One of the most stressful aspects of banking surely revolves around debt collection. As borrowers’ financial circumstances fluctuate, an effective debt collection process becomes a cornerstone in managing delinquent accounts while fostering borrower relationships. To be well positioned to navigate the complexities of debt collections, financial institutions must be equipped to harness the power of technology, data, and center their collection strategy around the borrower.
In this article, we delve into five essential components that will help you optimize your current debt collection process. By embracing these “must-haves,” you can find an effective balance between recovering overdue payments and preserving borrower trust, shaping a more robust approach to debt management.
Effectively and consistently communicating with borrowers can have a significant impact in retrieving payments or at least getting a response. Since the goal is collecting a payment, effective communication can help you learn more about the borrower’s circumstances so you can provide more tailored support. More than that, it shows your borrowers that you are committed to understanding their needs, creating a sense of transparency and trust. And financial institutions benefit from constant communication by being informed about any changes.
It’s also important to note that in this era, a letter in the mail or a phone call are not the only ways to communicate with a borrower. Taking an omnichannel approach will allow you to meet borrowers wherever they are and speak with them in a way that makes them feel comfortable.
2.Offer Easy Payment Options
It’s safe to assume that we are all glad we no longer have to pay bills by handwriting a check and mailing it back to the sender or calling the company to pay our bills over the phone. The ability to pay these bills online helps to do it in a timely manner, because we can do it in a more convenient way. The easiest way to ensure you recover funds is to make paying as easy as possible. There is an abundance of payment processing services that can integrate into your collections software to make this possible.
With current economic conditions, borrowers may be having more trouble paying their debts. A change in payment activity could be due to a recent lay off, poor health, or unforeseen bills. Showing empathy during your borrowers’ financial hardships can help you build trust in the relationship and create an environment where collaborative solutions for overdue payments can be explored together.
Automating some administrative processes and allowing them to be handled by a platform’s workflows and rules engine will give your staff more time to listen to and understand your borrowers’ circumstances.
4. Centralize your data
I’ve worked with many banks and credit unions whose data is stored on multiple spreadsheets and paper files. Employees are forced to sift through aging reports and various files for information, which can lead to errors, inefficiencies, and a negative experience for everyone involved. Without a single source of data, your debt collection efforts are more likely to be disorganized and lead to disjointed communication between lenders and borrowers.
Using a platform that enables visibility to all account information from a single repository system, can help you identify trends, segment borrowers effectively, and tailor communication and repayment plans to individual circumstances. This also reduces data silos, manual errors, and ensures consistent and accurate information across all stages of debt collection.
A comprehensive view of borrower information, including joint and consigner relationships to name a few, can also help increase resource productivity by providing visibility to multiple relationships and accounts at the same time in the workspace. This view typically includes configurable screens that will allow you to access payment history, past interactions, delinquency details and other information empowering you to create a more strategic approach to debt recovery.
5. Spend more time with borrowers and disputes
How much time do your employees spend working on tedious and redundant tasks like data entry, figuring out who to call, and searching for borrower information? Every minute that is spent on these manual tasks is one less minute that could be spent engaging with your borrowers to settle disputes. Having a solution that provides a single system strategy supported by integrated services, core processors, and automation will give your team the ability to put more effort into the actual debt recovering conversations and resolutions.
For example, being able to use the same platform to track specialty processes such as bankruptcy, repossession, fraud, troubled debt restructuring, etc., will help eliminate the use of spreadsheets and emails to manually document current procedures and save your team time on tedious tasks.
Also, by providing easy access to data visualization tools like reports and dashboards, the collection managers can quickly access the key decision-making information including capabilities to rank, rate and measure collection activity based on critical criteria the time spent with borrowers is more effective and valuable.
This also empowers your stuff to balance what is best for your institution in terms of efficiency or specific technologies, regarding how it is impacting the broader landscape and community that you serve.
Incorporating these five essential components into your debt collection strategy lays a solid foundation for successful debt recovery while maintaining positive borrower relationships.
How Can Temenos Help
Temenos Collection is the industry’s leading full-featured collection management system and is the right fit for any financial institution interested in reducing delinquency, improving efficiency of collection efforts, and streamlining specialty processes.