How AI helps tech win at financial debt collection by understanding humans better

By Anand Agrawal, Co-founder and CTO, Credgenics

There is a dramatic shift underway across debt collections with a combination of advanced technologies disrupting numerous industries. AI is at the forefront of such technologies, with its tremendous potential to reimagine existing approaches to problem solving. Across the banking and financial services industry there are numerous interesting use-cases — from enhancing customer journeys to personalizing experiences and boosting productivity to enabling informed decision making.

Converting Challenges to Opportunties with AI

A majority of lenders have traditionally relied on manual efforts and crude tactics to get defaulting loan borrowers to pay. Outsourcing recoveries to unprofessional agencies, who operate mostly with calling and field agents with the least concern for borrowers’ interest, is another widely prevalent approach. In most cases, the collections mechanisms have been applied in bulk without a need to consider relevance or applicability to specific borrower persona or behavior. The results have been sub-optimal with a lot of inefficiencies, excessive use of manpower, unhappy borrowers, and lower productivity.

Traditional customer-contact mechanisms – physical letters, emails, and phone calls – are examples of a one-sided, one-size-fits-all approach. The challenge, or rather the opportunity, lies in identifying accurately the customer’s risk quotient, financial challenge, the propensity to pay, responsiveness to various communication modes, and the likely response to a tone of message, and finally adopting it as a part of a tailored collections strategy.

Personalized Customer Experiences with AI

A combination of AI tools and ML-based intelligence helps solve this puzzle and enables lenders with a holistic, accommodating, and borrower-centric yet efficient mechanism. With customer segmentation, communications can be personalized with relevant information and vernacular language adaptation. AI provides insights into strategies that have worked well, and how to best deploy them to get optimum results.

For example, borrowers in the pre-due, i.e. before the payback due date, stage may need to be just gently reminded or nudged digitally on their preferred channel about their upcoming due payments. At a certain stage, borrowers may need to be provided instant handholding with clear information and direct payment links to help them repay. Customers that exhibit or are likely to exhibit behaviors signaling delinquency can be contacted earlier, avoiding bigger issues further down the line.

Emergence of Effective Communications Strategy

Thanks to AI, lenders can easily identify the best channels to reach customers on and automate the entire collections strategy with minimal human intervention. AI systems can recognize and implement the best mode of communication for different types of borrowers, allowing for optimum customer involvement. Cross-platform connectivity enables highly effective deployment of numerous communication channels, that include WhatsApp, SMS, Voicebots, Chatbots, IVRs, and Emails, allowing the most impactful strategies to be tailored for borrowers.

Borrowers Prefer Interacting with Debt Collection Bots

During debt collectors’ calls, people are at times embarrassed and uneasy, which is why many people prefer to speak with a voicebot instead of a human agent. Many customers prefer to communicate about their financial situation via digital messaging channels. Multilingual and intelligent voicebots powered by AI can capture the borrower’s intent to pay during calls and allow borrowers to choose their repayment approach to loans.

The customer’s response to the call can automatically trigger a text message / WhatsApp message with direct digital payment links, while the bot continues to assist them in successfully completing the transaction. It offers borrowers a convenient way to manage payments 24/7 around their schedules.

When lenders use a debt-collection bot for collections, the call efficiency increases significantly because these bots can interact with customers more effectively than humans. Bots can reach out to customers, streamline payments, and automate reminder communications without the need for human intervention. There are many such cases where a combination of intelligence, machine assistance, and personalization can make a huge difference in outcomes.

AI improves agent-borrower engagement with timely and contextual calling, which makes reaching out to borrowers more productive. Here, technology plays a significant role in assessing the borrower and making accurate assumptions, thereby improving the productivity of agents as well as their success rate in connecting with consumers.

Technology will continue to shape debt collections in the coming years

Technology is at the forefront of reshaping almost every part of our life. Debt collections is no exception. AI can not only dramatically improve debt-collections performance but also transform the borrower’s experiences tremendously. The ability to add a combined layer of intelligence, automation, data-driven insights, machine learning, and behavioral science to understand customers better and align actions accordingly is essential to stand out in today’s hyper-competitive world.

It helps to adopt a futuristic approach to make informed decisions, treat each case / borrower as a unique individual and logically automate the process. Lenders who focus on customer experience rather than plain debt collection are forging deeper customer relationships and are already looking a long term results rather than short term gain.