When Times are Tough, Collectors Innovate

Do you recall when a 3.85 percent charge-off rate was a problem to be fixed? We haven’t seen rates this low since 2007 and we only hope 2010’s 10.9 percent will be the all-time peak. How about when caller ID and answering machines were the biggest obstacles to our right-party contact rates? 25 percent of the population relies solely on cell phones now – and of the 25-29 age group, that number is 49 percent. Statistics that were unthinkable just a few years ago have become the new normal.

At the same time, fundamental shifts occurred in other areas. Increased regulations and oversight from governments, increased expectations and scrutiny from customers, evolving communication expectations and increased sensitivity to brand impact. When adding tightening credit standards, global competitors and a decreased pool of viable customers, it is a challenging business environment to say the least. 

Collection departments are innovative thought leaders in any organization. The collection industry returns $40 billion in debt annually to creditors according to a 2008 Price Waterhouse Cooper survey – no doubt that figure has increased during the past two years. The stakes are very high and customer evolution demands quick responses and creative approaches.

Pre-delinquency strategies and web self-service collections are the latest timely innovation to negotiate these changing fields of play. With pre-delinquency, clients are improving or developing strategies that allow collectors to get ahead of the delinquency by calling high-risk customers before they enter collections. By proactively preventing a high-risk customer from entering collections, you can mitigate the inevitable roll rates of 60+ percent to charge off. 

At the same time, web self-service collections is proving to be the best response to a customer demanding to be a part of the communication chain and not just the target of one.  According to TSYS clients, 50 percent of customers evaluating online payment programs enroll in a program or make an immediate payment. When coupling the enrollment with a 90+ percent kept rate, the web becomes a baseline standard for any shop. While 90 percent seems optimistically high, these are programs the customer chooses on their own – without pressure – and voluntarily attaches a funding account at sign up.

Although any seasoned collector will tell you that dialing will never go away, there is the very real sea change of cellular use over landlines and the regulatory and compliance challenges introduced by phone contacts that are not geographically bound to a time zone. Contact preferences are changing, as well.  According to a 2010 Mobile Access Survey, a whopping 72 percent of all cell phone users send and receive text messages. Texting is not limited to the 18-24 age groups anymore: the data showed that all customers prefer self-service or text over traditional phone calls and letters. This allows them anonymity, privacy and convenience-all qualities that will connect customers to you when they climb out of the recession and become a member of your lucrative client base once again.

2011 will see the growth and maturity of free to end-user text, web self-service strategies, and pre-delinquency analytics and strategies. In addition, as social media becomes an even more ubiquitous part of mainstream culture, we will begin to see businesses harness new means of communication both internally as well as externally. 

Improving and streamlining collections training remains important due to the ever-growing challenge of high turnover and cumbersome regulation. An emergence of sensitive voice analytic tools allows you to evaluate every single call on the floor and highlight key areas of need. This allows for targeted, real-time, online collections training. Training decreases your compliance violations and also improves your employee satisfaction and effectiveness. Social media platforms and blogs on internal networks allow you to provide consistent messaging and up-to-date communication on a personal level. Increasing empathy through awareness of economic changes and their impact, as well as education on the latest regulatory changes, can all be communicated via social media in the workplace.

We have not seen the last of these challenging trends, but difficult times yield the best innovations. The collections industry will emerge stronger and better in 2011 as we embrace our customers changing preferences and use those to strengthen our relationships and adhere to the myriad of regulations.

Bio: Julie Austin, Director of TSYS Collections & Recovery Product Development, is responsible for the strategic direction and integration of all TSYS collections products and services. The TSYS Collections and Recovery System has a comprehensive suite of collections solutions geared to help clients improve their enterprise collections performance through increased efficiency and effectiveness as well as capacity management through outsourcing.