Financial institutions must prioritise one thing above all else: agility.
The pace of change is rapidly accelerating year on year. The Covid-19 pandemic brought about two years’ worth of digital transformation in just two months. How consumers behaved, and what they expected from their financial institutions, changed almost overnight. Only the most agile of financial institutions can hope to keep up moving forward, adapting and refining their operations to meet consumers’ evolving requirements.
Consider the following statistics:
- According to the PwC Pulse Survey: Executive views on business in 2022, 56% of executives say that increasing agility to better operate in a turbulent business environment is very important to them.
- McKinsey research has found that: “Highly successful agile transformations typically delivered around 30 percent gains in efficiency, customer satisfaction, employee engagement, and operational performance; made the organization five to ten times faster; and turbocharged innovation.”
- What’s more, 65% of companies that had “highly successful transformations” reported that this newfound agility had a significant impact on their financial performance.
This blog will examine how collections teams in particular can stay agile. We’ll delve into the 6 top practices that they must follow, outlining the tools that will help them along the way—and the results they can expect if they get their approach right.
1. Adopt an Experimental Mindset
Agile organisations don’t just expect the unexpected—they welcome it.
Collections teams therefore need to adopt an experimental mindset if they want to keep up with the times. No strategies will last forever. What worked last year might not work this year. With this in mind, collections agents need to continually re-examine how their consumers are behaving before refining their dunning approach accordingly.
Think about self-service, for example. 10 years ago, most past-due customers would happily call up an agent to sort out their repayments. After all, this was what everybody did. Nowadays, however, many past-due customers won’t even engage in the dunning process if they have to deal with another person. They want to be in charge themselves—they want to be able to self-cure their debts.
By providing self-service options, collections departments can adapt their own ways of working around changing consumer behaviours. This will help them boost their repayment rates while also providing a superior customer experience.
2. Get everyone on the same page
Agile collections departments need to move as one. Heads of collections must ensure that all agents are on the same page—that they can all access the same key insights and follow department-wide best practises. Otherwise, you might have different members using different outreach strategies. This will result in a disjointed, confusing customer experience—which could negatively impact repayment rates and your brand’s reputation.
Collections departments must therefore implement all-in-one collections management systems with advanced data-driven dashboards and individualised case management capabilities. These dashboards will reveal everything about customers’ payment history and their interaction with collections agents. Collections employees and heads of collections will therefore be able to examine overall collections performance by simply logging into their collections management system.
Using this single source of truth, heads of collections and collections agents can work together more effectively. They can create unified, department-wide strategies according to the last data and insights that they have gathered.
3. Keep pace with financial trends and disruptions
Financial services don’t exist in a vacuum. Instead, they evolve due to wider societal trends and pressures. New technologies influence how consumers behave, which then impact how they engage in the dunning process. As a result, financial institutions must keep pace with large-scale trends and disruptions that will eventually impact the collections sector.
Think about the rise of smartphones. Suddenly, consumers can be contacted at all times, no matter where they are in the world. They’ve always got their phones on them—so they are always accessible. Rather than sending letters through the door (that may never even be opened and are impossible to track), collections departments should adapt their dunning approach.
Now, leading departments are using omnichannel tools to send out SMS messages, emails, or social media messages to past-due customers. These messages can be read, and responded to, at all times on a user’s smartphone—making it easier for consumers to engage in the dunning process. This digital approach also empowers financial organisations to track customers’ behaviours, and to develop new debt recovery strategies accordingly.
4. Embrace change
Financial institutions can often be scared to overhaul their existing legacy systems as they’re worried about how long a new system would take—and would cost—to implement. This means that they sacrifice short-term convenience for long-term gains. By persisting with inefficient legacy systems, they continue to serve up disappointing dunning experiences that produce subpar results.
Agile institutions that embrace change, however, gladly implement innovative solutions to update their system and improve their debt recovery efficiency and effectiveness. This helps them unlock greater results with ease—and provides them with a genuine competitive advantage.
5. Have visibility into your customers’ behaviour
Creating the perfect dunning strategy is no easy task. Every customer segment responds to different messaging, on different channels, at different times. Therefore, the best collections tools should provide recovery teams with visibility into their customers’ behaviour.
Agents need to track whether customers ever engaged with their dunning processes. By sending digital messages that direct consumers towards online payment landing pages, you can check your customers’ open rate, clickthrough rate, payment attempt rate and payment success rate.
These insights will help you understand which messaging templates are working (and which aren’t) for which segment. You can also clearly see if customers are running into technical problems when trying to repay their debts online—for instance, if your payment attempt rate is higher than your payment success rate.
With this data, you can then work to create the ideal strategy for each segment, refining and tweaking your approach on an ongoing basis.
6. Invest in the right collection management software
The five best practices outlined above are only possible provided collections departments invest in the right collections management software. Cloud-native collections management software offers collections teams all-in-one dashboards, easy-to-use content builders and AI and ML-based dunning optimisation.
The results speak for themselves. Since implementing receeve’s all-in-one collections and recovery software, Pactum GmbH achieved a:
- 15.1% increase in cash collection efficiency;
- 68% decrease in outbound calls;
- 9.1% increase in 7 DPD customers’ payback.
Make 2022 the year of collections agility
No one knows what will happen in 2022, but one thing’s for certain: change is coming.
Collections departments need to put themselves in the best possible position to react to consumer changes. By implementing cloud-first collections management software, they can make their entire department as agile as possible. They will be able to access key data-driven insights into how consumers are behaving—and will be able to adapt their collections approach accordingly.