The debt collection industry has undergone a seismic shift in recent years. A decade or two ago, companies largely outsourced their collections operations to debt collection agencies (DCAs). But the emergence of collections software has changed how businesses collect their debts. Companies can now use software to handle this process themselves, increasing efficiency and repayment rates while minimising manual effort and errors.
Consider the following statistics:
- According to TransUnion, 79% of companies have already implemented collections management software.
- 69% of collections teams plan on increasing their company’s spending on technology going forward.
- Indeed, the global collections management software market is expected to be worth $2.3BN by 2027.
In this blog post we'll the 5 key areas you need to consider before purchasing a collections solution.
5 areas to consider before buying a collections software
1. Tangible and intangible value
Businesses might hesitate to implement collections management software due to the upfront cost. However, the best collections management software provides a healthy return on investment (ROI). This is split into tangible and intangible value.
Tangible value refers to the following: a reduction in your days sales outstanding (DSO) and outbound calls, and an increase in repayment rates (RR), right party contacts (RPC), and profit per account (PPA). By analysing the changes in these tangible metrics, collections teams can clearly identify their collections software’s precise value.
But that’s not all.
Collections management software also provides slightly more intangible, but still beneficial, value—though this is harder to measure. For instance, collections employees that use effective debt management software will be better equipped to handle all stages of the collections process. They can dive into the data, segment customers according to their behaviour, devise dunning strategies, and send/modify their approach on an ongoing basis with the help of artificial intelligence (AI). Therefore, they will be less reliant on support from other departments (like the IT team) during dunning operations.
Collections software increases both productivity and results. Collections agents will not have to make endless calls to embarrassed or angry customers, which will enhance their employee experience. Likewise, your customers’ experience will also improve. No longer will past-due customers have to deal with debt collection employees or speak to external third parties when resolving their debts. Instead, they will be contacted on their preferred channels, using their preferred messaging, at their preferred time. Better still, they can repay their debts themselves via a self-service repayment landing page.
2. Adaptability and implementation
Implementing a new tool can be a tricky and time-consuming process. However, that doesn’t mean you should continue using outdated legacy solutions simply because you are afraid to overhaul your existing systems.
Too many financial institutions persist in using legacy systems first created over 30 years ago. These tools are slow, unreliable, inefficient, and vulnerable to cyber-attacks. Hence, PwC believes financial organisations can only succeed in this increasingly digitised landscape by replacing their legacy systems as soon as possible.
Only, there is a problem. Financial institutions are usually scared to implement new solutions because vendors often require them to completely revamp their existing operational systems, which is time-consuming and an unwelcome distraction. Worse still, it significantly delays the time-to-value.
Organisations must instead implement cloud-native software with user-friendly plug-and-play capabilities, drastically reducing the implementation time required. The best vendors adapt their solutions to match buyers’ needs, not the other way around.
3. Customer support
You might think that customer support only comes in handy once you run into a problem. However, the best customer support teams are proactive, not just reactive. They provide key assistance throughout the consumer’s lifecycle.
For example, financial institutions should work hand in hand with their software vendors to:
- Properly implement the tool, ensuring it plays nicely with the rest of their tech stack;
- Teach collections employees how to use the tool, providing ongoing support and training as new features are rolled out;
- Provide two-way feedback, offering suggestions as to how the solution can be improved (or even tweaked to their organisation’s individual needs).
By working with software vendors that prioritise customer support, you will create long-lasting and mutually beneficial working relationships.
4. The level of dependency on the IT department
To work efficiently and quickly react to different situations, collections agents should be able to create, send and modify their dunning messages without needing anyone else’s help. Unfortunately, many collections solutions require advanced coding knowledge.
This is a huge issue. First, it reduces the collections team’s productivity and efficiency. They can’t operate at speed as they have to wait until the IT team can help them sort things out. Second, it reduces your organisation's overall productivity as the IT team also needs to put other projects on hold while it supports your collections operations. When you consider that collections teams now use up to 10 different communication channels when contacting customers, the scale of the problem becomes obvious.
That’s why financial institutions need to implement no-code collections management software. These tools empower agents to edit a message’s wording/design, or create new workflows, all by themselves. They can use drag-and-drop functionality to modify the layout of an online payment landing page or create new workflows when necessary. In other words, no-code collections software gives collections employees full control over their dunning operations.
5. Self-service
Nowadays, consumers want to self-serve, handling matters themselves without needing anyone else’s help. 88% of U.S. consumers expect companies to have self-service portals. Currently, 85% of collections organisations offer online repayment portals, making it the third most popular repayment method.
But this means that 15% of companies still lack self-service capabilities. If that’s your financial institution, you need to act fast. Self-service functionality benefits both your organisation and your past-due customers. Consumers can pay back what they owe without needing additional assistance, meaning agents can focus their valuable time and energy on high-risk accounts. From the customer’s perspective, they can avoid the awkward situation of having to discuss their personal finances with a stranger over the telephone.
Now, it’s time to test out your options
The next step is for your team to test out potential collections management software solutions while keeping the five points listed above in mind.
