Cash-flow is the heartbeat of most organisations. Without access to secure working capital, it is difficult for businesses to operate effectively on a day to day basis. In the long-term, poor cash flow can impact more than just the operational efficiency of the business. It can also affect relationships with suppliers, increase employee stress and cause businesses to miss sales opportunities. As such, the management and collection of debt is an important activity as this ensures that sales are converted into cash as quickly as possible.Yet, for most organisations the debt collection process is still a labour intensive process and one that has been neglected when annual technology budgets are being allocated. In comparison, over the last couple of years, there has been a lot of news about technology that disrupts processes that have been traditionally human-centric. In this article, we look at some of the new technologies that will help make the collections process more efficient and effective.
The Evolution of the Debt Collection Process
For many organisations, the collections process still involves running a daily aged debt report, exporting it to a spreadsheet, and then manually compiling a list of debtors that need to be contacted. In the case of a collections team, this information needs to be split between different team members which quickly leads to information becoming fragmented and siloed.
Over the last 30 years, there have been significant improvements in the debt collection process. For example, the introduction of accounting systems that include an Account Receivables module has removed the need for a manual debtor ledger to be maintained. Further, the Accounts Receivables module has been enhanced with features that especially support debtor management and the collection of overdue debt. These features include account overview screens for a consolidated view of the account, calculation of collection metrics (e.g. daily sales outstanding, last payment date, number of broken payment promises, etc) and the capture of collector notes. There has also been the introduction of features that semi-automate day-to-day tasks like the creation of collection strategies for outbound communication and overnight batch job to generate collector work queues.
Have all of the above features assisted in making the debt collection process more efficient? Well, yes – and that is great. However, the time has moved on and it now feels as if organisations are still using software and processes that were available in the early 2000’s.
An example of this is that approximately 15 years ago the Enterprise Resource Planning (“ERP”) software Oracle E-Business Suite introduced an Advanced Collection’s module. This module supported debtor scoring, automation of collection strategies, and the ability to generate batch dunning communication (e.g. letters, emails). However, little has been changed since that early release – so if you were to implement Oracle E-Business Suite Advanced Collections today, you would still be using features that have not significantly improved for 15 years.
Another example is that many collectors are still tied to their computers – whether that is a desktop in the office or a laptop that allows them to connect back to their company network. As a result, a lot of manual preparation is required if they wish to perform onsite account reviews with their customers. That is, debtor reports are likely to be run and exported, invoices are likely to be printed and compiled, and account notes saved down to their laptops prior to going to visit a customer. In comparison, they have instant access to personal information using their mobile phones or tablets.
In the last five years, there has been a significant shift in the technology landscape which if harnessed, could transform the collections process. The likes of mobile apps, big data, artificial intelligence (“AI”) and even blockchain have been embraced by various industry sectors to make processes more effective and efficient. We think that the time is right for the collections process to embrace these technologies to have a timely makeover.
#1 – Mobile Technology
A smartphone is now a ubiquitous gadget of modern life and this offers a great opportunity for a more effective collection process. Many people have their phones with them nearly round-the-clock which increases the likelihood of contact. Access to mobile payment apps means that payments can be actioned at the moment which increases the likelihood of successful collection.
Here are some benefits of using mobile apps in the collection process.
Working On The Go
Debt collection apps allow employees to work anywhere and anytime as collection related information can be exposed to mobile phones and tablets. This allows collectors to be more productive if they are out of the office for onsite account visits or have flexible working arrangements.
Mobile Reporting Gives More Power To Staff
When staff has more information and data at their fingertips, any industry is destined to be more efficient. With mobile technology, staff uses a mobile device to share key information with their customers in face-to-face meetings. No more shuffling through paper printouts or navigating through spreadsheets!
Individual Account Management
A mobile app will allow you to display and update individual account information quickly and securely.
Debt Collection Via Payment Apps
The use of a mobile banking apps or payment apps can assist when collecting outstanding debts from consumers. There is no need to visit the bank, log onto a website, or ‘put the cheque in the mail’ as consumers can make payments from their mobile devices.
Messaging Is The New Form of Communication
There is now a generation of debtors where ‘messaging’ is a more common method of communication than using a phone to make a voice call or sending an email. If you are chasing debt from a generation that is mobile-centric then it is likely that you will need to contact them using more modern forms of communication.
#2 – Artificial Intelligence
In 2015, the BBC said that “real Artificial Intelligence is yet to arrive”. Fast-forward to 2018, and Artificial Intelligence has arrived – and it proves to be extremely useful to the debt collection process.
Artificial Intelligence (AI) is “machine learning”. In other words, machines have developed the ability to learn things that will empower humans and businesses the world over. AI uses algorithms to store data before making a prediction about something – such as when a debtor is likely to pay.
The following are examples of how AI could be applied to the collection process.
Augmented Intelligence is a branch of AI that carries out tasks which are wholly impossible for humans to perform. For example, consider the recommended viewing that Amazon Video suggests when you go to search for a movie. In the background, AI is using your mixture of customer demographic information and your profile overview to suggest content that you may wish to watch in real time.
Where the debt collection industry is concerned, if a collector could use real-time analysis to help them steer a conversation with their debtor in the right direction, it can improve the relationship and may speed up the payment process.
In recent years a small number of FinTech startups have started to emerge that are focused on embedding Augmented Intelligence into the collection process (e.g. True Accord, Collect AI). A good example is a startup called DialogTech which has machine-learning algorithms that study caller behaviours to work out how best to handle customer calls.
Autonomous Intelligence is still largely under development but aims to have machines act on their own without human interference. Although the media is focused on self-driving cars and fridges that reorder food there are clear areas where the collection process would benefit from Autonomous Intelligence.
A good example is the introduction of automated intelligence into the debt collection cycle so it can continuously learn and improve the debt recovery process. That is, debt collection strategies would become dynamic to reflect the individual debtor’s preference, as opposed to a static ‘one size, fits all’ approach that has been historically implemented.
Intelligent Virtual Assistants
AI has moved forward so quickly that it is now possible to ‘hire’ a machine based virtual assistant as opposed to a human virtual assistant. In other words, AI assistants can support collection agents in the debt collection process in order to make the process more efficient.
How? Intelligent virtual assistants allow agents to cut down on time spent unproductively. The average agent makes a lot of calls throughout the day, and while some of them will be successful a lot of them won’t. Intelligent assistants can help to automate self-service so that agents are free to focus on calls that matter.
Virtual assistants can also deal with outbound dialling, communicating with consumers to gather their payment information while setting up payment arrangements and more. And because virtual assistant is available 24/7, debtors can make payments at a time that suits them.
#3 – Blockchain Technology
The rise of cryptocurrencies – both the number available as well as the financial returns – have dominated the financial headlines in 2017. However, underpinning the various digital currencies is blockchain technology. In 2018 the news is becoming more about the application of the underlying technology to industries other than currencies. How can blockchain technology be applied to the collections process?
Precise and Secure Data
The present way that credit card companies and banks store personal customer information isn’t transparent and it’s open to hacking. In contrast, blockchain technology is decentralised, which means that it’s more secure, harder to hack and more transparent. This means that it’s a lot easier for collection teams to keep track of what is actually true – in other words, who has signed and paid for what and when.
This improves customer trust, and it’s an important point. Due to the sheer amount of personal data breaches in recent years, customers might be wary of providing alternative methods of payment. Because blockchain technologies are globally distributed digital ledgers and are decentralised, committing fraud and hacking into a blockchain is almost impossible without most of its members working together to tamper with the system. This bolsters their security and can help to build trust among customers.
Blockchain has already been called a “new architecture of trust,” and that’s largely because, as well as boosting efficiency and eliminating middle men, blockchain technology focuses on establishing a long-term human relationship between the company and their customers.
Fraud Can Be Avoided
Fraud costs the UK economy approximately £193 billion a year – equating to more than £6,000 lost per second every day. Due to blockchain technology being more secure it should be able to reduce the level of fraud in the collections industry.
Blockchain Gives Us More Choice
Blockchain can – and is – changing the way that business is performed. Customers have the power of choice when it comes to getting credit. Peer to peer lending is one example. Its aim is to establish a peer to peer, digitalised community that has more on-time payments and fewer loss factors. As this becomes more mainstream it will have a positive impact on how organisations credit score their customers and reduce the level of bad debt.
Although some of the above technologies feel relatively new they are starting to be adopted by many industries. In particular, labour-intensive processes are becoming automated, customers are expecting more transparency and security, and most people now expect to be able to work on the go. We believe that a combination of these technologies will be key in transforming the collection of debt and provide the process a much-needed makeover.