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How Was Your Digital Collections Experience in 2020?

At the risk of stating the obvious, we can likely all agree that the pandemic has significantly accelerated the adoption of online and mobile banking. However, that doesn’t mean that this acceleration has been evenly distributed across every company in the financial services industry, nor across every part of an individual financial institution.  One area that is often left behind in digital transformation initiatives, but that has also been a focus over the last year due to uncertain economic conditions is collections.

Without such investments, organizations continue with their favored channels for contacting delinquent customers, phone, letter, and voice mail.  Conversely, the channels that lenders use less often, email, text messaging, and chat are the most favored by customers today and yield the best results. 

How would you rate yourself when it comes to your collections transformation? What investments in your platform, data orchestration, analytics, human capital, UX design, etc., etc., were made in 2020 in order to create a robust digital collections experience?

Did the economic uncertainties at the early stages of the pandemic cause you go out and internally hire teams of collection agents or give the green light to your 1st or 3rd parties to do the same?  Are you now trying to figure out where to redeploy these resources now that you have excess capacity or mistiming of resource build up and operationally your metrics don’t support your current staffing levels?

If you’re wondering if you’re alone in this predicament, the answer is “NO.”

So, now what? We learn, adapt, and make the needed investments to better position ourselves for the next event that we can be assured are to come. Regardless of what stage you’re at in your digital capabilities journey (if you even have started), here were a few collections curveballs we saw the pandemic throw at the industry.

1. Capturing RFD -  “Reason for Deferral”

Call it forbearance, deferral, skip-a-pay, payment holiday, etc., there was a material increase in the number of customers that took advantage of these programs; some out of convenience, while others were directly or indirectly impacted by Covid-19.  With the speed at which banks and financial institutions made these programs available, many failed to capture the “WHY”. Capturing this information and applying risk analytics would allow you to assess the overall customer risk, track transactional behaviors, and better identify the customers who will be in need of continued assistance in the months to come.

2. Keeping an Active Dialogue

For those customers who took advantage of a deferral, how well did you communicate the terms of the transaction and more importantly, was there an open and continuous line of communication?  Did you send them reminders of when their next payment was due, the amount that was coming due or invite them to have a discussion if there were changes to their financial situation that would cause them to be unable to make that next payment.

3. Look at the Data

Did you access your customers primary checking account data or their external accounts through a financial data aggregator  (Plaid, Yodlee, Decision Logic, etc.)? Did you become obsessed with looking at the stories this data was telling? The answer should be a resounding “YES”.  Within weeks of the pandemic you would have observed changes to the source of income (salary vs. unemployment), size of deposit, average balance, transactional behavior, whether or not someone  received a stimulus check and what they did with it – all of this was at your fingertips. This data was critical to tracking your customers ability to pay and real time affordability that traditional credit scores are unable to capture.

4. Creating New Solutions

There will remain a segment of consumers who will continue to be financially challenged and in need of new types of workout plans. Do you have new tools in your toolbox? Automating the data collection through your digital channel(s) and selection criteria that will improve customer engagement can increase customer satisfaction and provide auditable consistent decision making. 

5. Eliminate Outbound Calling

With the stay-at-home mandates did you see a material shift in your right party contacts? Consumers are busier  then even balancing work from home, remote schooling, lack of daycare, keeping the family entertained, etc. If you are committed to having a robust digital collections strategy then be brave and set the vision of eliminating outbound calling.  Will you be able to eliminate outbound calling all together? “No”, but its effectiveness will be surpassed by customer self-service, chat and other digital capabilities.  For customers who prefer live agents, allowing them the flexibility to schedule call backs will improve account resolution and customer experience

Does anything above strike a chord? Do you feel you’re on the right track? If not, it’s never too late to course correct.  FICO Advisors are always here to help, reach out to JaimeGuzman@FICO.com.

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