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 used to 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 and context-sensitive collections
The technological possibilities for collections strategy optimisation are becoming more evident with next-generation digital systems that have progressed from the initial payment portal model to sophisticated context-sensitive applications that create accurate and appropriate treatment paths for each customer.
For example, no business wants valuable customers with a high propensity to pay categorised and processed in a way that effectively treats them like a non-payer. Previously this may have been the unintended consequence of early allocation to a DCA. Today, as DCAs prove to be enthusiastic adopters of digital collection technology with its enhanced segmentation capabilities, this outcome is becoming less likely.
Ultimately the goal is 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 complaints or poor publicity where 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. Choosing a reputable DCA with skills that match the ethical approach of an organisation as well as the sector, type of debt and demographics can make a real difference at any stage including harder to collect debt. As debt collection becomes a digital-first operation collections teams can make full use of individualisation and context-sensitive strategisation to ensure that however the debt is collected, efficiency and revenue are both optimised.
When 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 and regulatory requirements. 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.