Phone calls and letters have been the lifeblood of the collections industry for generations, and they still retain that central position at most firms. Yet those time-honored communication methods have declined in importance among consumers since the turn of the century, especially over the past decade.
Many consumers now expect companies to reach out to them instead through digital channels. Email, text messages, push notifications, and even social media private messaging typically meet with less resistance than calls or physical letters, and give better returns. Integrating these into a full-blown digital debt collection strategy, at the enterprise level, increasingly looks like the future for the industry.
In this article, we break down what collections teams need to know about the shift to digital-first strategies.
The Case for Digital Debt Collection
Any discussion of digital debt collection should begin by defining the term. For the purposes of this discussion, we’ll speak of collections processes and communications as “digital” if they take place on electronic devices, and through apps, social media platforms, or websites. This excludes contact through telephone calls or physical mail, but includes texts, push notifications, pop-ups at ATMs, and social media outreach.
A primary reason for embracing these communications channels can be summarized as “meeting consumers where they are.” Research carried out by the McKinsey Company has shown that not only do many consumers favor these novel communications options, but they are also more likely to respond positively when approached through their preferred channel. Favorable outcomes (full or partial payment) were consistently higher for digital communications than traditional communications.
It should be noted that digital debt collection involves two-way communication. Attempting to use digital communication channels as a means of driving debtors to reach out by telephone, or visit a physical location (in the case of first-party collections) negates the digital channel’s effectiveness. Consumers must be given numerous all-digital avenues for responding to your communications, including automated options for making payments or payment arrangements.
Establishing an Omnichannel Collections Strategy
The benefits of a digital-first, omnichannel collection strategy are potentially significant for both first- and third-party collections. McKinsey’s research shows not just improved response and payment rates with a digital-first approach, but significant uptake on self-serve options for payment. The net effect is a significant improvement in ROI for the entire collections process.
When Regulation F came into effect at the beginning of this decade, it provided long-awaited guidance on the use of electronic communications in the collections industry. While some practical details relating to the use of digital channels are still being worked out in the courts, Regulation F has in effect opened the doors to a true omnichannel collection strategy.
The effectiveness of traditional collection tools such as telephone calls and physical letters has eroded in recent years. The experience of the marketing industry indicates that consumers expect and reward personalization, digital-first outreach strategies, and self-service options. Digital debt collection, then, must be thought of as part of a larger reorientation of collections into a more customer-focused model.
Realigning Collections on a Consumer-Focused Model
Establishing a new paradigm of customer-centric business management represents a sea change in the collections industry. Consumers on the whole have experienced collection as an unpleasant and adversarial process, and the frequency of collections-related scams reinforces that negative impact.
Reimagining the collection process as an inevitable part of the overall customer journey (and a factor in customer retention) is a natural evolution for first-party creditors. A loyal customer may spend with a company for decades, but an unhappy collection experience caused by transient financial difficulties may often result in losing their future business. The benefits for third-party collections professionals are less obvious, but still tangible. An agency that can demonstrate a high level of successful recoveries, with a reduced risk of losing customers long-term, is in a strong position to market its services to consumer-focused enterprises.
Making this kind of structural and cultural change requires extensive planning, to ensure that branding and messaging remain consistent across channels and communications. Some changes may need to be made to the software stack in order to accommodate interactive communications across multiple channels, new payment options, and self-service tools such as chatbots; so input from the in-house IT team (where applicable) or outside software vendors is also usually necessary.
Constructing the Digital-First Collections Experience
Each first-party creditor or third-party agency will have its own set of priorities and emphases in creating this revamped digital debt collection experience, but some examples can be introduced here to outline the broad strokes of the process.
Establishing a Consistent Cross-Platform Presence
A company’s digital channels (website, social media pages, blog posts, app) should be consistent from top to bottom in their visual style, messaging, branding and – insofar as it’s possible across devices and operating systems – share a consistent interface. Consistency reinforces branding, and helps create an air of professionalism and competence.
Resetting the Collections Narrative
Changing consumers’ perception of the collections process, and more crucially, the reality, is a long-term project. Using your company’s website and social media presence intelligently to reset that narrative is crucial. For first-party creditors, it can easily be presented as part of the overall customer service package. For third-party collection firms, proactively creating an online presence as a source of reliable information on all things debt- and collections-related can give consumers familiarity with your name and branding. This familiarity becomes an asset when it’s necessary to make contact regarding a debt.
Useful points to stress in this kind of messaging might include:
- Humanizing the collections process, by profiling individual agents or having agents explain how they work.
- Collections-related “myth-busting.”
- Describing the collections process in positive terms, as an aspect of customer service. The messaging (however it’s delivered) should position the collections team as customer service professionals, helping consumers restore their credit and “get back the life you deserve,” or similar language.
- Explaining how the credit-rating system works, and how repayment benefits the consumer’s credit score.
Fostering a Consumer-Centric Culture
Note that these changes must be accompanied by a cultural change throughout your collections team. A commitment from the top to a service-oriented approach will fall flat if it isn’t accompanied by a similar commitment from frontline agents. First-party creditors, for example, might bring in trainers from the customer service team to train collections personnel.
Consumers are quick to recognize, and publicly call out, any discrepancies between a company’s branding or stated policies and its actions. Choosing to “talk the talk,” so to speak, requires a commitment to “walking the walk.”
Enabling Individual Agents to Have an Online Presence
Some of your collections team may prove to have a knack for communications and social media. Those agents should be given opportunities to maintain their own online presence, where they can share tips and experiences, correct misinformation, and accept incoming private messages from consumers they’re actively working with.
It’s an opportunity for them to demonstrate their expertise and empathy, provide links to information and payment options on the company’s main site, and also issue low-key invitations for debtors to voluntarily establish contact.
For compliance and accountability reasons, those individual accounts must be monitored and their posts should ideally be archived. Agents should be given clear visual and content guidelines to ensure consistency with the company’s broader branding and messaging.
Verifying Debtors’ Communications Preferences
It’s possible to make educated assumptions about which communications channels are likeliest to work for a given segment of your clientele. The McKinsey research cited earlier provides some information on debtor preferences within select specific demographics, and other sources such as Pew Research can be used to determine which demographic groups are most active on the various social media platforms.
Those broad-brush generalizations represent a helpful starting point, but don’t represent true personalization. First-party creditors have the option of requesting their customers to state a preferred communication method when making an initial purchase, setting up an account, or installing an app. Third-party creditors can make the same request when making initial contact, and then pursue any follow-up communications through the debtor’s preferred channel.
Expanding and Personalizing Digital Outreach
Email is the form of digital outreach that’s best established within the industry. First-party creditors have the option of setting up push notifications through their app, or pop-ups on their website or ATMs. SMS text messages are on the rise with both first- and third-party creditors, driven by the medium’s high success rates in conventional marketing, and social media private messages are currently less utilized but hold great potential.
Push notifications and ATM popups are easy to implement because in those instances the debtor is already using the company’s app or products. Email, text messages, and social media private messages are more problematic, because the debtor’s known contact information may be outdated or incomplete. Identifying additional numbers or emails increases the likelihood of finding the consumer’s current or most-used address or telephone. The same is true of the debtor’s social media presence, with the added complication that those accounts may be anonymous or pseudonymous. Connecting them definitively with a specific consumer is a non-trivial exercise.
A final consideration is that, as discussed in the McKinsey research previously cited, consumers expect personalized, informed communication from the companies they deal with. The data on file may or may not paint a clear picture of the individual consumer. Sourcing additional data to complement what’s currently available can be genuinely helpful in forming a more complete picture of the debtor, for both first- and third-party collections.
Spokeo for Business Empowers Digital Outreach
Spokeo for Business’ powerful search capabilities makes it an exceedingly useful tool for any company planning a transition to this kind of digital debt collection strategy. Its algorithms require just moments to search billions of data points, drawn from over five thousand sources, to make connections between consumers and information about them. These data sources include government records, open-source data, and publicly available information from selected private data partners, and regulated financial-industry data similar to that provided by the collections industry’s legacy data partners.
A Spokeo search using the debtor’s known information (last known address, phone number or email of record) will typically return additional data. This may include both newer and older addresses, previously unknown email addresses, and any additional phone numbers associated with the consumer. Spokeo’s algorithm identifies the numbers and emails most likely to be currently active and in use. You’ll also find additional information that can include employment data, property ownership, suspected family members, and even more.
Spokeo’s search results will also report any social media accounts connected to the consumer through those phone numbers or emails across 120+ different platforms. This is an exceptionally useful feature, in part because those accounts may become viable communications channels and in part because of what they can reveal about the location of the debtor and secured collateral.
A collections professional browsing the consumer’s public posts can quickly develop a communication approach that the debtor may be more receptive and responsive to than traditional collections techniques. Spokeo was launched initially in 2006 as a social media aggregator and maintains its leadership in this specialized search niche.
Closing the Loop with Self-Service Options for Debtors
Creating self-service options for consumers is the final step in creating a truly digital-first, omnichannel collections experience. Consumers who favor arms-length communication through digital channels such as email, texts, and private messages should be given opportunities to complete their interactions with your company through similar means.
These options should include some combination of interactive AI-powered chatbots for 24-hour assistance, the ability to reply directly to a given email, text, or social media private message, and, most importantly, methods to make payments or set up payment arrangements that don’t require speaking to a human within specific hours.
The goal is to reduce “friction,” which simply refers to any step or policy that places even a modest or incremental barrier between the debtor and the successful payment. This includes opening the door to additional payment options where needed, including PayPal or online wallets from companies such as Apple and Google.
Building Out a Digital-First Collections Experience
Creating a detailed guide to digital-first collections is beyond the scope of this article, and no such guide could be universal in any case. The goal was rather to make a case for this consumer- and technology-centric approach to collections. Bringing about such a fundamental procedural and cultural change requires a significant degree of commitment, and won’t happen overnight.
Acquiring the necessary software tools along the way will be a fundamental part of the process. That may include upgraded call management, text management, and email management software, an investment in AI, and coordinating with your IT team or outside IT contractor to plan implementation.
It also includes upgrading your data sources, and adding new tools like Spokeo for Business to complement the more limited information available from legacy data providers. Note that Spokeo for Business has a powerful Application Programming Interface (API), so your IT people can easily integrate it with your existing systems and data providers.
For a deeper look into Spokeo for Business’ capabilities, to arrange a demonstration, or to request a no-cost trial, reach out to our team through the contact information on our Collections/Skip Tracing page.
Sources
McKinsey Company: Going Digital in Collections to Improve Resilience Against Credit Losses
McKinsey Company: Holistic Customer Assistance Through Digital-First Collection
Forbes: The Personalized Customer Experience: Consumers Want You to Know Them
California Management Review: What is Customer-Centricity, and Why Does it Matter?
US Consumer Financial Protection Bureau: How Do I Tell If a Debt Collector is Legitimate or a Scam?
Tech Report: 37 Fascinating SMS Marketing Statistics and Trends for 2023
Pew Research: Social Media Fact Sheet