Five Reasons Digital Approach to Debt Recovery is the Most Cost-Effective Solution

In my recent blog posts, I spoke about the importance of a holistic approach to the debt recovery process and building a resilient debt collection ecosystem. I pointed out how embracing digital solutions is pivotal in providing a holistic customer experience and strengthening the resilience of lenders. In this piece, I will delve into another valuable aspect of the digital approach: its cost-effectiveness.

Household and business indebtedness are on the rise. Government assistance introduced during the COVID-19 pandemic has been withdrawn, but individuals and companies still feel many problems it aimed to tackle. Layoffs, loss of income, and inflation have led to a drop in consumer spending. To stay afloat, households that struggle financially turn to lenders. Companies are equally affected by existing debt that continues to grow, facing a risk of insolvencies and defaults and dealing with higher financial leverage that contributes to a reduction in investment and job creation, especially in the European region. 

However, it’s not just gloom and doom for lenders—Teleperformance’s debt recovery strategy is cost-effective while accommodating your customers at their most vulnerable times. We can change our debt recovery strategy to make it cost-effective while at the same time accommodating individual and business customers at their most vulnerable times. Let me show you a few of the reasons why the digital approach works, focusing on elements that bring cost-saving results and are indispensable in expediting debt recovery: communication, segmentation, insights, automation, and customer DIY.

1. Seamless Communication

One of the main pain points experienced by lenders and borrowers is broken communication. Companies can no longer afford to manually review vast amounts of data and execute their collection strategy one channel at a time. With customers moving to multiple digital channels, companies must find more efficient ways of engaging their customers in a conversation that reduces the number of calls and increases the probability of successful interactions. The solution here is the omnichannel collection strategy that proved to be more effective by engaging borrowers on their preferred communication channels. But to do that, you must first find out which channels your customers favor.

2. Accurate Segmentation

AI-driven platforms segment customers into different personas based on their propensity-to-pay and connect percentage (reachability). They also deliver omnichannel segmentation-based collection models and strategies. Its primary objective is to drive cost savings and revenue generation by determining the most effective contact method tailored to specific customer segments. The result not only provides better recovery rates, but also improves overall customer loyalty.

In one example, Teleperformance segmented customers into different personas based on their propensity-to-pay and reachability for a banking and financial services company headquartered in Mumbai. The results were substantial, with collection rates improving by 10%.

3. Actionable Insights 

For the debt recovery strategy to be successful in a digital world, it must be purposeful and data-driven. Advanced tools that use the latest interaction analytics technology can analyze data from multiple channels, such as calls, emails, and surveys to provide insights on risk and compliance, customer experience, performance management, and collections efficiency and effectiveness. 

Insights-driven solutions proved to work particularly well for cash collections. In one instance, a utility company based in the UK increased its cash collection by 54% by analyzing ingested voice calls to identify causal factors leading to a low collection rate.

4. Automation 

The rapid shift towards digital channels requires a sharper focus on automation. Powered by AI, conversational platforms allow lenders to automate conversations and initiate workflows without agent intervention. When customer support is needed, it equips the agents with intelligence to make the interaction successful. In essence, automation, AI, and other emerging technologies improve communication, work allocation, processes, and cost efficiencies. 

For one U.S. retail lender, automation enabled managing ~1.4M dispositions per month while increasing online payment conversion from 16% to 29% and reducing unpaid balances by 33%.

5. DIY - Empower Your Customers 

Digital innovation is vital to a customer-centric approach to debt recovery. It gives customers more options to solve problems and, as with AI-driven tools like voice bots, provides 24/7 opportunities to solve queries independently without human assistance. DIY options enabled by new technologies can make your customer experience operations much more efficient, saving lenders and borrowers time and money. 

While a digital approach to debt recovery can cut your costs substantially and increase your revenue, implementing it in-house requires considerable investment. Finding an expert partner is usually the best solution to create savings and enhance profits, allowing you to grow your business and not strain the handling of any unpaid monies owed – an experienced, knowledgeable, and agile partner can adapt operating models to ensure customer engagement and will already have the advanced technology and processes to sustain a resilient debt recovery ecosystem. Lastly, with experience in multiple markets, the right partner will know how to make interactions with distressed customers across different cultures meaningful. 

Digital strategies benefit all parties involved, and our job as debt collectors is to resolve the consumers’ issues in the fastest, most efficient, and professional manner possible.

Contact Teleperformance today to learn more about our collections services.