Reimagining Debt Collections: Top 5 Trends to Expect in 2022
Since COVID-19 hit, the lending market has grown exponentially. Lower disposable incomes coupled with rising unemployment rates forced consumers to turn to credit more than ever before. This meant that debt collection companies had their work cut out for them. As of September 2021, the US has an outstanding consumer credit worth $4,346.7 billion.
Rapid digitization has forced collection companies to switch from traditional methods of collection such as phone calls and letters to digital channels. A McKinsey survey indicated that as much as 73% of delinquent consumers paid up when contacted digitally, even before the pandemic. The reliance on technology has only increased since then.
As the pandemic has eased, US consumers have been rather punctual with paying back their debt. According to the American Bankers Association, consumer credit delinquencies in the second quarter of 2021 fell to 1.21%, the lowest since 1993. Though this may seem unlikely, better employment rates and federal stimulus has improved consumer financial health. While this has made it easier for debt collections, there were other challenges during the course of this time that they had to adapt to.
Debt Collection Future Trends
From omnichannel collection strategies and self-service tools to artificial intelligence-based collections management, the debt collections industry has transformed over the past 18 months. Going forward, many of these trends are likely to prevail through 2022.
Here are the top 5 debt collection trends to look out for in the coming year:
- Automated Outreach Processes
Until the use of technology such as Robotic Process Automation, debt recovery agents would have to manually reach out to customers, even for something as routine as reminders for repayments. Newer technologies have made it possible to automate such tasks. In 2022, more and more debt collection services will look to automation for repetitive tasks that will make the outreach process more efficient and allow agents more time to focus on difficult cases.
- Digital Channels Will Win
Millennials are the largest chunk of debt payers today. In the past 5-7 years, they have seen the biggest increase in their total average debt, at about 58%. A collection agent trying to reach a millennial customer, who relies more on digital services, through a phone call is likely to fail. Millennials prefer text messages, emails, and interactive voice response techniques. Moreover, stricter regulatory compliance surrounding phone calls which are now deemed to be excessively intrusive will further encourage collectors to switch to digital channels.
- Self-Service Will Increase Efficiency
Do-it-yourself self-service channels for debt collections fared well during the pandemic. Early adopters of a self-service collections portal saw considerable success, with customers finding it simpler to repay their dues with a single click. As per BCG, the number of collectors using self-service channels went up by 20% since the start of the pandemic. This will become an important competitive feature for debt recovery services when it comes to quick, efficient, and hassle-free collections.
- More Thoughtful and Intelligent Agents
As the use of automation increases, the role of collection agents will become more nuanced. Collections agents will have to be adept at gauging consumer situations and providing them with solutions that are feasible, encouraging, and more likely to show results. Automation will leave agents with more time to focus on complex collections. With all the extra time, agents will be put to task to come up with better contact strategies, personalize interactions, and leverage technology to ensure better collection rates.
- Artificial Intelligence Will Enable Predictions
If automation will help with easier collection, artificial intelligence and machine learning will aid with better recovery predictions and ongoing case management. Moreover, AI can also help with regulatory compliance. AI-based collections management software is bound to find higher usage in the coming year.
Conclusion
Collection agencies have to embrace technology, digitization, and smarter collection strategies to do better. Allsec’s smart debt collection services come with contact management, inventory management, segment analytics, and the latest technology to ensure higher hit rates. To know more, CLICK HERE.
