Five ways banks can transform their collections processes

In our first article, we explored how banks have an opportunity to reimagine their debt collection techniques and strategies now, before facing a wave of non-performing loans (NPL) in the months ahead.

Now, in our latest article in this series, we examine five areas banks must focus on to reimagine the collections model in practice.

1.    Transforming the role of collections recoveries 

Transforming the collections model from a labor-intensive outbound approach to a loss-preventative inbound operation can drive greater operational efficiency and improve workforce capabilities.

This would fundamentally change the nature of the payment collections role – from frontline debt collector or administrator to financial advisor. In keeping their workforce engaged – and training them to display greater empathy and compassion to customers – banks can communicate with customers in difficulty in a better way, which will be critical to the success of an inbound campaign.

2.    Process automation is key

Banks will come under intense regulatory scrutiny to ensure the fair and consistent treatment of customers in the months ahead. Process automation and predictive analytics can help banks to remove human bias or arbitrary judgments from their decision-making processes. This is one way to help banks avoid regulatory fines.

Investment in the automation and streamlining of back-end processes, will significantly reduce accounting reconciliation and amortization challenges, which will ultimately impact banks’ balance sheets.

3.    Inbound digital channels

Banks need to show a higher level of understanding of their customers’ needs and situations, across every channel. By making greater use of their digital channels, banks can provide customers with notifications about debt modification options; for example, giving customers greater awareness and understanding of what a modification program involves and what they are signing up for.

An inbound campaign also relies on banks making better use of virtual agents and chatbots to answer some basic payment questions. As a result, when customers call their bank, the discussion will be more streamlined and efficient.

4.    Data: the power of knowing your customer 

By making better use of data to understand each customer’s situation, banks can apply this knowledge to a set of pre-approved, personalized debt solutions. The closer banks get to Q1 2021, the more certainty they will need about which customers are going to default or who will need their loans modified.

Banks already have a substantial amount of customer data at their disposal, but they must begin to use and apply it in a more effective way. This will benefit an inbound collections model by not only building a more satisfactory, personalized customer experience, but also boosting the likelihood of recovery returns.

5.    The next generation customer engagement model

An inbound model has the potential to create a powerful effect on the banking sector’s next generation customer engagement model. Investing in a proactive approach that treats customers uniquely and fairly holds promise for greater customer retention and increased customer satisfaction.

In practice, this means approaching customers in a compassionate, personalized way, seeking to understand their personal circumstances and how financial lenders can help. By applying predictive analytics to assess likely customer behavior and profiling their customer base, banks will have greater insight into real-time customer behavior in the marketplace. This will give them the confidence to pre-approve treatment strategies where appropriate.

This is an edited version of an article. You can read the full article here.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.