Guest blogger and North America Payments Senior Principal, Dan Kreis, looks at the impact that a new generation of consumers and technologies will have on delinquent debt collections.
Everything we know about collections is about to be challenged and reinvented. The magnitude of the shift can be observed through three key lenses: strategy, analytics and operations, as shown in Figure 1.
Figure 1. Key collections migrations
What is driving the change?
Unlike prior evolutions, the new age of collections is not being ushered in by economic downturn, runaway lending or regulatory fluctuation. It is being beckoned, primarily, by two phenomena: digital revolution and Millennials.
At present, collections managers listen in on live or recorded collections calls to assess whether agents are performing adequately and inform potential corrective action. Such manual call monitoring practices are prohibitively time-consuming at scale. In practice, this means some 90+ percent of calls go unmonitored, leaving management largely in the dark as to their customers’ experience.
Growing ever-cheaper and faster, voice transcription technology could monitor and collect data from every inbound or outbound customer call, for example. Detection of certain keywords, such as “bankruptcy” or “illness”, and customer tone could drive tailored treatment strategies in real time.
The number of Millennials in the US will soon pass that of the Baby Boomers, becoming our largest generation. This group of young adults is dramatically different than their predecessors:
- Few have landline telephones
- Texting is their preferred mode of communication
- Many will not answer calls from unknown caller IDs
- Many have never activated or checked their voicemail
Moreover, it is critical to understand that Millennials are not only our customers, but our collectors as well. Having collectors who may be equally as unreceptive to conducting cold calls as customers are to answering them will require lenders to define new tactics to effectively collect in this new age.
What do strategies look like in the ‘New’?
Consider a hypothetical queue of delinquent customers whose accounts are two cycles past due. In the old-world order, an adaptive control strategy may have looked something like the scenario in Figure 2.
Figure 2. Illustrative Old-World Collections Strategy
Note that in the old-world order, past-due customers with similar data profiles and dollars-at-risk are treated the same.
In the “New”, the collection strategy builds upon what we have learned over the years—and augments the treatment in real-time based on sentiment, keyword recognition and additional information as shown in Figure 3.
Figure 3: Potential New-Age Strategy
Under the potential new-age strategy, the treatment approach is tailored by incorporating sentiment, keywords and other alternative data. Barry, for example, is not assigned to an auto-dialing queue as his keyword indicator is “bankruptcy”, which suggests a different approach (a top reason people give for filing bankruptcy is to “stop the numerous collections calls”). Instead, Barry may be most responsive to push notifications or texting, given his activity on social media. For Jill, more traditional methods may be effective considering her concerned nature and lack of social media activity.
The new-age approach greatly expands on the collections strategy design to include advanced machine learning beyond that of the traditional champion-challenger testing capabilities in the adaptive control decision engine. Not only will there be dramatically more treatments, but the results will be captured more rapidly using intracycle behaviors and payments. We also imagine the use of real-time sentiment and word recognition to inform the collections approach and negotiations with the delinquent customer.
To remain competitive, debt collectors will need to understand the implications of today’s changes for their business, develop a plan to adapt and dedicate the resources required to execute successfully. Accenture is leading the industry into this exciting new era, bringing to bear our experience in advanced Machine Learning, Robotics and deep understanding of the collections and behavior sciences.
I invite you to learn more about the data imperative and its potential.
Dan Kreis, Senior Principal, Payments
The reason I spend so much time reading on this blog is to get an idea different from the ones I’ve had myself. Thanks for sharing! I’ve learned a lot.