Self-Service Collections: A Smarter, More Human Approach

Debt collection is a fundamental process for banks and credit unions, but it can also be challenging due to the complexities of the industry. With consumer debt and delinquency rates on the rise, many industry players are navigating a difficult operating environment.

Aggregate household debt balances increased by $93 billion in Q4 2024 to reach $18.04 trillion, up by $3.9 trillion since the end of 2019.[1]

While much of this is being fueled by macro forces such as economic volatility, there’s a clear opportunity to modernize elements of what is within our control – the debt collection process. Specifically, the need for more customer-centric approaches.

Banks and credit unions have traditionally offered resources such as financial education and debt management programs to help clients manage their debts. But they are realizing the need to do more.

Addressing inefficient debt collection processes

Collections can be highly labor intensive, requiring a large workforce to perform an array of tasks such as contacting delinquent account holders, negotiating payments, and making sure compliance processes are adhered to.

Complicating matters, many financial institutions still rely on outdated collection systems and manual workflows, leading to inefficiencies and (not-to-be-underestimated) frustrating experiences for borrowers and lenders. This is critical because poor customer experiences can linger long after the interaction, potentially damaging trust in the company and, in the end, loyalty.

Adopting a comprehensive collection management system is a great starting point to address some of these challenges. But that’s just the beginning, with several trends shaping the way collections work today:

• Advanced analytics are now playing a key role in guiding the best course of action for managing accounts or account holders.
• Automation is improving efficiency, reducing collections teams’ workloads, and supporting compliance processes.
• Self-service channels are empowering account holders to be more proactive when managing their debt.

Empowering customers through self-service collections

It’s no secret that debt can be exacerbated by the sense of helplessness and lack of control felt by individuals, leading to continued inaction. Offering self-service capabilities can help to restore a sense of empowerment, giving customers greater visibility into their situation and, crucially, the ability to take charge of their repayments.

Specifically, self-service portals allow account holders to:

• Make payments at their convenience (within agreed timeframes)
• Set up and manage payment plans
• Schedule calls or request assistance
• Receive automated reminders and notifications

For financial institutions, self-service gives teams more time to address complex cases, provide personalized support, and explore value-added services. This helps to improve repayment rates while also driving efficiency and performance.

An inevitable shift to self-service

Self-service is fast becoming the industry standard and it’s clear to see why. Just as in other aspects of their lives, many of today’s account holders prefer to manage their finances on their own terms, often via mobile devices.

But even in a digital-first world, there’s a balance to maintain. Some customers still very much value the ability to talk to a human agent, particularly in complex financial situations.

At Temenos, we understand the challenges and complexities of the collections space. We’re equally inspired by the transformative role technology continues to play in reshaping how financial institutions serve their clients.

A recent innovation within our Collections solution is the Digital Collector, a self-service tool designed to streamline and humanize the debt collection process. Temenos Collections is part of our broader Lifecycle Management Suite, which supports every stage of the account holder lifecycle, from origination to recovery.

This reflects our belief that, when approached strategically, there’s more to debt collection than recovery; it can strengthen customer relationships and drive greater efficiency.

[1] https://www.newyorkfed.org/microeconomics/hhdc