Affiniti’s 2023 Collection & Recovery Management Top 10 Insights
As Affiniti Innovations, we stand at the forefront of innovation in the collections and recovery industry. Through our constant pursuit of deeper understanding and continuous refinement of our solutions, we’ve unearthed ten critical insights shaping the landscape of this dynamic field in 2023.
These insights hold the potential to revolutionise the way we interact with debtors, optimise workflows, and ultimately elevate the ecosystem of the entire collection.
Let’s delve into each one, examining its significance and exploring the transformative possibilities it unlocks.
Increased demand for AI/ML-centric predictions and communications
During the year 2023, we noticed the highest demand for AI-based predictions and communications. Traditional methods rely on historical data and statistical models to predict the likelihood of repayment and the best time and channel to contact the customers, which are often outdated, inaccurate, and biased.
AI and ML technologies are a superior alternative, as they can process large volumes of data, learn from patterns and behaviors, and generate dynamic and adaptive predictions and recommendations.
Our two highest-demand predictive requirements are,
- Default prediction
- Credit risk prediction
From the communications aspect, AI-centric capabilities allow you to determine the optimal time, frequency, and channel to contact each customer, and tailor your messages and offers accordingly.
Additionally, you can also monitor and measure the effectiveness of your communications and campaigns, and adjust your strategies in real-time based on feedback and results.
Priority for hybrid and full automation for recoveries and communications
Automation has a high demand for collections and recoveries; we noticed a surge in the demand and more specific requests in 2023.
Human agents can provide personalised and empathetic service, but they are also costly, limited, and prone to errors. Automated systems can offer speed, scalability, and consistency, but they may also lack flexibility, nuance, and trust.
The ideal solution is to combine the best of both worlds and create a fully automated hybrid system that can handle different scenarios and customers.
Some clear measures are:
- Automate the routine and repetitive tasks, such as sending reminders, notifications, and confirmations, and free up your human agents for more complex and sensitive cases.
- Automate the entire communication process, using natural language understanding (NLU) and generation (NLG) to create and deliver personalised and engaging messages and offers, and natural language dialogue (NLD) to handle customer queries and objections.
- Automate the payment collection and verification process, using secure and convenient methods, such as mobile wallets, QR codes, and biometric authentication.
Collectively, these enable better resource optimisation and operational efficiency, which ultimately leads to higher customer satisfaction.
Rapid adoption of customer-centric omnichannel communications
Debtors are no longer confined to a single communication channel.
In the 2020s, they expect a seamless, omnichannel experience, effortlessly transitioning between phone calls, emails, text messages, websites, and even chatbots, with the advancement of communication technologies.
Some specific examples would be:
- Reach out to the customers through their preferred channels, and switch between channels as needed, without losing context or continuity
- Provide the customers with self-service options, such as online portals, mobile apps, and chatbots, where they can access their account information, make payments, request extensions, or negotiate settlements
In 2023, we observed a rapid adoption of omnichannel communication platforms that cater to this diverse landscape, ensuring consistent messaging and a positive debtor experience across all touchpoints. This customer-centric approach fosters trust, increases engagement, and ultimately leads to higher recovery rates.
Higher effort for personalisation replacing generic segmentation for recoveries
In 2023, we witnessed a stronger shift towards hyper-personalisation, where debtors are treated as individuals with unique circumstances and motivations.
This means moving beyond basic segmentation and employing advanced analytics to understand individual payment behaviors, financial constraints, and communication preferences.
By tailoring collection strategies to each debtor’s specific situation, we can build trust, encourage engagement, and ultimately achieve higher recovery rates.
Imagine this from the debtor’s perspective: Instead of receiving generic robo-calls, debtors are contacted by agents who address them by name, acknowledge their individual circumstances, and offer customised payment plans based on their financial realities. This personalised approach fosters empathy, understanding, and a willingness to work towards a mutually beneficial resolution.
As this can consume a considerable amount of resources, using AI/ML to do the hard work for you is more realistic and yields the best results.
Higher preference for customised solutions, steering clear of the templated
One of the key challenges in collections and recovery is to differentiate themselves from the competition and to meet the changing expectations and demands of the customers.
Traditional methods often rely on templated and standardised solutions, which may not suit each organisation’s or customer’s specific needs and goals.
2023 is a model year where we saw a growing demand for customised solutions that cater to the specific needs and challenges of each client. This means abandoning generic templates and developing bespoke strategies that leverage industry insights, client data, and regulatory compliance considerations.
The best example of this is:
- Provide your operational gaps and the chosen tech organisation offering you a bespoke solution that meets and exceeds your expectations sustainably.
It is safe to conclude that this customised approach increases brand loyalty.
Targetting brand reposition by using AI across multiple industries
2023 marks the dawn of AI-powered rebranding, where algorithms shed the industry’s harsh image and cultivate trust through empathetic language and personalised interactions.
The incremental growth of AI across multiple aspects heavily influenced the business world as a whole; not just collections and recoveries.
Collection and recovery departments are typically found in banks, insurance firms, credit unions, retail companies (especially with buy-now-pay-later plans), and even tech companies.
The integration of AI into the brand enables these brands to reposition themselves in a more relevant, more customer-centric, and technologically advanced position. Not only does this positively impact brand equity, but the resulting differential positioning harvests a competitive advantage in any industry.
As an AI-fronted tech firm, we encourage organisations to be early adopters in the AI adoption curve. Imagine a collections agent, guided by AI insights, adjusting their tone and phrasing based on a debtor’s emotional state — that is a mutually beneficial corporate image.
Higher efficiency achieved through remote performance monitoring
Using outdated and on-site methods to monitor and evaluate the performance and quality of the recovery process, agents, and systems, and to identify and address the issues and risks, can be challenging.
In 2023, several organisations with collections and recovery departments adopted AI-enabled remote performance monitoring, typically on mobile and tablets.
In fact, the Affiniti MobileXtend module in Affiniti Collect Plus (our award-winning collections & recovery solution) had a relatively higher demand this year. The module comfortably runs on iOS and Android skyrocketing overall efficiency.
AI enables a new level of monitoring, as it can track and measure the performance and quality of the recovery process, agents, and systems, in real-time and remotely, and provide feedback and guidance, in an automated and proactive way.
Our advice for any firm seeking remote debt recovery and performance monitoring is to:
- Ensure the solution is compatible with both iOS and Android
- Prioritise web-based solutions over PlayStore/Appstore-based solutions
- Check if hierarchical access is available with swift navigation
- Make sure the platform security is sky-high
Growth of digital collections which reduces operational costs and delays
The world is digitising faster than ever, and the collections and recovery industry is influenced by that too.
Digital collections platforms streamline the recovery process, from initial contact to final payment. Imagine eliminating paper forms, automating document workflows, and securely storing debtor data electronically.
This digital metamorphosis unlocks a treasure trove of benefits:
- Cost reduction: Eliminate printing, mailing, and storage expenses associated with paper documents.
- Increased efficiency: Automate repetitive tasks, streamline workflows, and reduce processing times.
- Improved accuracy: Minimise errors and discrepancies inherent in manual data entry.
- Enhanced compliance: Ensure secure data storage, audit trails, and adherence to regulatory requirements.
- Transparency and trust: Foster open communication and build trust with debtors through easy access to their financial information and repayment options.
Embracing the digital wave in collections isn’t just about efficiency, it’s about transformation. It’s about building a more transparent, customer-centric, and sustainable collections ecosystem that fosters trust, collaboration, and ultimately, financial wellness for all parties involved.
Other departments using recovery insights for improved individual performance
The insights gleaned from collections aren’t just for debt recovery. Forward-thinking companies are leveraging this valuable data to improve individual performance across various departments.
Let us break it down across 5 common departments found in financial institutions.
- Marketing: Imagine crafting hyper-personalised offers and promotions tailored to individual financial needs. Collections data reveal spending patterns, payment behaviors, and even communication preferences. Marketing teams can utilise this intel to design targeted campaigns, send relevant product recommendations, or offer timely financial assistance programs – all resonating deeply with customer circumstances.
- Customer Service: Proactive problem-solving becomes a reality when customer service teams anticipate potential payment issues. Collections data sheds light on common reasons for delays, allowing proactive outreach before escalations occur. Imagine agents equipped with knowledge of financial hardships or unexpected expenses, reaching out with empathy and offering tailored solutions before frustration sets in.
- Risk Management: Early warning bells become deafening with collections insights informing robust risk assessment models. By analysing payment patterns and identifying early delinquency indicators, risk management teams can proactively adjust credit limits, tailor loan terms, or offer preventative financial tools. This data-driven approach minimises bad debt while promoting responsible credit habits.
- Product Development: Collections data isn’t just about collecting; it’s about understanding customer needs. Product development teams can glean invaluable insights into financial pain points, unmet needs, and desired features. Imagine new product offerings designed to address common financial struggles, tailored repayment options based on real-world challenges, or even innovative tools for budgeting and responsible spending.
- Branch Operations: Imagine branch staff empowered to offer personalised financial guidance based on customer data. Collections insights reveal financial situations and communication preferences, allowing branch personnel to tailor interactions and offer relevant support. This could involve proactive referrals to financial advisors, debt consolidation guidance, or simply a more empathetic and informed approach to customer service.
Thus, when you invest in AI for collections and recoveries, you’re empowering your entire organisation for the cost of just one department.
That’s as cost-effective as it can get.
Debt collections agencies aiming to reduce staff costs with AI technologies
The cost of labor is a significant factor for collection agencies. To address this, we’ve observed a growing focus on leveraging AI technologies to automate tasks and reduce staffing costs. AI-powered chatbots can handle initial inquiries, answer common questions, and even negotiate settlements, freeing up agents for more complex interactions.
This optimisation of resources leads to greater efficiency and profitability, allowing agencies to remain competitive in a challenging market.
Think of it this way: A debt collection agency employs AI-powered virtual assistants to handle the majority of incoming calls, significantly reducing the need for human agents and the associated costs, while still providing a high level of customer service. This strategic use of technology allows the agency to reallocate resources to more value-added activities, such as personalised recovery strategies and customer relationship management.
Over to you
Our analysis uncovers ten transformative insights reshaping the future of debt recovery. The focus on customer-centricity, powered by data and artificial intelligence, presents significant opportunities for improved performance.
Embracing hybrid or full automation, tailoring communication strategies to individual profiles, and leveraging recovery insights across departments empower organisations to achieve higher collection rates, reduce operational costs, and enhance customer relationships.
We, at Affiniti Innovations, with our deep expertise and commitment to innovation, offer our clients the strategic guidance and technological solutions necessary to navigate this dynamic environment and achieve a competitive advantage in the future of debt recovery.