Welcome to Digital blog – Debt Collection Evolution

I’ve been in Collections for over forty years and seen a huge change since my first position in the 1970’s, as you would expect! This has been my journey from a full head of hair, wrinkle-free, to the skin-headed “lived in” face I have today.

In the main in the 70’s we relied on huge ledgers or even worse a very complicated “Kalamazoo” rotating card system with customer details and payment records. It was a nightmare and the monthly reconciliations were a real challenge. Collections were easy though. No real legislation or code with “blue frightener” letters the norm, written in script and striking the fear of God in recipients. This was Collections out of revenge not because it was the right business thing to do. No real National Collections capability relying rather on regional or branch offices to effect local collection. It worked, but at an extreme cost and every office had a payment desk where local debtors could pay their weekly payment. Towards the end of the 70’s and beginning of the 80’s computers emerged much to the suspicion of staff.  “ It will never catch on” – It did.

This wasn’t one workstation each, it was typically 1 terminal between 50 people with some confusing code to get it to do something. Typically, it was used as a source of information as you couldn’t view anything. You entered the code for a report, it acknowledged, and you got the report 7 days later – telling you what you should have done 7 days ago! Still, it was getting better.

The acceleration of Credit Cards brought accelerated investment in technology and software applications to manage the business in a modular way. The Collections software module was born. No more card-based systems or dealing in reams of printouts, your work queue was on the screen, as were all the account details and you could enter memos and action codes that triggered letters to customers. You could even pick up the phone and call them as well as more efficiently take inbound calls through a new call center type application, an “ACD” “It will never catch on” – it did.

Now, this was good, we had account details on the screen but we were still dialing manually and maybe only getting through to 30% of dialed attempts. Whilst the end results were good it was really inefficient. Listening to ringing tones was not the best use of staff time. Then came Power and Predictive diallers. Wow! I installed the first one in Europe in the nineties, a Davox system where algorithms were written in DOS, supplemented by 144 smart buttons into which were written wrap up codes for both the Dialler and Host collection system. Thirty-five, yes thirty-five people per hour our agents talked to each, admittedly we dropped a similar amount because of the nature of the algorithm at that time but this was a dream with no regulation. We talked to 4 times more customers with the same number of people! Legislation and better algorithms and systems much improved these drop rates to negligible amounts. Again- lots of resistance in the marketplace to begin with but you couldn’t run a business without one now. “It will never catch on” – it did.

The combination of Collections systems and diallers and blended call technology allowed Collections to take a huge leap forward and really creative collection strategies emerged. Collection managers were becoming no different to Sales managers just the message they were delivering was different. They still had to reach their target audience and did so by having regional campaigns as well as hugely sexist campaigns where they would dial women during the TV soap operas and men during live football. Answer rates went sky high. But it still wasn’t quite right.

Essentially every customer was being treated similarly despite having different payment and behavioral data. That was it, along came behavioral and payment projection scoring which enabled us, using scores based on behavioral data, to segment accounts into different groups for Collection activity and the timing of that activity. Again quite a bit of resistance as “best results come from an experienced member of staff taking a good look at the account” – not at these volumes. “It will never catch on” – it did.

Never before has data been so important in determining the best strategy for groups of customers but also in determining what channel is most appropriate and receptive to that customer

SMS was introduced with some real success despite again some resistance. Same tool for email and temporary apps as well as internet sites where customers can self-serve. This is all taken for granted now but initially had a lot of doubters “It will never catch on” – it did.

To such an extent now that channel management is equally as important as segmentation so that prior customer interactions through specific channels are captured for future delivery.

So, what now? We have streamlined accounts onto capable collection platforms, take input from decision engines on scoring, segmentation, and strategy, output to diallers to make efficient calls to customers, output to SMS and email delivery engines to make use of those channels. We still have a large cost base in people and generally not available 24/7. Equally some of the calls being routed from and to agents could be dealt with routinely freeing up staff for the more complex calls.

Artificial Intelligence use is growing considerably as is the capability of the technology. In truth the limitation is not in the technology but what is in your head. It is really possible to come up with an interactive agent using you and your colleagues’ vast experience and by colleagues, we do mean the collection agent in the front line. Taking payments making payment arrangements, updating communication preferences, the list is endless and available 24/7.

Remember that on the other end are customers that are catching on with new technology much faster than businesses. Customers have turned to the things that make their lives easier – there is an app for everything today. Millennials will soon become the largest consumer base for financial industry which brings the new questions to the table: what their values and habits are, what kind of service and communication level they prefer – face-to-face or face-to-app, how they communicate and will they answer the phone if called by unknown number…

Every entity that offers its services or goods using online platforms should ask one simple question: “Why would the customer answer the phone to talk with me about the debt if we haven’t talked over the phone or face-to-face until now?”

Personal financial interaction has never been more personal.

Years ago, in an organization I was leading we had a large number of callers setting up payment plans with us. We surveyed these customers asking “if we set this facility and outcome on an internet site, would you use it?” 45% said “Yes” Why? Because they said they found it embarrassing talking to another person about the problem. So not all customers need advice or counseling some just need either money or an impersonal method of dealing with the matter.

So were you a late user of systems, predictive dialing, scoring and segmentation, SMS. Email, Channel Management? Did you wish you engaged earlier, won some business you otherwise wouldn’t, and had a competitive cost base? Artificial Intelligence in this Digital age is growing quickly and it’s important not to be left behind.

“It will never catch on” – It is, jump on board!

Bob Welsh

Bob Welsh is a highly experienced and respected Collections Practitioner. A former Collection Head at various Banks and he has also held executive positions in DCAs and BPO’s. Bob spends most of his time now carrying out Collections Optimisation projects across Europe and across Multiple industries. He is currently involved in projects involving Collections Artificial Intelligence.