No matter where they're located, collections managers generally face the same challenges. In recent online polls taken during a series of FICO webinars in North America, the biggest priorities for collections heads were:
- Nearly two-thirds of respondents were focused on driving innovation in early-stage collections or across the entire lifecycle.
- More than 50 percent of respondents felt that technology was the area they needed to improve on the most.
- The next most important area was process – getting the right strategy.
- Many felt that collectors don’t have the right level of customer insight to help enhance staff, dialer and strategy performance.
These same issues arose during a recent webinar we held in Asia. The webinar focused on how collections heads could manage these issues and improve collections results in a relatively short timeframe. We discussed:
- Predictive analytics for collections – i.e., collection scores. Collection scores can be configured to meet the objectives of the business. Typically they are built to predict which accounts are likely to self-cure, roll from bucket 1 to bucket 3, or roll from bucket 3 to charge-off, and/or to calculate the expected collection amount (ECA) for accounts already defined as bad. Knowing these predictions helps determine which accounts to focus on – who to contact, when to contact – and also which accounts not to focus on because they are likely to self-cure. Our studies have shown a 3 to 1 return on investment for organizations implementing collection scores – for every $1 spent, there is a return of $3.
- Advanced analytics and optimization for early-stage collections. Early-stage collection optimization helps answer problems such as determining the best collections treatment that maximizes repayment whilst minimizing attrition and costs. It uses action-effect modeling to combine data, predictions, decisions, constraints and objectives, and predict the optimal result. The outcome of such advanced modeling can be as simple as a decision tree that can be implemented in a client's automated decision platform, ensuring the results are easy to action.
- Improving customer dialogue and using self-service tools. With the explosion in smart-phone use, customers are becoming more sophisticated, and expect convenience and ease of use when making repayments. Best practice is to use two-way SMS messages to remind customers that a payment is due, and enable them to authorize that payment along with web-portals that enable customers to setup promise-to-pays or installment plans themselves. This has been shown to not only improve kept promise rates and collection amounts, but also have a marked impact on customer satisfaction.
- Preconfigured collection strategies and workflows that can implemented very quickly – typically in less than six months. This option may not be viable for all organizations, but for those that are able, it enables collections departments to implement faster, reduce deployment costs, utilize best-practice strategies and workflows, and gain rapid ROI.
Finally, perhaps the quickest way to improve collections and gain fast ROI is to use best-practice consultants. Consultants with global experience gained over many years can review the organization's existing strategies and operational practices, quickly understand the business pains and objectives, and then determine the best way forward. Consultants can deliver clear, actionable feedback and recommendations, and build a roadmap of short-term and longer-term initiatives, with associated expected results.