Combat Rising Default Rates – Strategies, Tactics, & Tools for 2024
The lending industry landscape continues to evolve with increasing fintech competition, the ongoing impact of COVID, and rising inflationary pressures. For asset-based and non-asset-based lenders, the need to optimize collection processes to combat the rise in default rates and portfolio losses has never been more critical.
Join experts from Alorica, Oracle, DecisivEdge (an Oracle Partner), and other industry executives as we uncover how to transform your operations, become more efficient and agile. Ensure happier customers and a stronger bottom line.
During this webinar you can expect:
- Expert insights, knowledge and real-world experiences to navigate intricacies of collections management.
- Cutting-edge strategies and tactics (including self-curing options) to combat rising default rates, mitigate risks, and enhance collections efficiency.
- An overview of technology integrations to streamline collections processes for a more efficient and customer-centric approach.
- A deep dive into behavioral scoring and data enhanced decision-making to optimize workflows and identify early warning signs of potential defaults.
ASK THE EXPERTS | Frequently Asked Questions
Get the inside scoop! Read on to see the pressing questions our panelists could not address during the webinar but found imperative to discuss. Get practical solutions to navigate your day-to-day Collections concerns.
What types of technology and software capabilities do you find most valuable for Loan Collections, and why? Which of these capabilities directly impact the customer and/or agent experience?
The most valuable technology capabilities in Loan Collections prioritize ease of communication for borrowers, typically through channels like text, chat, apps, web platforms, email, and phone— usually in that order of preference. Self-service options are particularly critical, empowering borrowers to manage their accounts efficiently.
Additionally, technologies enabling omni-channel communications, reminders, and assistance offerings are essential. These tools ensure that customers can interact with servicers seamlessly, choosing the channels and times that suit them best.
For instance, while mass email campaigns can be effective, they lose their impact if agents aren't available to engage with borrowers promptly when needed, resulting in missed opportunities for resolution and customer satisfaction. Thus, prioritizing technologies that facilitate timely and personalized interactions is key to optimizing both the borrower and agent experience in Collections.
Additionally, technologies enabling omni-channel communications, reminders, and assistance offerings are essential. These tools ensure that customers can interact with servicers seamlessly, choosing the channels and times that suit them best.
For instance, while mass email campaigns can be effective, they lose their impact if agents aren't available to engage with borrowers promptly when needed, resulting in missed opportunities for resolution and customer satisfaction. Thus, prioritizing technologies that facilitate timely and personalized interactions is key to optimizing both the borrower and agent experience in Collections.
In your previous Loan Collections role, what were the things that “kept you up at night”?
In my late-stage collections and back-office role, there were a couple of key concerns that I often thought of.
Firstly, it was the challenge of effectively communicating with severely delinquent borrowers when they were finally ready to engage. Timing is everything in these situations, and being able to connect with borrowers when they are open to discussion can significantly impact the likelihood of finding a resolution. Another aspect that weighed on my mind was effectively offering solutions to cure their delinquency and prevent the escalation to legal action. This involved striking a careful balance between emotions and a practical assessment of a borrower’s situation to get to a solution that was feasible and acceptable to both parties.
Lastly, I was concerned with engaging customers in late-stage delinquency after they had negative experiences in the early stages. Overcoming these negative perceptions and rebuilding trust is crucial, and ensuring a positive customer experience despite past challenges is important.
Firstly, it was the challenge of effectively communicating with severely delinquent borrowers when they were finally ready to engage. Timing is everything in these situations, and being able to connect with borrowers when they are open to discussion can significantly impact the likelihood of finding a resolution. Another aspect that weighed on my mind was effectively offering solutions to cure their delinquency and prevent the escalation to legal action. This involved striking a careful balance between emotions and a practical assessment of a borrower’s situation to get to a solution that was feasible and acceptable to both parties.
Lastly, I was concerned with engaging customers in late-stage delinquency after they had negative experiences in the early stages. Overcoming these negative perceptions and rebuilding trust is crucial, and ensuring a positive customer experience despite past challenges is important.
How do you see the adoption of Buy Now Pay Later (BNPL) offerings impacting collections systems?
One major challenge is that BNPL arrangements can handicap lenders and servicers because they often lack visibility into these obligations until it's time for repayment. This lack of foresight can lead to difficulties in forecasting and managing cash flows effectively, potentially causing delays and/or gaps in collection efforts.
Moreover, when BNPL payments come due, subprime and near-prime customers are particularly susceptible to overextension. They may have committed funds from sources such as tax refunds, leaving them financially strained when these payments are due. This overextension increases the risk of delinquency and default, necessitating proactive and sensitive collection strategies to address these challenges effectively.
Overall, the rapid adoption of BNPL offerings underscores the importance of adaptable and innovative collections processes and collections software to accommodate evolving consumer preferences and financial behaviors.
Moreover, when BNPL payments come due, subprime and near-prime customers are particularly susceptible to overextension. They may have committed funds from sources such as tax refunds, leaving them financially strained when these payments are due. This overextension increases the risk of delinquency and default, necessitating proactive and sensitive collection strategies to address these challenges effectively.
Overall, the rapid adoption of BNPL offerings underscores the importance of adaptable and innovative collections processes and collections software to accommodate evolving consumer preferences and financial behaviors.
What are your thoughts on remote work and its impacts on talent availability, collaboration among colleagues, and overall business results?
Remote work has its pros and cons. On the positive side, it significantly widens the talent pool for businesses, allowing them to recruit top talent regardless of geographic location. Many individuals prefer the flexibility of working from home (WFH) and are motivated to perform well to maintain this arrangement, which can enhance productivity and job satisfaction.
The cons are that some employees may struggle to maintain productivity or engagement when working from home. Also, the lack of face-to-face interaction can diminish the sense of connection among colleagues. This can be particularly challenging for fostering innovation and maintaining a strong organizational culture.
The proliferation of WFH opportunities may contribute to higher turnover rates. Employees may be more inclined to seek alternative remote positions if they feel disengaged or disconnected from their current organization.
The cons are that some employees may struggle to maintain productivity or engagement when working from home. Also, the lack of face-to-face interaction can diminish the sense of connection among colleagues. This can be particularly challenging for fostering innovation and maintaining a strong organizational culture.
The proliferation of WFH opportunities may contribute to higher turnover rates. Employees may be more inclined to seek alternative remote positions if they feel disengaged or disconnected from their current organization.
What tactics are less effective now than they were a few years ago, and what could replace them?
Outdated tactics like treating all accounts the same and relying heavily on phone calls are less effective today. Instead, adopting risk-based contact strategies and being customer-centric by contacting them when and how they prefer can yield better results. This approach prioritizes efficiency, effectiveness, and customer satisfaction in collections practices.
How can we adapt our approach for the generation that prefers not to answer phone calls?
To accommodate the preferences of millennials, Gen X and others who avoid phone calls, it's essential to employ a variety of contact methods such as text, chat, app notifications, IVR self-service options, web portals, email – make those a priority – and treat phone calls as secondary.
Tailoring the contact method to the customer's preferred mode of communication enhances the likelihood of successful engagement and resolution.
Tailoring the contact method to the customer's preferred mode of communication enhances the likelihood of successful engagement and resolution.
How can we ensure that agents prioritize contacting the most critical borrowers on their next call?
Implementing real-time, risk-based scoring and segmentation enables us to connect the highest-risk borrowers with our most seasoned representatives. Additionally, we can leverage self-service options or allocate low-cost resources to engage with easier or lower-risk customers, all while ensuring a positive customer experience.
How can we ensure that agents exercise their discretion while also preventing them from selectively choosing tasks solely to improve metrics?
We can achieve this balance by implementing robust productivity reporting and real-time alerts on dialer systems that identify/address these promptly.
It’s also important to establish and communicate "no tolerance" policies against practices – for eg, avoiding calls. When employees understand the consequences - including immediate termination - and witness enforcement of these policies, undesirable behaviors can be significantly minimized.
Effective communication and consistent enforcement are key to maintaining integrity in performance metrics.
It’s also important to establish and communicate "no tolerance" policies against practices – for eg, avoiding calls. When employees understand the consequences - including immediate termination - and witness enforcement of these policies, undesirable behaviors can be significantly minimized.
Effective communication and consistent enforcement are key to maintaining integrity in performance metrics.
What new technologies are now indispensable in modern loan servicing and loan collections?
Omni-channel communication solutions have become essential. These platforms allow agents to handle various communication channels (such as voice calls, chat, text, and email) seamlessly within a single CRM or interface, ensuring timely responses precisely when customers wish to engage.
By offering multiple customer engagement channels such as text, chat, mobile apps, email, IVR (Interactive Voice Response), and web portals, businesses can accommodate diverse preferences and enhance customer satisfaction and engagement.
By offering multiple customer engagement channels such as text, chat, mobile apps, email, IVR (Interactive Voice Response), and web portals, businesses can accommodate diverse preferences and enhance customer satisfaction and engagement.
What should the loan collections industry prioritize as its first universal improvement?
Enhancing communication methods and providing comprehensive collector training to boost first-call resolutions should be the initial focus.
What do you predict will be the primary challenge in 2025, and how can we prepare for it?
Rising inflation, particularly in areas like automobile costs, insurance, and rent, coupled with the reinstatement of student loan repayments, may strain borrower finances.
Lack of accessible modern technology like cloud collection and collections software for both borrowers and servicers could hinder contact and cure rates.
Preparation should involve investing in technological solutions to improve engagement and seeking innovative approaches to support borrowers amid economic challenges.
Lack of accessible modern technology like cloud collection and collections software for both borrowers and servicers could hinder contact and cure rates.
Preparation should involve investing in technological solutions to improve engagement and seeking innovative approaches to support borrowers amid economic challenges.