It’s fair to say that consumers don’t like dealing with collections agents. That’s not to say that most of them don’t or won’t pay their bills, but rather that they simply don’t like getting the collection calls.

Providing the means for customers to get up to date without dealing with an agent can be far more effective than traditional methods in terms of both collection rates and costs. Being able to pay over the Internet, through a mobile app, or via text message are very important ways to enable customers to manage their payment plans, especially for customers who are embarrassed and don’t want to speak to agents.

Today, however, very few lenders offer digital solutions that enable their customers to manage their payments via alternate channels such as mobile payments. But digital strategies can dramatically improve collections performance. While providing a more personal channel that gives customers more control, an integrated digital strategy delivers significantly better results, including reductions in call center volume, faster customer response, increases in collection rates, higher customer satisfaction, and lower costs.

The digital approach

A digital strategy spans many channels, including websites, two-way interactive text messages, and mobile applications on smartphones or tablets.  Digital solutions can even include social media as a means to alert customers and allow them to respond. A digital strategy also takes a customer’s preferences into account. For instance, if the application determines that the customer is really responsive to text messages and not to voice, then the lender can stop using the voice channel.

An example of how these various channels can be integrated is where a customer receives a text message and then goes to a website to set up a plan, uses web chat to ask questions of a live agent, and then completes the payment plan online. The customer could also be given the option to manage the payment plan through two-way interactive texting and make payments by text.

It’s important to note that once a customer is online, it’s counterproductive to offer only rigid plans. One often-overlooked reason is that the customer may be able to pay more than anticipated. A smart approach is to ask clients to submit their own offers of what they can pay on a monthly basis. Once that plan has been established and set up online, the next hurdle is to manage it going forward. Experience shows that customers are very resistant to setting up automatic bank payments or recurring card payments because that doesn’t give them the control that they require. By offering different options, customers can stay in control of their payments and make payments conveniently and easily.

Of course even with a digital channel, there are many customers who may still become unresponsive because the plan no longer fits their circumstances. Giving customers the ability to respond and providing more flexibility is very important to make sure they don’t start ignoring the messages.

Reduced costs, better customer experience

At the same time that it empowers consumers, a robust digital strategy also reduces business costs and increases response rates. By giving customers more control and making it easier for them to pay, many more pay within a much shorter time frame. One user of mobile payments reported that once customers had signed up, 80 percent of them paid within two days of receiving the notification to their mobile phone, and 40 percent paid their bill within 30 minutes of receiving the SMS alert.

A digital strategy also enables the lender to migrate a typical voice customer — who would have kept calling into the call center and making payments over the phone — to mobile where they’ll pay quicker and need less attention. That’s important to both lender and customers because SMS and social media provide a much lower cost and a better customer experience. In fact, the cost of managing payments through websites, SMS, social media or mobile apps is about a quarter of that for automated voice and about a tenth of that for straight agent payment. In addition to lower costs, a digital strategy also makes it easier for lenders to identify the accounts that are not going to be paid.

The overall benefits of an integrated digital plan include reductions in call center volume, increased plans-kept rates, reduced roll rate through collection buckets, increased ability to focus on problem accounts, and an increase in customer satisfaction – with overall lower costs. That makes digital collections an attractive proposition for both lenders and their customers.

Daniel Melo is Senior Director, Consulting, at FICO. He has more than 20 years of experience in credit, collections and risk management.  He blogs at

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