Outsourcing debt collections is a practice that has been gaining momentum among creditors lately.
The benefits of this approach are numerous: improved customer experience, cost savings, time savings and most of all, better recovery rates. Not to mention the necessity to keep up with the industry’s transformation due to new technologies, changing consumer habits, and shifting attitudes toward debt collection. This makes it all the more difficult to identify which trends are likely to be enduring and which will fade away as quickly as they appeared.
To address this, we have compiled a two-part blog series to detail the trends gaining traction in the debt collection outsourcing industry.
While we discussed the modern, digital-first debt recovery trends in the previous blog, this blog will examine the trends on the business front as well as the collection process.
Collectors Involved Early in the Recovery Process
Previously, creditors waited for at least 90 days before outsourcing the due accounts to third-party debt collection agencies. However, nowadays, many are working with the collection agencies much earlier in the process. This practice is becoming prevalent among creditors from most industries, considering how important the first few weeks past a due account are.
Some creditors outsource the entire order-to-cash process, including billing, call center operations, and customer communications, to concentrate on their primary business activities. In turn, the debt collection agencies stay on track from the beginning and create tailored strategies to lower the bad debt expenses, operating costs and billing cycle delays for their clients.
Debt Recovery with No Direct Interactions
One of the ideal ways to collect debts is when the dues are paid without any human involvement. Some collectors have made this possible through personalized strategies applied to a segment of debtors. They are also helping the creditors to make the most of the low-hanging opportunities without minimal overhead costs and zero manual intervention.
To understand further, let’s look at the three broad categories of debtors:
- The ones who missed or forgot to make the payments but are willing to pay
- The ones who plan to pay the debt but aren’t able to under current financial strain
- The ones who don’t have any plan of repaying the debt
Often, the debtors under the first category are grateful for being reminded about the payments and are willing to take steps to repay their debts. These people prefer non-intrusive communication, e.g., through text messaging, automatic call reminders, and emails, and are willing to repay the debt quickly — without actually talking to a human agent.
Debt collection agencies are therefore saving time by automating these initial points of contact based on the profiles of such debtors. Many perform batch operations based on these profiles to multiply the results with minimal effort.
Demand for Seasoned Talent in Debt Recovery
The total federal debt held by the people has grown from $14.6 trillion in 2017 to over $21 trillion in 2020 and these numbers are expected to increase more and more. And as more people fall behind on payments, there has been a rise in unpaid accounts—which means more companies need skilled employees who can handle the recovery process.
The demand for niche experts, like those specialized in healthcare debt recovery or credit card recovery, with an acute knowledge of the particular industry regulations and customer behavior is on the rise. For example, in the healthcare sector, many regulatory policies protect the patient’s right to privacy. This means that healthcare companies and third-party debt collection companies must be careful about how they communicate with their patients while upholding these regulations.
The need for relevant niche specializations as well as candidates with an aptitude for communicating with and resolving unpaid accounts has opened up opportunities for small and medium-sized debt collection companies. And many creditors are turning to such companies with niche experts to help them recover their debts fast and through legal means.
Capital Recovery has niche debt recovery professionals specialized in the healthcare, insurance and commercial sectors. We have a skilled and highly knowledgeable team that knows the ins and outs of handling debts from these industries and has been helping many businesses to hit high recovery rates every year. Reach out to talk to us about your debt collection strategies.