Who knows, maybe the final goal of digital collections is to replace traditional contact methods like phone calls and text messages completely. But to make the collection process more efficient, you, as a collector, need to prioritize accounts wisely. By ‘wisely’ we mean careful analytics and strategy planning, which will allow you to know who to lend — and collect from them successfully afterward.
But how can you plan your moves without properly prioritizing accounts? Without prioritization, you won’t know whom — and, most importantly, when — to contact so that your debt reminders won’t be a ‘puff.’
Account prioritization is particularly important in early debt collections when you contact the consumer for the first time. But it doesn’t mean you should neglect it then! Now, we will tell you what makes for a good communication strategy in debt collections, with tips on how to build up the one flexible enough to change and adjust in the process.
Risk-based Account Segmentation
A good starting point for early collections is to define and separate cases that require special treatment. It’s recommended to prioritize accounts based on one or a few data attributes. These ‘special’ cases are the ones that are related to defrauders, defaulters, and customers whose contact data is invalid.
What to do with the rest of the accounts? Segment those by days past due, or arrears bucket, balance, and level of risk. Most likely, you will have a ‘tree’ hierarchy like this one:
How often to evaluate that segmentation depends on your process’ specifics; you can do it daily, on each of the pre-defined cycles, upon account balance changes, or when payment agreements are fulfilled or, otherwise, broken.
A risk-based approach to account segmentation allows you to single out non-standard accounts among all the others and tailor their treatment, so don’t neglect it.
Workflows that Define Customer Experience
Based on the segments you defined and their risk, now, you can adjust your workflows to each by varying the timing of communication, communication channel, and tonality. For example, you can start reminding a consumer of debt with a text message on day 2, then follow up with a call on day 8, and then come back on day 15 with a letter.
And speaking of buckets. If you used to contact consumers through phone calls (at least, at first), then consider prioritizing calls for the ones that are 61–90 days past due or even more. At the same time, automated emails should be sent to accounts at much earlier past-due stages. Make sure you contact all buckets rather than contacting one of them while not contacting others.
Alternative Way to Prioritize Collection Calls
The risk factor is not the only determinant that allows you to prioritize accounts. Besides that, you can rank your customers in the following way:
You can use this method of prioritization together with aging buckets, and you will know which accounts to contact first. For example, Rank D customers at 90+ days past due age bucket should be followed up with a call before the Rank C customers from the same bucket.
Now you know how to effectively prioritize accounts. Maybe you even started to build long-lasting relations with the consumer. But what if the consumer doesn’t feel well about the terms you offered? What’s next, then? How to keep these relations and still collect without resorting to legal action? We have a solution that will help you get these questions out of your head.
Paydit Case Study: Loan Modification
Digital collections don’t stop at early ones. Understanding this, we at Paydit created an eponymous debt collection solution that brings together such aspects as early collections and pre-delinquency and forbearance treatment through loan modifications.
In traditional collection practices, consumers that claim hardship and need forbearance can receive it only if you understand the nature of the issue and evaluate the financial capacity of the claimants. However, verbal discussions only take your time and operational efforts.
With Paydit, the consumer has full flexibility in choosing how to repay their debt. Initially, the system provides them with a set of pre-calculated payment plans based on their credit score and credibility indicators. Through a convenient system interface, they can agree with a collector to pay the debt in full at once or handle payments in an agreed number of installments.
However, if the customer feels like the provided options are beyond their budget, they can try to negotiate to pay less. The system will offer payment plans to pay a percentage of the amount they owe which can be accepted by the consumer or renegotiated again until the agreement is reached.
Collectors can also use Paydit on all stages of delinquency by negotiating payment plans for a portion of the past-due amount or creating their own flexible payment plans based on the consumer’s financial capabilities and schedule.
and you will see how it facilitates your collections!