI) has become the backbone of collections, enabling hyper-personalized strategies and seamless customer experiences. At the same time, customer-centricity has combined with technological advancements as the critical differentiator in a fiercely competitive landscape. Here are the top debt collection trends for 2024 that will continue strongly into 2025.
4 key debt collection trends for 2024
1. Gen AI transforms debt collections and customer assistance
AI and machine learning are changing the game in debt collections. These technologies are helping agencies use smarter, data-driven strategies. By using AI-powered predictive analytics, agencies can group consumers based on their likelihood to pay and figure out the best way to get in touch with each person. This targeted approach makes collections more effective and helps agencies use their resources more wisely.
According to a recent McKinsey report, agencies leveraging generative (gen) AI can realize up to a 40% reduction in operational expenses while simultaneously improving recoveries by approximately 10%. This significant cost savings and enhanced recovery rates are made possible by the powerful capabilities of gen AI.
Gen AI enables agencies to automate and optimize various aspects of the collections process, from customer segmentation and communication to payment processing and performance analytics. By leveraging machine learning algorithms and natural language processing (NLP), gen AI can analyze vast amounts of structured and unstructured data to identify patterns, predict customer behavior, and generate personalized, context-aware communication strategies.
For example, gen AI can help agencies prioritize accounts based on the likelihood of recovery, ensuring that resources are allocated to the most promising cases. It can also generate intelligent, empathetic scripts for collectors tailored to each customer’s unique circumstances and preferences. This personalized approach not only improves the chances of successful recovery but also enhances the overall customer experience.
In addition to the operational benefits, McKinsey has observed that agencies deploying gen AI in collections have seen up to a 30% increase in customer satisfaction scores. This significant improvement in customer satisfaction is driven by gen AI’s ability to accurately identify and address customers’ needs promptly, ultimately helping them become debt-free more quickly.
2. Connecting with debtors on their terms is paramount
With so many new forms of technology on the rise, traditional debt collection methods are losing their effectiveness. A staggering 78% of customers are now blocking calls from third-party collection agencies, forcing the industry to rethink its approach to customer engagement. As consumer preferences shift towards digital channels, it has become increasingly clear that embracing an omnichannel communication strategy is the key to successful debt collections.
Gone are the days when a simple phone call would suffice in engaging customers with delinquent accounts. With the proliferation of smartphones, social media, and instant messaging apps, consumers now expect to interact with businesses on their preferred channels at their convenience. Failing to adapt to these changing expectations can result in missed opportunities, reduced collection success rates, and damaged customer relationships.
To keep up, debt collection agencies are using an omnichannel communication approach to meet customers where they are and engage with them on their terms. This means using both traditional and digital channels like text messages, emails, online portals, chat apps, social media, and phone calls. By reaching out through different channels, agencies can significantly improve their chances of connecting with customers, which ultimately helps them collect more debts.
Using omnichannel communication not only helps agencies recover more debts but it also makes the customer experience better. Customers feel more valued and supported when they can communicate with agencies through their preferred channels and get consistent, seamless service across different points of contact. This positive experience can lead to more cooperation, quicker resolutions, and even improve how customers see the agency, as they appreciate the effort put into meeting their needs.
At Capital Recovery, for example, we use enhanced strategies for increasing payment propensity, incorporating direct-to-voicemail drops, personalized text messaging, outbound calls, targeted emails, and other tailored communication channels.
3. Make self-service the catalyst for reducing call volumes
As much as people prefer their ways to connect with debt collectors, self-service has been becoming a top replacement for traditional calls. One of the key techniques to add to your omnichannel approach is offering self-service solutions.
A recent McKinsey report revealed that nearly two-thirds of organizations that successfully decreased their call volumes attributed this achievement to implementing enhanced self-service options.
In today’s fast-paced world, customers want the freedom to manage their accounts and address issues on their own terms. When agencies offer easy-to-use self-service platforms, it puts the power in the hands of customers, reducing the need for them to reach out for help and making things more efficient for everyone.
Self-service options like online portals and mobile apps are a win-win for customers and agencies. Customers get the convenience of accessing their account info, making payments, and communicating with the agency whenever and wherever they need to. This not only improves their experience but also helps remove some of the stress and stigma that can come with dealing with debt.
For agencies, self-service means big improvements in how they operate. When customers can handle routine tasks on their own, it lightens the load on call center staff, letting them focus on more complex issues. This helps agencies be more productive, save money, and work more efficiently overall.
4. Embrace diverse payment methods for quick debt recovery
The payment landscape is evolving rapidly, with consumers increasingly adopting digital payment methods such as mobile wallets, peer-to-peer (P2P) apps, and contactless options. To meet changing consumer preferences and improve collections outcomes, agencies must expand the range of payment methods they accept.
Accepting a wide array of payment options not only improves the customer experience but also streamlines the collections process. Digital payments enable faster, frictionless transactions, reducing the time and effort required for manual processing. This can lead to accelerated funding and improved client cashflow.
To get the most out of digital payments, companies should connect payment solutions with their collections software. This lets payments show up in real-time, reconciles payments automatically, and gives detailed reports. Connecting everything also lets companies offer flexible payment plans, automatic payments, and self-service options, making the customer experience and payment collection more efficient.
The Path Forward
2024 marks a pivotal year in the debt collections industry, as the accelerating change demands a new level of innovation and agility. The most successful agencies will embrace a forward-thinking, customer-centric, and technology-driven approach.
Investing in the right tools, strategies, and talent is essential for long-term success. This may involve partnering with fintech firms to access cutting-edge solutions, hiring data scientists and AI experts to drive innovation, and fostering a culture of continuous learning and development.
If you want to partner with a reliable debt recovery agency with the right combination of tools, techniques, and people, reach out to us now.