Covid-19 has had a big impact on collections departments and consumers. Covid related lockdowns over the years have built a new digital first mindset with consumers. Business and personal Zoom meetings have made people comfortable with video and digital audio. Slack and Texting has replaced phone calls and email in both professional and personal life. This Digital-first mindset is carrying over to consumers interacting with their financial services providers. Consumers are interacting with brands via digital channels like Text, Chat, Video and Digital Audio.
Collections departments that have incorporated texting into their collection practices have seen incredible results. Consumers are not only reading the collection text but responding to the text and engaging with collection officers to work out the re-payment plans.
“Texting as a method of communication has been very effective not only in the late stage collection but also reaching some of our members in the earlier stages of collections,” says Bert Jones, Account Resolution Manager with the Credit Union of America. “We are very satisfied with this process.”
While the pandemic will eventually fade into an endemic, this digital shift isn’t going anywhere. Consumers’ preference for texting is here to stay, and will become more important as the years go on.
The current collection communication methods are mostly letters, robo calls and auto-dialers. Letters are ignored, robo-calls get sent straight to voicemails, and getting customers on the phone is becoming increasingly difficult. According to a McKinsey study, the digital-first segment is 12 percent more likely to make a payment when contacted by the bank through a preferred digital channel in early delinquency. In late delinquency, this likelihood rises to 30 percent. The proportion of these customers who pay in full also doubles when they are contacted through digital channels.
To avoid defaults, replacing email and voice notification with automated SMS & a link to a self service payment site can help improve the delinquency rate. In early delinquency, texting also represents a less intimidating mode of communication than robo phone calls and letters. It also allows for two way instant communication between consumers and officers to talk through any issues at a pace the customer prefers. Unlike phone calls, customers can engage with officers in free movements while at office. This low effort method of instant communication is preferred by the customers and as per McKinsey study mentioned above, can lead to a 12% increase in payment for early delinquencies. Text is great, but the addition of video meetings can be incredibly effective to work through any issues in late delinquency in which a customer needs a more intimate experience for finding a repayment schedule that works for them. For such instances, officers can seamlessly add in either an ad-hoc or scheduled video call to meet with their customers virtually.
As the McKinsey study shows, the channels favored by lenders for contacting delinquent customers—phone, letter, and voice mail—are now the least effective in eliciting payments. Conversely, the channels that lenders use less often—email, text messaging, and pop-up notifications—are the most favored by customers today and yield the best results . Lenders, in other words, are using the least effective rather than the most effective contact channels, while customers clearly prefer digital-first contact.
The shift to digital channels of communication is underway, and accelerating.
Having an Omnichannel Digital Communication solution for your collections department is less of a luxury and more of a necessity.
To find out more about how Eltropy is enabling our collections partners to connect more effectively with their customers, visit our website today.