In Focus Collections


Debt collection strategies for the digital age


New technology can provide opportunities for debt collection, but the key is to make the right choices and maintain a focus on customers


Debt collection, always a sensitive and tricky topic for businesses, has become even more complex with the impact of COVID-19. Companies that normally would not have incurred cash fl ow issues or found themselves in debt are now facing such challenges. For those managing collections,


understanding the current and likely future landscape while remaining sensitive to consumer issues and vigilant to regulatory changes has become more important than ever. The easing of lockdown, however, has


signifi cantly boosted the UK economy. Employment rates are up, and despite one of the worst recessions in history, households on average are fi nancially better off today than they were before the pandemic. So, what can collection teams learn from


the pandemic and how can they turn the corner to position themselves for growth?


Responding to customer preferences is key In the past, organisations have always communicated with customers by telephone. But as technology becomes more advanced and preferred methods for interaction continue to evolve, it is no surprise that customers are now less interested in traditional channels. These days customers prefer a text message, email, chatbot or contact through social media– these options allow them to get what they need without any interactions whatsoever!


“75 percent of people using digital channels for the fi rst time indicate that they will continue to use them when things return to normal. Companies will need to ensure that their digital channels are on par with or better than those of their competition to succeed in this new environment.” Source: McKinsey, The Recovery will be Digital


Enabling people to access messages from 34


any channel according to their preference establishes a sense of trust within both parties. It helps build a stronger relationship with those who receive the communication because it refl ects understanding and empathy on behalf of the company.


Legacy platforms struggle to adapt The rapid change to operations has put board-level focus on collections and shone a light on inadequacies. Many companies on legacy platforms have struggled to adapt to changing customer behaviour and demands, resulting in an increase in late payments.


“44% of the total value of UK B2B sales were reported as ‘overdue’ in 2021 with a further eight percent written off entirely as ‘uncollectible.” Source: Credit Connect: Businesses Write Off £8 in Every £100 as Uncollectable’, December 2021


The traditional model’s inability to predict


which debts will go into collections puts lenders behind the curve. Even worse, when accounts fall behind, this


approach applies one-size-fi ts-all responses that may let too many borrowers slip into default. Organisations leveraging cloud-based


collection solutions have adapted quickly to meet customer demands while optimising working capital and reducing DSO (days sales outstanding).


“HighRadius helped the team focus on more important cases which required more human touch, like strategic decision making and creating better relationships with customers.” Kay Rogers, Vice President North America Financial Transactions, Ferrero


The power of AI The growing use of AI and machine learning in lending is ushering in a new era in debt collection. One that includes an early warning for delinquency, refi ned methods of categorising borrowers, and optimised


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Enabling people to access messages from any channel according to their preference establishes a sense of trust within both parties. It helps build a stronger relationship with those who receive the communication because it refl ects understanding and empathy on behalf of the company


strategies for customer engagement to reduce defaults. The enhanced ability to understand,


identify and interact with borrowers can reduce exposure to losses by more eff ectively addressing past-due accounts. For example, HighRadius customers achieve 75% faster receivables recovery by leveraging AI-based decision-making. Optimising debt collection goes beyond


the choices of communications, it is about tailoring the message at the right time, in the right format. This is often context- dependent and relies on several variables making it ideally suited for analysis by machine learning to enhance customer engagement.


Reducing the backlog With an expected surge in collections activity, automating customer communication will be key to the success of collections in the future. Self-service options and alternative


communication methods will streamline the collections process and minimise the strain on call centre agents. Those who take a digital-fi rst approach to


March 2022


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