What Is the Role of Data Analytics in Debt Collections?

I read a cartoon created by Kelly Kamowski on debt collections. It spoke about the ten things I’d rather be doing instead of collecting late payments. They are:

• Doing taxes
• Dieting
• Watching reruns of game shows
• Mole removal
• Finding a cemetery plot
• Sump pump shopping
• Hosting daughter’s tween sleepover
• Bunion surgery
• Lunch with my ex
• Going to a high school reunion

Does this give you an idea of what people think about debt collections?

The way debt collection has evolved in the recent past, things aren’t this bad, and it results in happy interactions.

All customers are good in reality!

Everyone wants to be on the right side of the law, and everyone wants to remain debt-free.

More often than not, circumstances push people not to honor payments, and most debtors are not willing defaulters.

This is where technology helps convert debts into profits easily.

In this article, we will focus our attention on data analytics and how it helps realize debts.

Data Analytics

Data analytics helps you leverage data to optimize collection strategies, reduce delinquency rates, and maximize recoveries.

I will give you multiple scenarios to show you how to appreciate the usage of data analytics in debt collections.

Identifying High-Risk Debtors

Let us look at the real-life example of a customer’s payment pattern. The auto-debit that the customer signed up for hits the bank on the 3^rd of every month, and it gets returned for lack of funds. Then, when you send the customer a text stating that the payment was not honored and that they can pay it through an online link, they make the payment.

This happens every month.

Now, after three months, you pull that data out and put them in a high-risk bucket.

You start sending them out reminders, asking them to keep sufficient balance in their accounts.

Alternatively, you can call them to identify if the auto-debit account they have signed up for is in red and if they would like to change their auto-debit account.

One of these options will resolve the issue and put the customer in the green.

DPD Debt Prioritization

You have multiple debtors who are categorized in the red, and you want your collection agents to go after them and maximize recovery.

How do you prioritize?

Our data analytics solution helps prioritize accounts based on Days Past Due (DPD). It buckets them into various categories, such as DPD 30 days, DPD 60 days, and DPD 90 days.

Now, your top priority will be those debtors in the DPD 60 days. You tell these debtors that their loans will be categorized as a non-performing asset after 90 days of non-payment. This would be reported to the bureau, which will affect their credit ratings.

Most people would ensure payments to avoid getting reported to the bureau. Otherwise, they would at least open up and tell you their real issues, which will allow you to restructure their loans.

Prioritization on Debt-Owed

What about the value owed? Does that play a significant role in debt collections?

Yes, it does. Our data analytics solution helps you prioritize based on the debt owed.

For instance, it will flag all those debts that are more than 100K – you will have to call them immediately. If the debt owed is between 50 and 100K, then you call them when the DPD count exceeds 30 days. If the debt is less than 50K, then you send them periodic payment reminders for them to honor the payment.

Communication Channels and Timing

You try reaching debtors through multiple channels at different times of the day, and you are still very unsuccessful.

Some of them will have their preferred mode of communication, and they prefer to receive calls at specified times during the day.

Our data analytics engine can pull together the likely mode of communication – calls, email, SMS, or WhatsApp, and also the likely time they would respond to your messages.

This will help you reach more debtors in the given time and maximize recoveries.

Compliance with Regulations

As a debt collection agency, you need to comply with TCPA, FDCPA, Reg-F, GDPR, SARFEASI, and IBC regulations – these are a must to ensure fair practices in debt collections.

You get an 11-hour window to contact customers between 8 am and 7 pm. Besides, you cannot call a customer more than so many times, and the language used must be polite.

Our analytics engine ensures compliance with all these regulations and raises a red flag on any non-compliance. Besides, the metadata functionality that we have ensures that the platform adheres to these regulations automatically.

What Value Does This Provide Creditors and Debtors?

For Creditors

• Maximize revenues – with data analytics, you get to target the right customer segment on the right channel at the right time to maximize recoveries.
• Lower costs – data insights help you make informed decisions, and you get to have more value for the money you spend on collections.
• Proactive Vs. Reactive – analytics help you anticipate risks and mitigate them proactively.
• Compliance – you don’t have to doubt whether your agents are complying with regulations, as they would get flagged easily by analytics.
• Expand their reach – the biggest concern for lenders is their ability to collect, so most financial services organizations operate in their regional sweet spots. With data analytics and technology, it can tremendously help lenders go beyond their sweet spots and expand their market and reach.

For Debtors

• Personalized communications – debtors receive regular reminders so that they don’t miss their payment dates and frequency. Besides, multiple payment options make it easier.
• Custom payment plans – analytics help restructure payment plans for debtors, making them manageable.
• Transparency and fairness – analytics ensure that the agency follows fair debt collection practices with zero harassment.
• Improve credit rating – restructured plans and personalized engagement helps debtors improve their credit scores.

How Have We Helped Collection Agencies in the Past?

• Increased ‘right party’ contacts by 288%
• Increased agent talk time by 169%
• Improved answering machine detection by 45%
• Ready/idle time reduction by 43%
• FTE (full-time employee) reduction by 44%

With data analytics, these numbers keep getting better and better for collection agencies.

Data analytics provides organizations with insights that help maximize recoveries while running down the costs of collection.

It creates value for both the lenders and debtors and ensures happy interactions while ensuring compliance with the regulations.

The role of data analytics in debt collection will continue to evolve, and it will help create fair outcomes for all the stakeholders.

After all, every customer is a good customer, and they want to be on the right side of the law.