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It’s Time to Pay – Credit Collections Outsourcing

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By Martin Conboy

Managing credit and collections in-house can be a time consuming and complex task, requiring specialist skills sets and processes. Collections outsourcing offers a more innovative approach to improve the collections process. Without the need to invest in technology, systems and people to manage a non-core activity, it can save organisations an enormous amount of money while improving cash flow.

With the right technology and processes in place allows better credit decisions and improves the efficiency of debt-collection processes. But implementing those systems can be an expensive headache to do it yourself. After all you are not a bank and don’t want to be treated as a source of easy credit.

New channels means new challenges and opportunities

 

The spread of mobile devices, social media, and the advance of Internet technologies have opened up new avenues and challenges for collections.

The growth of mobile and prepaid phones, matched with the diminishing use of residential land lines, has raised new challenges for collectors. Mobile phone users can easily avoid contact by diverting calls to voicemail, or swapping out their phone’s SIM card to get a new number. Also, telco providers regularly recycle numbers to new customers. Creditors must be more careful to verify right-party contact and maintain accurate contact information.

Yet, mobility, supported by the relevant technology and processes, can offer a very automated and scalable means of collections. The quickest and most scalable is sending an automated text or email to a mobile phone. Sending undifferentiated texts to all delinquent customers is far from ideal, however. There’s no visibility to whether these messages were received or even sent to the right number. If you have ever been on the receiving end of these annoying sms messages you would appreciate that its probably better to pay the outstanding account rather than suffer the grating reminders, which can go off anytime, day or night.

Use of data analytics in collections

 

Your collections outsourcer should have the capacity to deliver targeted, customer specific communications. Analytics, business rules and workflows should be established to segment delinquent populations based on credit risk. Leveraging data analytics they can also determine which channels and actions are most likely to be effective based on the customer risk profile and the results of past contacts.

Creditors now have access to more data about their customers. Data analytics allows intelligence to be gleaned from that data showing each customer’s journey from the opening of their account to when they become delinquent. Based on this intelligence creditors can assess the best contact strategy for each customer at a certain point in time.

Over the past decade, technological, social and economic changes have had a profound impact on collections and recovery operations. Organisations need to adapt to one or more of these developments:

  • The prevelance of mobile phones increasing competition in the race for payment share
  • Complex, changing regulations
  • The impact of social media
  • Evolutions in consumer attitudes toward debt
  • Rising consumer use of the Internet for financial transactions
 

To address these issues and reduce costs, credit collections outsourcing has been seen as the way to increase efficiency. Whilst relationships with outsourcers and clients continue to develop, clients’ expectations of the relationship are also growing, looking for additional ways to create more value and drive the effectiveness of their business

The expectation is now towards innovation and greater collaboration with access to specialist tools and expertise; with these expectations the cost to the outsourcer is on the rise.

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October 15, 2014
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