In recent years, the world has become increasingly digitised, and this has had a significant impact on the way businesses operate. One area that has been particularly affected is debt collection.
However, in today’s fast-paced digital world, debt recovery has become much more challenging for financial institutions, but by understanding the client preferences and leveraging preferred communication channels during collection, the recovery rate is significantly enhanced with the omnichannel approach and the customer experience can be increased:
One of the key advantages of an omnichannel approach to debt collection is that it allows banks to reach customers through their preferred communication channels. For example, younger customers (below 44 years) may prefer to receive text messages like SMS, push notifications, or using mobile applications while older (44 years old or older) customers may prefer phone calls and letters. By offering a range of communication options, businesses can increase the effectiveness of recovery.
Another advantage of the omnichannel approach is that it allows financial institutions to personalize their communication with customers. By using data analytics and customer segmentation with AI, banks can tailor their messages to the specific needs and preferences of individual customers. This can help to build a stronger relationship with customers and increase the chances of successful debt recovery.
Preferred Digital Channels Improve Effectiveness of Recovery
Many banks are still relying on traditional channels to reach out to their customers, missing a valuable opportunity to connect with them through the channels they prefer. The use of digital touchpoints such as email, SMS, and push notifications has been limited to only 35%. However, it has been observed that the response rate to digital channels is much higher than traditional channels: 73% of debtors make a payment after being contacted through digital touchpoints.
The success rate for full payment through traditional channels was only 12%. This suggests that financial institutions may need to re-evaluate their debt recovery strategies and shift towards a more digital approach.
When it comes to debt recovery specifically on digital channels the success rates are significantly higher. For example, the success rate of in-app notification is 92% but the push notifications is also quite high, standing at 88%. SMS or text messaging is another popular way of engaging with users and the success rate is 77%
This indicates that push- and in-app notifications are effective tools for engaging clients through their preferred channels leading to a higher success rate of payment.
The importance of digital channels in debt recovery is essential in today’s digital landscape.
Personalisation is the key
Hyper personalization during communication with customers is important for banks and they can improve their strategy with the right communication. With the help of advanced technologies such as AI and Machine Learning, enterprises can now personalize their interactions with customers across multiple channels like SMS, E-mail, Chat, and more, which plays a crucial role in optimizing debt recovery rates.
The key advantage of omnichannel strategies is the ability to gain a comprehensive view of a customer’s past interactions across various channels. This information can be used to tailor messages and offers to the specific needs and situations of the customer: For instance, as a result of a rise in unemployment, the debtor has become unable to pay their debts and may require a restructuring plan to restore solvency.
For debt recovery, this is particularly important as it can increase the chances of successful recovery and the customer experience by gaining a comprehensive view of past interactions and tailoring messaging.
Digital engagement improves the customer experience
Digital engagement has become an essential part of the customer experience.
It allows debtors to interact with banks on a hyper-personalized level, and that is not just about the CX, but it also helps to build trust between the collections team and the debtor. The usage of AI algorithms and Machine Learning to analyze customer behavior is a crucial aspect of personalized communication.
When a customer feels like their cases are being taken into account, they are more likely to feel like they are being heard and understood. For example, let us assume that a debtor is facing difficulty with their payments due to job loss and is feeling overwhelmed. A personalized message from the debt collection agent that acknowledges their situation and proposes a payment plan can help the debtor feel heard and understood. This approach can encourage the debtor to become more involved in the collection process and improve their likelihood of making timely payments. This can lead to increased customer engagement and a more positive experience of the collection process.
Streamlined payment management: Self-Service App
Digitalization has the potential to streamline processes and make finances more efficient, and digital tools can help businesses meet their debtors’ needs. Customers have come to expect seamless, convenient digital experiences that empower debtors to have complete control over their payments.
With the rise of self-service apps, customers can manage their finances at any time, from anywhere in real time. They can check their balances, and debts, and ask for payment rearrangement options or can make a partial or full payment with a few clicks on their devices. Self-service apps are a game-changer for customer satisfaction in debt collection. This level of transparency and accessibility can boost up recovery rate.
Overall, financial institutions are seeking ways to streamline their collection processes to provide a seamless and convenient experience to their customers.
Additionally, using personalized interactions with the power of AI (if you are interested in other areas where AI has an impact on collection, read our previous blog post ) through digital engagement strategies improves customer satisfaction and chances of successful debt recovery by providing preferred digital channels to customers and adopting an omnichannel approach is crucial for the recovery process to be effective.
Furthermore, apart from omnichannel communication, there are several other aspects to contemplate when developing a collection strategy that prioritizes the customer. To explore them in greater depth, we recommend downloading our latest white paper.