It is undeniable that the pandemic sent ripples across various industries, including lending and third-party collections. Though delinquency rates on debt payments are now largely stable, with the economies starting up again there has been a spike in spending behaviors of consumers.
How can companies collect from their delinquent accounts receivables, given that it requires a specialized collections capability that requires knowledge and expertise when collecting payments in a regulated environment?
A Glimpse at Post-Pandemic Debt Collection
The debt collection industry has raked in $18.8 billion in revenue in 2022 with an average of 2.6% annual growth within the last five years. At the height of the pandemic, delinquency rates fell due to the lack of spending during lockdowns and the rise of unemployment and underemployment. Debt collections have resumed since then, and what we are now witnessing is a spike in spending and borrowing largely due to the following:
- Increasing cost of living as a result of high inflation
- Rising interest rates
- Reduced savings rate
- Growing consumer over-commitments due to “buy now, pay later” (BNPL) schemes
- Increasing revolving credit
- Resuming in-person activities (e.g., return-to-office arrangements and social gatherings)
- Catching up on suppressed payments from pandemic-related restrictions to collections
Optimizing Debt Collection Schemes
Companies specializing in lending and debt collections services must reframe their mindset to create better relationships with consumers. The ever-present survival mode attached to business continuity must make way for holistic customer support anchored on customer engagement.
Companies that specialize on lending, or companies that allow their goods and services to be paid in future installments, should ensure that their accounts receivable portfolio remain healthy for their business to grow. With that, they will need a strong collections infrastructure capable of keeping costs down while ensuring compliance to regulations and satisfactory customer experience.
Applying an empathetic customer-centric approach to collections is key in growing the business. This means that the method of contacting the customer, understanding customer's situation, and providing solutions to customer's situation need to be well-organized.
- Engage customers on their preferred digital channels
Lending and collection must address the accelerated shift of consumer behaviors towards digital experiences. Digital channels allow a proactive, empathetic way to connect with consumers around the world.
Omnichannel support through digital channels – such as the use of SMS, email, chat, Whatsapp, in-app support, and push messaging on mobile apps – provide great avenues for connecting with the customer. These modern ways of communicating may delight customers who prefer digital engagements than speaking to third-party collections associates face-to-face.
- Improve processes through digital transformation
Digital transformation can prove to be more cost-efficient and helpful in eliminating human errors in collection processes. Automation, artificial intelligence (AI), and other technologies are just some of the best tools that can support debt management. These technologies can help collectors process a large number of data, identify vulnerabilities, and drive better engagement. Companies that can deploy bots such as chatbots, voicebots, and the use of data analytics will be able to manage costs better than counterparts.
- Adapt to customer and industry climate demands
Receivable management companies must always seek to understand these changes to adapt their service models that enable sustainable growth and improved customer satisfaction. Customers who go through financial difficulty will in some point recover, but they will need the right collections arm as they go through these difficult times. Providing the right support to customers, either by way of digital tools or self-serve provisions, or knowing the best solution for payment plans, are key in sustaining customer loyalty.
- Find a partner with the right capabilities and experience in the industry
As a trusted partner, Teleperformance’s vast industry experience have helped manage debt collections portfolio and improve business results for receivable management companies, including agencies handling third-party collections. Teleperformance’s global infrastructure ensures best-in-class technology, while keeping employees highly skilled and engaged as they provide genuine help for customers in times of financial difficulty. We are ready to be your ally in tough times ahead.
Download our white paper “Intelligent Debt Collection for Today's Digital-First World" to take your business to the next level. Let us help your business accelerate in the collections space while ensuring compliance with regulations, risk management, and growth of revenue. Contact us to know more!