CRM and analytics change the game for collection payments
Like relief pitchers, collection executives are tasked with “saving” a situation that has gone bad—customers who haven’t paid their debts.
While the collection department’s intended function is to retrieve money from customers who are late on their payments, banks that fully leverage this department beyond its initial goal will ultimately find their team performs better than those that don’t.
Collection departments can strengthen relationships with customers, offer insights into customer behavior and payments and provide insight into broader market conditions.
Banks that see the best return on their customer acquisition investments tend to be the ones that have invested appropriately in their collections departments. Here are few areas of opportunities that banks can leverage to capitalize on their collections departments:
Use analytics to drive segmentation: The way each customer approaches collections is different and requires segmentation. Some customers need a well-timed pre-delinquency reminder, some will handle paying their debts on their own, and some won’t be responsive at all. There are other customers whose situation requires significant intervention. To approach each customer appropriately, banks can use predictive analytics to divide their customers into segments and use prescriptive analytics to determine the best treatment strategy for each segment.
Understand customers’ behavior and preferences: Because collecting debts is a delicate process, success centers on small, crucial details, including tone, timing, frequency, and channel. Debt collectors who focus on these details are usually the most effective so long as they measure everything and continuously experiment with new strategies, fine-tuning their approach to communicating with customers.
Contribute to better risk and fraud decisions: During the marketing and origination stages of the customer life cycle, critical decisions are made that have a huge impact on collections. Savvy lenders will apply the insights gained from their collections departments to improve the accuracy of their risk and fraud decisions, which will ultimately alter the effectiveness of their customer acquisition and retention strategies.
Returning to the baseball metaphor, there’s a reason that while it was common practice 75 years ago for starting pitchers to play the full game, today’s baseball teams invest in relief pitchers to close out games.
A similar transformation is taking place in banking, as lending banks are investing in flexible analytics-driven debt management capabilities across omnichannel customer contact services, with the goal of building a robust collections and recovery platform that becomes integrated with their customer relationship management system.