6 Pillars of a Customer-Centric Debt Collection Strategy

Understand the six most critical elements of building a customer-centric digital engagement debt collection strategy. Fueled by your existing data and insights, plus the power of financial literacy.

The first two blogs in this series focused on the importance of data collection and how data interpretation and analysis can inform your digital collections strategy. This final blog explains how to execute an effective debt collection digital engagement strategy. These five actions will help you leverage your data and insights to create a customer-centric digital debt collection strategy:

• Monitor insights that inform you of your customers’ financial health
• Create digital touchpoints that keep customers engaged
• Make customer action simple and straightforward
• Track every customer interaction for regulatory compliance
• Use test and control strategies to optimize success rates
• Invest in financial literacy training to your collection agents.

How to Create a Customer-Centric Digital Debt Collection Strategy

1. Monitor insights that inform you of your customers’ financial health

“Knowing” your customers involves going beyond the data that you have on file. Effective engagement hinges on also understanding how the customer’s situation—and their resulting behaviors—have changed since origination.
To use a credit card portfolio as an example, you can consider how understanding a customer’s payment patterns could help you determine if that customer’s financial situation has changed and is at a high risk of delinquency. If a customer’s utilization percentage continually increases, whereas they previously were a full balance payer, this could be indicative of a change in their circumstances.  That information combined with a bureau score that has significantly dropped since origination or from the last score refresh are two telling data points that display potential customer-facing affordability issues.

From our previous blog, remember that to analyze these patterns, you’d need to regularly refresh data and set up that data to trigger a pre-emptive review. Always ensure that all customer touchpoints are compliant with regulatory mandates.

2. Create digital touchpoints that keep customers engaged

Look at your strategy from your customer’s perspective—build it so that it positions your debt as the highest priority of their other debt responsibilities. You can strengthen trust by soliciting your customers’ feedback regularly, not just when they fall behind.  There are several ways to achieve an engaging digital customer experience, however at a minimum we recommend the following:

• Regular communications with your customer before they fall behind based on their contact preferences and spending behavior.
• Promotional offers, building customer loyalty.
• Customer satisfaction surveys and feedback solicitation.
• Portals for online payments
• Asking how a specific experience is rated during a previous call, branch or online interaction.

Doing so allows you to proactively gain insights into their financial condition, including any potential changes in their ability to pay their debt.

3. Ensure that taking customer action is simple and straightforward

Keep every customer interaction simple, easy to understand, easy for customers to respond and easy for them to ACT.  Ensure that your contact strategy is clear on the call to action for the customer. To do this, examine other types of customer responses—beyond making payments—that can bring successful outcomes. For example, ask questions that determine a customer’s ability to pay so that you can offer more affordable payment options or refer them to a debt counseling service.

4. Track every customer communication that can be audited for compliance

Communications must be personalized to the consumer’s situation and also be in compliance with CFPB’s Debt Collection Rule. Make sure that you have guardrails in place to accurately track all contact touchpoints and responses. Doing so protects you in case of an audit. You’ll be able to demonstrate how, when and why customers were contacted.

In addition, make sure to determine upfront which data you must provide as part of a regulatory or internal audit. The second blog in this series, Five Steps to Make Debt Collection Data Analysis Work for You and Your Customers, underscores the importance of defining all use cases as you set up or refine your data collection operations. If you set up your processes and guardrails correctly, you can more easily access and extract a subset of the required data for your internal review process prior to an audit.  This type of approach (forward thinking) will undoubtedly position your organization successfully with the regulators in addition to providing a positive customer experience

5. Incorporate test and control strategies to optimize your debt collection success rates

Implementing testing and control strategies—and using the resulting insights—is a proven method for increasing digital contact success rates. A successful debt collection strategy is one that you monitor, measure and adjust on an ongoing basis as your customers’ situations and behaviors change.

6. Invest in financial literacy training to your collection agents

When a customer is in financial distress, an effective digital engagement strategy should offer more than hardship programs, but also education.  Financial education helps customers better understand their options and avoid poor financial decisions, especially during significant life events. Equipping your collection agents with digital financial literacy training benefits the customer but also enhances the agent’s ability to empathize and communicate effectively.

Many collection agents may lack personal experience with the financial struggles their customers face. This can make it difficult to explain financial terms or offer support during stressful life events. In our experience, there’s a gap in how industry knowledge is delivered to front-line associates, particularly around understanding and addressing customer challenges.

To bridge this gap, Bridgeforce and CBS Academy have come together to create next-generation digital training, tools and resources that help collectors’ and consumers’ understanding of life events, lending, personal budgeting, and sound financial habits.  By providing a digital, self-guided overlay of financial literacy training, you empower your collection team to engage with customers in a more empathetic and informed way, fostering a truly customer-centric environment.

We offer training for your collection teams and your customers. Click here to learn more.

If AI and machine learning aren’t a part of your organization’s current product roadmap, start thinking through how to implement them now. In the meantime, by continuously measuring and analyzing customer response rates, you’ll be able to improve performance and identify opportunities to enhance your operational support model. Knowing which metric is being tracked (e.g., the “propensity of open to pay rate”) allows you to effectively measure the model results. Lastly, as with any new strategy, first use a subset of data to test the results against the control group.

A Customer-Centric Digital Debt Collection Strategy Can Transform Your Organization—Don’t Fall Behind Your Competition

We have seen across the industry that for these strategies to work, organizations have recognized the transformational potential of digital collections and invested accordingly.

However, as you know, collections and debt recovery teams are often the last in line to secure investment funding of new technologies and processes. Unfortunately, even with business case ROI projections, collections transformation projects can fall behind other strategic initiatives. As a result, the disparity in an organization’s systems and manual processes tends to grow wider over time, resulting in a much higher spend for the (inevitable) transformation in the future.  Evaluating the gaps in your collections strategy and identifying existing enterprise tools available in your organization should be part of your strategic planning.

We recommend creating an ROI business case for investing in new technology that covers all gaps in technology and tools, from data analytics and predictive technologies like AI to more traditional relationship management tools such as Customer Relationship Management. While it is an activity of magnitude, a solid business case can reap rewards down the line.

You don’t have to go it alone; we’ve helped clients with this endeavor as well as serving as an independent, agnostic guide to select the right-fit technology.

[Editor’s note: this article was written by Jackie Sullivan, former Bridgeforce Senior Program Manager]