How to Build a Resilient Debt Recovery Ecosystem

How to Build a Resilient Debt Recovery Ecosystem

Nicolas Zavala - 04.01.2024

My previous blog discussed how new digital tools and AI can help lenders create a holistic approach to customer support and debt recovery marked by an empathy-driven customer experience. These innovations yield tangible results in the current unpredictable reality and help companies prepare for the future. 


However, a debt collection ecosystem must embody both innovation and resilience to withstand economic and social challenges. Intuitively, we know what resilience designates, but we need a more thorough understanding of what it means in a business context and how to achieve it. 


In the second part of our trilogy, we will explore how building a resilient debt recovery ecosystem can help companies minimize the ramifications of economic, social, and technological disruptions and secure their financial future in an ever-evolving economic landscape.


Resilience refers to a company's capacity to bounce back from adversity, maintain sustainability, and prosper in new circumstances. Resilience has proven particularly critical during the recent global health crisis, which exposed organizations' vulnerabilities. For lenders, the impact of the COVID-19 pandemic has been felt beyond the final lockdown. 


The aftermath of the pandemic has led to a disrupted economic and social reality. The lending market witnessed significant growth, generating a staggering $18.8 billion in revenue in 2022. However, when governments phased out stimulus packages – particularly in the European region – many individuals and businesses found themselves in dire financial straits. Rising energy and fuel prices, job redundancies, escalating interest rates, and consumer over-commitments have contributed to an increased cost of living, forcing more households to rely on additional credit. Similarly, companies face liquidity issues due to existing debts and growing operational costs. Lenders operating in multiple international markets must additionally tackle unprecedented challenges caused by frequent legislative changes.


This is where resilience becomes paramount. 


A company's capacity to rebound and flourish depends on several critical factors, such as the availability of a skilled workforce, the implementation of efficient processes, and adoption of appropriate technology. 

A Resilient Debt Recovery Ecosystem


When I think about the debt recovery ecosystem, what I have in mind is an interconnected network encompassing employees, technology, processes, and customers within a specific economic and social context. All the elements come together to form an accurate, focused, responsive, and empathetic approach, you are well on your way to establishing a resilient debt recovery ecosystem.


Be Accurate

Being precise and meticulous in your efforts will boost the chances of successful interactions. That's where analytics backed by AI comes into play – it helps with customer segmentation, focusing on those with a higher value at risk. This approach can predict whether customers might default or stay delinquent longer and their likelihood of responding when you contact them.


Here’s an excellent example: a top retail bank that had a tough time dealing with over 150,000 debt recovery cases per month. The bank needed a solid strategy to prioritize customers more likely to pay. With analytics, they segmented customers based on their payment behavior, calculated the probability of them defaulting, and split them into low-risk, medium-risk, and high-risk groups. Therefore, customer segmentation improved overall accuracy, resulting in a lift in revenue and reduced overall chargeoffs.


Stay Focused

Lenders have to deal with vast amounts of data. Manual processes escalate operational costs and make it nearly impossible to sort data for the best possible outcome. But with automation and AI, we’ve got the power to analyze data taken from pre-collection surveys, emails, and calls. Historical data also provides insights into customer behavior, including payer frequency, call times, outreach type, contact times, and contact days. This way, we can direct our debt recovery efforts where they're most likely to get results and use the best agents and technological resources more efficiently.


Voice bots are used to initiate workflows and conversations in different languages. When agents are needed to handle more complex situations, the intelligence gathered by AI-driven analytics equips them with valuable contextual information to make customer interactions successful. 


Be Responsive

Lenders must know where, when, and how to communicate with customers. With digital and analytics capabilities, we can gain valuable insights into customer experiences and enable data analysis from various sources. It allows us to develop omnichannel-segmentation-based collections strategies. 


Understanding and adapting to customers' preferred communication channels enables more seamless and positive interactions. It boosts customer satisfaction, increases the chances of successful debt recovery, and fosters a stronger and more trustworthy relationship between lenders and borrowers. Adopting the best contact methods reduces costs and increases revenue.


Stay Empathetic

Digital and analytics capabilities are crucial in providing transactional insights, helping identify customer affordability and vulnerability. For customers, it means the company considers their channel preferences and receptiveness to contact and recognizes their needs and emotions. As a result, this empathy-driven approach leads to greater outreach, higher levels of engagement, and a higher conversion rate of successful contact. Empathy isn’t driven by a method of contact but by the skilled agent on the other end of the call. It is important to not only have the tools to get the consumer on the phone but to also provide the human touch with highly skilled agents.

 
In light of the current economic and social instability, adopting a high-touch strategy becomes imperative to cater to vulnerable customers while prioritizing fairness and positive customer experiences. Automation and AI technology play a pivotal role in achieving this objective. 


Debt recovery trends are evidently progressing towards perceptive AI-led analytics, hyper-automation, personalized approaches tailored to individual needs, and real-time assistance, all of which support a more empathetic approach towards customers. These advancements enhance the overall customer experience and foster a deeper understanding of their unique circumstances, ultimately contributing to more effective and compassionate debt recovery practices.


Contact Teleperformance today to elevate your debt collections strategies.

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