The debt collections industry is evolving at a rapid pace, with revenues standing at $14.99 billion in the US and expected to hit $16.7 billion by 2025. Several factors are responsible for this, including the emergence of new debt collection regulations and changing consumer behaviors.
As a result, many companies have started to outsource their debt collection operations to focus on their core business activities instead of handling administrative tasks such as collecting payments. This is also fueled by the need for creditors to have access to specialized technologies to contact debtors, establish communication and collect payment — all the while making the most of their agents’ time.
Outsourcing to debt collection agencies has become a norm since creditors are now looking for experts with an unfettered drive to solely focus on improving the debt recovery rate while keeping the operational costs minimal.
The debt collection industry has been on the path of transformation for the past few years, and here are some of the recent trends we’re witnessing.
Digital-First Communications
One in three people is in regular touch with their financial institutions many times a week through digital channels, while two in three people use such platforms at least once a week. Given such preferences, many outsourced agencies are taking a digital-first approach to ease the first line of communications with the debtors.
Debt collection agencies use various tools and platforms like text messaging, automated voicemail drops, and emails to send out reminders about past and upcoming dues with direct links for instant debt payment.
In fact, during the early stages of debt, digital approaches have proven more effective than traditional ones, with debtors 12% more likely to pay when contacted digitally. Further, digital communications deliver a non-threatening, frictionless experience that allows debtors to respond at a time convenient for them. And it also helps collectors to comply with various regulations like FDCPA. So it’s a win-win for both.
There are various other technologies on the rise for collectors, like:
- Interactive Voice Response (IVR): An automated interaction with callers to gather information and answer queries
- Self-service portal: An easy-to-use platform through which debtors can manage their accounts and make payments
- Process automation tool: A tool to provide collectors and clients with complete access to debtors’ information
- Collection analytics platform: A guiding platform for making intelligent decisions about performance tracking, custom reports, profiling, segmentation and debt scoring.
Personalized & Segmented Debt Collection Strategies
Many creditors are outsourcing debt collections to reliable agencies to cut down collection costs and increase the recovery rate. In fact, many creditors have experienced an increase in the recovery rate of 15 to 20% when outsourced to debt collection agencies. And at Capital Recovery, we have a recovery rate of around 25%, which is higher than the industry average.
This is due to our customized collection practices combined with the proper use of smart technologies.
Many debt collection agencies use Artificial Intelligence (AI) tools to create profiles based on the debtor’s repayment ability and tailor personalized strategies for each profile. It has become a staple for debt collectors as it gives them an idea about the people they’re dealing with and employs necessary strategies to encourage them to pay.
Omni-Channel Approach to Debt Recovery
Collectors are now taking an omni-channel approach to debt collections to increase the response rate and reduce the average account handling time.
By integrating the contact center with other communication channels, collectors are providing the debtors with the option to interact in the way they prefer. For example, some people may not want to talk to a collection agency over a phone call but may be willing to communicate through text or email.
During such situations, an omni-channel approach helps identify the preferred mode of communication and tailor future contact strategies. It also maximizes the effectiveness of communications and can help close accounts quickly and with minimal interaction. At the least, it opens up an avenue for the agents to negotiate the repayment terms and close the account as quickly as possible.
At Capital Recovery, our experts rely on intelligent technologies to create profiles, automate communications and maximize our recovery rate. You can partner with our team to improve your debt collections while shifting your focus to your core business operations.