Debt Managment using AI / ML

Debt Management using AI/ML

The use of AI / ML has optimized Debt Management Process today. Financial Institutions are finding themselves heavily dependent on automated Collection Management Process. It has revolutionized the way whole collection management functions, affecting end-to-end Digital Collection Services & New Age Payment Management systems using unconventional Data & Innovative Algorithms.

During the times of Covid, Indian Market witnessed Consumer Debt rising as never before. As per sources, “Delinquencies in fintech consumer credit increased from 1.82% in Sept 2020 to 4.56% in Sept 2021. Among all categories, fintech has seen the highest increase in late repayments or defaults in 2021 and 2022 First Half. This in turn has resulted in increased cost of collection.

On time Debt Collection enhances organization’s revenue. It plays a significant role in deciding the profits of organizations. Due to this reason, increasing number of Lending Platforms are turning towards optimizing Debt Collection process through automation.

Let’s look at the business benefits of automated Debt Collection process:

? Increased Responsiveness: Automation allows customer support to access more data about customer and respond in a time bound manner with tailored solutions.

? Improved Delinquency Rate: Automated Debt collection minimizes risk of defaults & NPAs to a larger extent. It saves human errors including mistaken identity, repeated calls, lack of information about debts owed, failed attempts to collect debts.

? Debt Collection efficiency improves: With the help of automation, customers are divided into various segments. Then, ML analyses historical data, demographics of debtor and his debt amount. This helps in development of predictive models based persona segmentation which results in collection productivity.

? Optimizing contact through automation: ML now suggests best communication channel to contact a customer via phone, sms, email, whatsapp etc. It results in positive response from customer.

? Correct prioritization of recovery: Automation has helped in recovering debts in shorter time. AI algorithms can identify customers with highest propensity to pay.

? Regular Monitoring of customers: Automating processes generates dashboards which easily monitors customer accounts, actions & does analysis on data, in one place.

? Automatic Payment Reminders: Periodic reminders are useful in reminding customers their upcoming due date of loan payment. It helps in nudging customer to make payment on time, avoiding last minute rush and default by him.

? Correct Compliance: Appropriate Compliance can be taken against borrower who defaulted debt. In this process, an automated debt collection system ensures that the right procedures and relevant laws are abided by. Since everything is recorded automatically, it ensures that the lender also has the progress report of the borrower along with the entire compliance report.

? Risk Mitigation: Using AI/ML tools, meaningful insights can be gained of a customer such as his income, social status, pattern of expenditure, online activities. In case of emergency issue such as job loss, AI tools can alert collectors to proactively reach out to customer & offer him counselling support, restructured payment etc.

? Enhances Customer Centricity: Automated tools are designed to collect customer specific information like preferred mode of communication, preferred time to be contacted, tone of voice etc. Based upon this information, customized messages for improved responses and recovery. Customers also appreciate a tailor-made solution which takes into account their likes and dislikes and made just-for-them.

Automated Lending Platforms are the future drivers of debt management process. It enables Organizations to take informed decision and cut down delinquencies successfully. Research has proven that customers are capable of paying off their debts with right knowledge and right assistance. This requires intelligent analytical & decision-making tools. Today many Lending businesses are utilizing the power of automation to improve their revenue trajectory and its usage in Lending Industry has just started.