Introduction
Scalable information and communications technology has revolutionized how information, content and experiences are created and consumed. India has witnessed massive change in across industries on account of digitisation. While the financial services industry has always been a keen adopter of technology, the same was not always the case with the debt collections industry.
Digitisation in the debt collections sector has gained momentum post the pandemic. According to a survey, 75% of customers who used digital channels for the first time during the Covid-19 lockdown indicated that they will continue to use digital tools even when things return to normal.
We see the following trends in the debt collections industry:
Digital Multi-Channel Communications
Companies communicate with their customers across multiple digital channels, including SMS, email, IVR, WhatsApp among others. It is important for financial institutions to understand this and formulate a communications strategy for each channel. A customer should experience the same high level of service regardless of the communications channel.
This multi-channel approach very much extends to the debt collections space where customers prefer being contacted over SMS or email rather than phone calls or through letters. Debt collections processes should embrace the multi-channel approach and reach out to customer according to their channel preference.
Customer-Centric Approach
Customers are accustomed to personalized service and offerings when they access products and services. A one-size-fits-all approach is no longer optimal and can potentially drive customers away. Furthermore, it is important that customers be given the self-service option. According to our survey, 57% people prefer self-service channels. Customer self-service options along with empathy is paramount in crafting customer centric journeys for debt collection. Borrowers in delinquency can use a channel of their choice to resolve their debt problems.
Machine Learning and Data Analytics
Digitization was a prominent trend prior to the pandemic. This trend has been reinforced over the last 2 years. Financial institutions have a lot of high quality, actionable customer data that they can use to serve the customers. This is even more important in debt collections where Machine Learning algorithms analyze customers’ demographic data and their financial history in order to create various options for delinquency management.
Compliance
The debt collection industry traditionally employed strong arm tactics to resolve delinquencies. Regulators want debt collectors to be more empathetic to customers in terms of the language they use, the channels of communications and the contact strategy. Hence the Reserve Bank of India has put in place stringent customer centric regulations. Digital debt collections help financial institutions and debt collectors adhere to all these regulations. By creating guardrails in their communications strategy, financial institutions can rest easy knowing that they are complying with regulations algorithmically.
Multilingual Communication
Adopting a nuanced approach to reach all sections of the society is a crucial step for financial institutions towards driving financial inclusivity. In debt collections, communicating with customers in a language of their choice helps customers understand their obligations better which in turn ensures timely payments.
Sources
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