Operational decisions have to be made on more than a wish. Resources are always working at full stretch and costs have to be controlled. Resolving arrears in-house can mean a large workforce on the phones, doing everything from taking payments and negotiating arrangements to talking through simple problems or registering a disclosure of vulnerable circumstances.
“I think the traditional DCA model is under real pressure”
Digital-first collections is changing this relationship. By serving more customers with a light touch digital approach early in the process, the cost and return on in-house collections can align more favourably. Meanwhile, priority calls can be answered more quickly and resolved without the time pressures that existed pre-digital.
Maximising lighter touch collections
The technological possibilities are many and only just beginning to be exploited fully. For example, no one wants valuable customers with a high propensity to pay categorised and processed in a way that effectively treats them like a non-payer. This may include an early allocation to a DCA. From the customer’s point of view, it can be disorientating and worrying if a third party takes over your debt before you feel that you’ve had time to pay or come to an arrangement. This can have a detrimental effect both in terms of customer opinion and on their willingness to engage voluntarily if they default again.
Ultimately the goal has to be to that each customer is treated as a “segment of one” according to their situation and their needs. This means looking to emerging technologies like machine learning that can provide detail such as propensity to pay and sentiment detection and ensure the most appropriate strategy for each individual.
Reputation, reputation, reputation
With the collections process under scrutiny and likely to face legislation around language and wording in communications, it makes sense in both financial and reputational terms, to maximise early collections rather than retrospectively manage customers who feel they have been handled too heavily.
Organisations who are known for an empathetic and flexible response to debt can cultivate early intervention as the norm. Using a digital approach backed up by an internal collections team instilled with the company ethos, acting sensitively and ethically can make collections an asset to the business. With the arrival of digital technology, this is now an achievable and attractive proposition.
A study showed half of customers in arrears don’t feel valued. Being directed to the best treatment option can help rebuild trust and confidence.
Refining the partnership with DCAs
“I don’t refer to them as DCAs any more, they’re more collections partners”
By allocating the most appropriate cases to a DCA, their role becomes more valuable and more cost-effective. At the right stage, choosing a reputable DCA with skills that match the sector, type of debt or demographic can make a real difference to harder to collect debt. So, as debt collection becomes a digital-first operation, the balance between lender and DCA will alter. When the most cost-effective digital and in-house channels have been explored and exhausted, then the expertise and persistence of a good DCA is invaluable and appropriate.
One of the wider benefits of moving to digital collections can be to change the perception of what it means to be in debt and how you expect to be treated. This change is already underway but the ability to collect efficiently and at a reasonable cost can be hampered by legacy systems and processes that aren’t agile enough to suit today’s business requirements. This slack was traditionally taken up through increased contact centre capacity and outsourcing volumes to a DCA, leading to accelerating cost and disappointing customer satisfaction scores. There will always be parts of the collections process that are labour intensive and more costly but an intelligently optimised treatment strategy and a light touch self-service for early collections means lenders and DCAs can spend the time and money where it really matters.