Debt collection can be complicated, especially when dealing with a large customer base. You have to make sure you’re treating everyone fairly and equally — but that’s easier said than done. At times, collecting debts can even be extremely tedious and challenging.
While there are many ways to approach debt collection, some methods work better than others. And the truth is, choosing the best collection methods can make a world of difference between a frustrating debt collection and a quick resolution. But, which ones are the most effective at getting a response — and better yet, a repayment? Let’s find out.
Automated Digital Outreach
Using smart digital tools is a new approach to debt collection that combines the power of automation with human expertise to deliver more personalized messages. It’s an answer to the challenge of high volumes of data while meeting the expectations of consumers who want more personal interactions at their convenient times.
Automated texts and calls empower collectors to be more effective and efficient by improving first contact resolution rates and total collections. There are several automated intelligent tools used for debt collection like:
- AI-Based Personalized Chats
AI chatbots can help automate the process of reaching out to customers, answer their questions, and give them options for resolving their debt. They can also provide information about payment plans or other options for settling debts. It’s a low-touch way to reach out to customers who don’t want to talk over the phone.
The ability of these chatbots to learn from previous interactions allows them to provide accurate answers to common queries and respond intelligently with natural language. Having an AI-powered system that learns from your customer’s behavior can also incrementally improve your interactions and response rates.
- IVR
Interactive Voice Response (IVR) is an automated customer service medium that allows people to respond to calls through voice responses or by pressing buttons on their phones. With personalized interactions based on real-time insights into each customer’s situation and preferences, you can increase the response rate and push the debtors a step close to paying off their dues.
- VoApps
VoApps are all about using technology to improve the customer experience and provide more value to your customers — without wasting the time of the collections team. You can leave an automated voice mail right to the debtors’ phones with information about the debts and how you can help them resolve them.
This way, the debtors can reach back any time they need and directly talk to the agents about their repayment options.
- Text Messages
Texting is an easy and discreet way to communicate with your customers. Instead of directly calling the debtors, our collection team sends text messages to the debtors’ phones. It’s also convenient for them since they can quickly send back a text response without taking the time out of their day to call back.
- Emails
Email is useful to remind your customers that their debt is due. It’s also a great way to let them know that you’re ready to help them with their situation. Many creditors use direct pay links in their emails, allowing the debtors to instantly repay with a click of a button.
Traditional Outreach
Apart from these digital communication modes, there are also a few traditional means that many creditors have been using for the past decades.
- Letters
Postal letters are typically sent to the address of the debtors, reminding them about upcoming or past dues. Letters may also include terms about the repayments or ways to negotiate the payments. Some creditors may also use letters to send out official notices about the consequences they may face if the debt goes unpaid.
- Direct Phone Calls
Direct phone calls allow you to speak with your customer directly and resolve issues immediately. However, many debtors use live screening options for incoming calls, which means there are high chances that the calls may get ignored.
You may want to consider using live chat or text messaging first before making direct phone calls because it allows you an opportunity to reach out in a more personal way without having them ignore your call altogether.
In the worst case that a debtor has disappeared to avoid paying the debts, collection agencies use skip tracing to find the debtor’s information using public records. After getting access to the phone number and the address, creditors use any of the above methods to initiate contact.
Which Debt Collection Methods Have the Best Resolution Rates?
While there are many ways to reach out and collect debts, we can broadly categorize them into digital and traditional means based on the response and resolution rates.
According to a McKinsey report, when creditors use the digital-first approach, they are 12% more likely to receive a payment in early delinquency and 30% more likely in late delinquency. Similarly, the percentage of customers who repay in total doubles through digital communication.
However, 66% of the initiated communications from the creditors are through traditional means, even when they have been proven to be less effective than digital methods.
In fact, only 48% of the phone calls have resulted in particular or full payments compared to 47% of the debtors taking no action. On the other hand, 77% of the debtors repaid either partially or fully when connected through text messages, while only 23% took no action. More such digital communication methods like mobile app pop-ups and mobile push notifications and online banking notifications have proven to be more effective than traditional means in encouraging a repayment.
With people preferring to be contacted over emails, texts and other digital means rather than phone calls for debt reminders and collections, it’s high time for creditors to embrace the digital technologies.
At Capital Recovery, we rely heavily on the IVR, automated voice messages, AI chatbots and text messages to initiate the first line of communication to answer questions and negotiate payments. We then follow it up with direct calls with agents if the customer chooses to. This has helped us reach a high debt recovery rate of around 25%, which is more than twice the average debt recovery success in the country.
Want to know more about how we can help recover your debts? Reach out to our team today.