Collections & Recovery Three Ways to Use Collections to “Save the Win”

Apr082019

In my last blog post, I discussed the importance of learning from your ‘at-bats’ — analyzing every interaction with your customers and using those insights to become a bit better next time at understanding their needs and delivering on your brand promise to them.

In this blog post, I’ll keep the baseball analogy but change my perspective from hitting to pitching, and from customer management to collections. Let’s look at the crucial difference between a win and a save.

In baseball, the pitcher responsible for building his team’s lead usually records the ‘win’. However, when that win is in jeopardy, a team will bring in a relief pitcher to help them hang on to it. If that relief pitcher is successful, they record the ‘save’. Because relievers don’t record wins and tend to pitch fewer innings overall, they have historically been paid less and received less acclaim than starters.

That description should sound familiar to collections executives at banks — no fanfare, very few resources, brought in at the end of the process to save a situation that has gone bad. And much like a baseball team’s bullpen, collections departments are critical to the success of their organizations.

Beyond the obviously important function of retrieving money from customers who are late on their payments, collections departments play a vital role in protecting and strengthening banks’ relationships with their customers and providing essential insights into customer behavior and broader market conditions to the rest of the institution.

Three Areas of Excellence for Collections

Indeed, I’ve found that the banks that see the best return on their customer acquisition investments tend to be the ones that have also invested appropriately in their collections capabilities. These market leaders usually excel in the same key areas:

  1. Leveraging analytics to drive segmentation. Some customers can be kept on track with a well-timed pre-delinquency reminder. Some customers will self-cure. Some customers won’t cure, regardless of the treatments they receive. Some customers are profitable enough to justify significant intervention. And some aren’t. Market leaders utilize predictive analytics to divide their customers into granular segments and prescriptive analytics to determine the best treatment strategies for each segment.
  2. Understanding customers’ behaviors and preferences. Collecting debt is a sensitive task. Success hinges on a number of small, but crucial details — tone, timing, frequency, channel. The most effective collectors obsess over these details. They measure everything and they continuously experiment with new strategies in order to fine-tune their approach. Savvy banks will carefully study how their collection departments interact with customers and apply their best practices to the interactions they have across the rest of the customer lifecycle.
  3. Contributing to better risk and fraud decisions. The decisions made in the marketing and origination stages of the lifecycle have an enormous impact on collections. As one collections professional we’ve spoken with noted, “a ripple on the front end is a tidal wave on the back end.” Sophisticated lenders will apply the insights gleaned from collections — which accounts were written off, which accounts required significant resources to cure, which accounts wouldn’t cure because they turned out to be fraudulent — to improve the accuracy of their risk and fraud decisions and thus the effectiveness of their customer acquisition and retention strategies. If collections is thought of as the ‘tail’, then it truly is the ‘tail that wags the dog’, meaning that tracking collections outcomes so that they can be regularly applied to risk and pricing decisions is a crucial best practice.

75 years ago, it was common for starting pitchers to pitch the full game. Relievers were an option that was rarely considered or used. Since then, the game has changed. Today’s teams invest heavily in their bullpens and almost exclusively rely on relief pitchers to close out games.

In banking, a similar transformation is taking place. Leading banks are investing in flexible, analytic-driven debt management capabilities spanning omni-channel customer contact services and adaptive strategy control, on top of a robust collections and recovery platform and integrated with their customer relationship management system.

The skies are blue, it’s spring here in the United States, the start of the baseball season. Is your ‘collections bullpen’ ready to compete effectively?

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