Debt collection challenges point towards technology enhancement.

We started having conversations with our customers in the collections space as to what challenges they face and what their expectations are.

We had deep conversations with three of them, and I'd like to take a moment to thank them.

These challenges came out as a part of our conversations:

1. Collect overdue with as minimal a dent as possible on customer experience, brand value, and compliance
2. Contactability of debtors itself is a challenge, especially with the debts becoming dated
3. Segregate debtors into buckets - wilful defaulters and people with temporary cashflow issues. This is happening sporadically. 
4. Integration with multiple payment channels to make digital payments easier and more manageable. This is at a nascent stage.
5. The usage of voice BOTs hasn't become mainstream. This would help in collecting low-value payments quickly.
6. The ideal cost of collection that every collection agency aims for is about 1%. However, it always crosses 4 to 5%, discounting the right-offs.
7. The collection agents that you send for large value payments will have to be DRA-certified
8. Regulations that stop us from calling any debtors before 8 am and after 7 pm, and the number of times you can try contacting them, whether or not they pick up your calls
9. Any minor infraction in customer experience gets escalated to the highest rung in our organization due to social media tagging
10. Banks gross NPAs dropped to a 7-year low of 5% in September 2022. This is a tough number to maintain as the number of low-value credits, EMI credits, and buy-now-pay-later schemes are launched.

Given these challenges, banks, NBFCs, and financial institutions will have to juggle the options available to realize the debts, primarily the late-stage debts.

The more the age of the debt, the riskier it becomes as a right-off candidate.

How do you go about realizing your debts?

Most agencies are leveraging technology to send reminders to people of their loans and quick ways to make payments.

Most debts get realized due to this.

Let me give you some examples.

No. 1

I pay a monthly bill of 499 rupees to my mobile service provider. Earlier, I used to set an alert so that I remember to pay this every month before the due date. Sometimes, when I travel, I miss paying it, and then they add a fine, which I pay the subsequent month.

Now, with auto-debit, I don't have to set an alert, and the money gets automatically debited from my account on the date it is due.

For regular payments, do sign up a mandate with the customer for auto-debit, as it becomes easier for both the lender and the customer.

This would always work for low-value payments

No. 2

For auto-debit of high-value payments, what do you do?

Let us assume that someone pays you 50K monthly towards their home loan, which gets debited from their account on the 10th of every month. You send them a reminder on the 7th asking them to ensure their account is sufficiently funded to honor the debit.

No. 3

Your customer has missed making the payment on the due date. You don't have to jump the gun and make calls or send your collection executives to their place as a first step.

Try sending them voice broadcast messages, SMS, and WhatsApp texts reminding them of the payment overdue, and provide them with the option to make the payment online.

Most people would pay immediately, and a few would pay in the next few hours or days.

Those who still don't make the payment can be called as a follow-up.

How have we helped collection agencies?

We, as an organization, have helped 100s of collection agencies worldwide. We have delivered the following improvements to our existing customers.

1. Increase 'right party' contacts by 288%
2. Increase agent talk time by 169%
3. Increase answering machine detection by 45%
4. Ready/idle time reduction by 43%
5. FTE (full-time employee) reduction by 44%

There are no standard or acceptable default rates, which vary based on the ticket sizes and portfolio. The idea is to keep them near zero as much as possible.

The underlying fact is nobody wants to be on the wrong side of the law. People borrow with the good intentions of repaying them on time.

So, collections as an industry would move towards the digital infrastructure, and small reminders and nudges would go a long way in ensuring collections without compromising on the customer experience.

Besides, the credit bureau has become very robust, and any non-repayment will affect the customers' chances of availing credit for any reason later.

We are participating in the collections and recovery summit at the President Hotel in Mumbai on the 23rd and 24th of February, 2023. We are giving two keynotes during this event, besides being a part of the panel and having a booth there.

I'd like to see you there.

If you are interested in attending, let me know, and we shall arrange for you to visit us during these two days.