Many creditors work hard to maximise debt collection performance by closely managing their collection teams and Debt Collection Agencies (DCAs). TDX Group research highlights that creditors’ hard work could be undermined by a lack of flexibility in their recoveries infrastructure and systems.
We take a look at five of the key challenges.
1. Difficulty with adding a new DCA or switching DCA allocation
A common complaint of many recovery managers is just how difficult it is to take-on and integrate a new DCA. The addition of a new DCA usually requires changes to internal systems and access to IT development resource. This is often easier said than done – especially if development resources are shared and the recoveries system is not considered an internal development priority.
Our research highlighted this is the top reason why creditors avoided engaging new agencies. Some creditors even admitted to having no option but to tolerate poorer performance, rather than go through the laborious task of switching.
Even if a DCA is already on the creditor’s system, it can still be difficult to change the rules which define the amount or type of debt the DCA receives. This removes an important performance management tool for creditors.
2. Failure to track and reconcile accounts
It is impossible to execute timely and effective recalling and recycling of accounts – the movement of an account from one DCA to another – if the current status of the account is uncertain. Yet this unnecessary problem is exactly the challenge many creditors experience with their recoveries systems.
In fact our research identified that, because of this issue, some creditors have large numbers of accounts which are stuck in a state of ‘limbo’, where no collection activity is being undertaken at all.
3. Inability to test new collection strategies
A key feature of top-performing debt collection teams is the continual ability to develop, test and execute new recoveries strategies. Unfortunately many systems struggle to support testing – especially the setting-up and monitoring of multiple test and control groups.
Systems need to provide the flexibility to append new external data sources, adjust portfolio segmentation rules and support detailed performance tracking.
The inability of systems to support the development, testing and application of new strategies can severely hinder the opportunity to maximise collections.
4. Poor query management
Perhaps the greatest cause of customer dissatisfaction is the failure to react in a timely manner to queries and complaints.
Much of the debt collection industry continues to rely on manual processing of queries between the customer and the different organisations involved in the recoveries process.
Apart from obvious reputational and regulatory risks, creditors also incur the cost of managing the resultant operational activities.
Our research also found that failing to respond to queries impacts the ability to collect. Recent trials have shown that automated query management can increase collection levels on these accounts by as much as 400%.
5. Lack of data and insight
The importance of having access to good data to drive insight on performance cannot be over-stated. In fact, this insight is the enabler for all other performance enhancing activities.
Unfortunately, many creditors complain they are ‘flying-blind’, hampered by the inability of their systems to deliver quality management information. When data is available it is often only a historic view, which restricts the ability to forecast and manage ongoing DCA performance.
Furthermore many creditors’ systems are unable to receive or interrogate DCA activity-level data, which shows what specific collection activity has taken place on a particular account. As a result creditors can not directly control or track the activity being applied to their accounts.
Jason Incles, Head of Recoveries Management at TDX Group says, “Creditors are realising that the opportunity exists to access industry-leading infrastructure without having to commit significant upfront investment. This allows them to achieve what they had previously thought was impossible – greater capability and more flexibility, at a lower overall cost.”
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