CREDIT MANAGEMENT
Choosing A Collections Partner : What Should A Digital Lending Company Consider ?
By Wasilwa Miriongi
It goes without saying that digital lending via Fintech is on the rise , more and more consumers have more options than ever for obtaining loans . There are a lot of considerations for numerous digital financial providers when building their business models , but one important and often-overlooked strategy is recovery for delinquent accounts . No wonder they are grappling with high default rates that to some has adversely affected their portfolio rotation .
New lenders go into business to lend money . They start with a target audience and product market fit , and tailor underwriting to their growth aspirations and customer value proposition . That is absolutely what any new lender should focus on . But often lenders are either naive about the impact of losses or they do not have a full appreciation of how managing losses and taking advantage of recoveries will enable them to lend more money and retain more of those hard-earned customers . Having a trusted collection partner can allow the lender to focus on what they do best while reaping the benefits of sound practices to manage delinquency .
Credit professionals know that collection does not start with the collector contacting the customer , it actually begins with onboarding the customer . Ensuring that a customer is vetted and only creditworthy customers are taken up .
Companies new to lending are originating loans , and therefore the entire customer relationship , online . Their customers had a digital experience to begin the relationship and they will expect a digital experience throughout their relationship with the lender . With that in mind , some things a digital lender should consider when choosing a collections partner include :
● Does the collection company primarily communicate with my customers in their channel of choice ? Many collection companies will say they use email , but it is often not the primary mode of communication and can amount to a small percentage of an otherwise heavy , offensive phone and pesky calling strategy .
● Are customer communications personalized when it comes to the channel being used , the time of day the communication occurs , the content and tone of the message or do they segment broad groups of customers for a one size fits all treatment strategy ?
● Does the collection company leverage any machine learning that could augment what they already know about their
“ It is a known fact that even though the customer may be experiencing some difficulty in meeting payments now , it does not preclude them from becoming a good customer in the future . Therefore , it is important to maintain goodwill while pressing for collection .” customers based on their internal data alone ?
● What process does the collection company have for continuous improvement enabled by a strong champion / challenger testing capability ? This is the most effective way of testing the effectiveness of a collection strategy decision as it has the capability of real-time results .
● How much execution risk does your collection partner expose you to ? Operations that rely on more collection agents will carry more risk exposure . Poor agent attendance or high attrition will impact expected coverage . Poor quality or agent errors across a varied labor pool will impact collection results and pose compliance risks . Cultural bias or un-neutralized accents of other nationality agents have been shown to result in lower contacts and lower average commitments than more expensive local agents .
● If they are outsourcing to an agentintensive provider , they should make sure they understand what drives the agent incentive plan . Agents interested in making incentives do not always have the company ’ s customers ’ best interests in mind .
Choosing a right collections partner is must do for success of any digital lender , remember in Kenya , digital lending facing a number of challenges like aggressive calling and many Kenyans started relaying their experiences when confronted by debt collectors even the hashtag # Debtofshame has at some point been originated to show the gravity of the whole situation .
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