What We Know:Colllections

Every process needs a specific type of “fail-safe mechanisms” to be safe and profitable like for instance elevator break. Until Elisha Otis invented his famous elevator brake, elevators have been considered too dangerous for widespread use. In the same way, debt collection can be supposed to be a fail-safe mechanism to manage risks related to offering services or lending money. Until functioning debt collections processes are not in place, the risks associated with the business may be too high to operate safely and to reach profitability.

 

ABC has hands-on experience with all stages of the collections process including pre-collections, early collections, late collections (debt restructuring, termination, legal), and NPL / NPE Management (please see the relevant section). Here is a sample of issues our clients were facing, and ABC helped them to solve:

 

PRE-COLLECTIONS | Decrease the inflow into the early collections

 

Our client, one of the leading banks in Hungary, was facing an increasing inflow into Collections which required an increase in capacities of the call center agents. It pushed the costs up, and from a long-term perspective, it would create issues with the call center seat capacities. Therefore, we were asked to help the client with the situation and suggest the solution for it.

ABC analyzed the data and found out that there are some insufficiencies in the early collections processes which can be improved and therefore, the resources allocation can be optimized. However, a significant share of the clients entering the collections were late payers. The new pre-collections segmentation was designed, piloted and deployed which led to a substantial decrease in inflow into the first bucket without the need of performing the pre-collections actions on the entire portfolio and with minimum costs and impact on the customer satisfaction.

 

EARLY COLLECTIONS | Optimize the dialer set-up and dialing strategy to improve the collections results

 

Our client, one of the leading consumer finance companies in the Russian market asked to help them with optimization of their early collections communication and dialing strategy and the dialer parameters set-up and improve the collections results. The client had long-term problems with reaching the target regarding recovery rate and cash collected. The goal of the project was to help the client to reach the goals by optimizing the settings of the auto-dialer set-up and by designing new dialing and calls sorting strategies which will improve the results using the available resources.

ABC performed detailed analyses to find the best topics for auto dialer optimization and designed a new dialing strategy. The original set-up was in the form of the not differentiated dialing strategy (the same approach, dialing time and treatment settings for all the clients and phone numbers). We designed and set up the optimal dialing order, frequency and dialing time for the individual customer and phone number segments which resulted in an increase in the cash collected and recovery rate significantly.

 

TERMINATION | Decrease the inflow into the 90 DPD bucket and therefore, decrease the amount of terminated contracts

 

Czech Telco Company, one of the biggest players in the market, was facing problems with the increasing amount of cases which reached 90 days in collections which automatically led to the contracts termination and further actions such as registration in Credit Bureau and handover to next collections stages. It was blowing up the backlog of cases in late collections stages including legal, pushing up the costs, decreasing efficiency and first of all, it was very negatively impacting the customer experience and satisfaction. Therefore, ABC was asked to optimize the process using the same resources and systems features to decrease the amount of terminated contracts and thus, to reduce the inflow of the cases into the late collections.

We analyzed the current processes and found significant inefficiencies in early collections. The client exhibited a minimal usage of collections tools, inefficient collections strategy, limited control over the actions and results, and a monolithic collections process for all customers regardless of their collections history and behavior. It caused the same customers sequentially promising the payment and subsequently breaking them. However, the agents were occupying the time mainly with these customers. One of the quick wins was the usage of additional tools in the early collections stage once a client broke payment promise.

 

Collections Components

 

Debt collection is the topic in which we have more than ten years’ experience. We delivered 70+ collections projects of all the types (health check, implementation, pilots, due diligence) and for which we developed our ABC methodology. All the ABC competences related to the collections process can be split into several blocks which each one belongs to one of the three categories within the 3P framework (sometimes with 4th P – being Policies). These categories are Process, People, and Platform:

Picture: Collections Components ABC has hands-on experience with

 

PROCESS

 

  1. Strategies refer to plans and components which aim to achieve the financial goal of Collections – recovery or fulfill risk-costs budget. It lays out the ingredients, rules, and parameters of debt collections ( e.g., duration and aim of Early Collections, if and how Skip Trace will happen, particular case handling such as deceased clients. However, also parameters such as what is the grace amount, what is the grace period, expected recovery, organization, toolset used, etc.)

  2. Segmentation refers to a division of clients to distinct groups. These groups indicate their likelihood (or unlikelihood) of payment or movement to the next stage of the process. This is done statistically, through scorecard, or ML. Usually, clients are then divided into high, medium and low-risk segments. Each segment has then a different communication strategy or is moved to a different strategy entirely.

  3. We refer to Tools more like the available “toolkit”. That is all treatments applied to the client to get recovery. Some are soft, such as PTP (Promise to pay or repayment plan), some friendly, yet not easy (restructuring, voluntary asset sale), and some unfriendly (legal, asset takeover, debt sale). Tools are usually assigned to strategies and have own communication strategy.

  4. Communication strategy refers to the usage of channels (SMS, IVR, Visit, Meeting, letter, e-mail…), intensity (frequency and sequence) and messages (tone, persuasion techniques, complaint handling, etc.) to maximize recovery per segment of clients and applied tool (treatment).

 

PEOPLE

 

  1. We can design and implement the hiring and training processes including the workshops, materials, assessment methodology. It is closely related to the proper set-up of quality assurance management.

  2. We can design and set up the motivation and incentive scheme for the employees of all the levels (includes KPIs, SLAs, bonuses)

  3. We can develop the optimal capacity planning for the agents in the collections call center and/or field visit agents.

  4. We can set up the proper shift and floor management in the call center

 

PLATFORM

 

  1. We can design, develop and implement the end-to-end collections reporting (automated reports generation, all managerial levels and operational raw data materials)

  2. We can review the systems needed to support the collections processes and need and help with the implementation (collections tools, reporting systems, change management systems, etc.)

  3. We can implement the dialer and set up the dialer parameters and design the dialing strategy to improve the collections results

  4. We can design and develop the collections Data Marts for both the reporting and the analytical purposes

 

ABC standard project outcomes:

  1. Collections health check
  2. Design
      • Collections segmentation
      • Collections scorecards
      • End-to-end collections reporting
      • Collections cases assignment automatization (assignment to individual call center agents, field visitor, external agencies)
  1. Implementation and Roll-Out including:
      • Improvement of collections processes
      • End-to-end collections reporting
      • Training and handover to the local team
      • Dialer optimization

 

For more on our Collections competencies and on how we can help you, please contact:

Tomas Wolf,

our Subject Matter Expert and Engagement Manager for all matters related to the Collections.