Revolutionizing Debt Collection: Data-Driven Strategies for a Digital Future

Rising interest rates, unemployment, and escalating costs have driven a surge in late payments across home loans, auto loans, and credit cards. Cloom’s data-driven, customer-centric approach transforms debt collection by leveraging advanced analytics, omnichannel engagement, and digital platforms. This blog explores how lenders can realign strategies to meet today’s challenges, optimize operations, and enhance customer experiences.

Realigning Yesterday’s Collections Structure

With payment default rates rising in 2024, higher collections volumes strain traditional operations. Lenders face decisions on insourcing, outsourcing, digital tools, or legal action. Cloom emphasizes customer experience (CX) in collections, mirroring its importance in onboarding to maximize lifetime value. By focusing on consumer preferences and tailored solutions, Cloom’s approach aligns with lenders’ risk appetites, helping fast-adapting lenders gain a competitive edge.

Digital Debt Collection and the Future of Lending

The collections landscape is shifting toward a digitally driven environment. Relying on intuitive strategies, one-way messaging, or manual processes is no longer effective. Cloom’s solutions deliver:

• Analytical, data-driven strategies for precise targeting.
• Support for digitally savvy customers via self-service options.
• Optimized back-office workflows with real-time analytics.
• A tech-led environment empowering organizations.

The Emerging Collections Landscape

Compliance is critical, with regulations like the UK’s Consumer Duty and similar rules in South Africa and Brazil emphasizing breathing space and fair outcomes. Customers expect lenders to understand their needs, enabled by:

• Cloud-enabled capabilities for scalable use cases.
• Enterprise platforms for data orchestration and real-time decisions.
• APIs and microservices for dynamic strategy execution.

Inefficient collections impact long-term costs under standards like IFRS9. Cloom’s solutions address these challenges with advanced analytics and customer-centric tools.

Two-Way Digital Dialogue

Traditional dialler-based systems and one-way channels like SMS are less effective, as seen during the pandemic. Cloom’s bi-directional omnichannel solutions leverage analytics, data streaming, and real-time triggers to enable:

• Smarter engagement through preferred channels.
• Auto-resolution via self-service for scalability.
• Personalized strategies informed by customer data.

Collections Strategies

Common Collections Strategies

Many lenders rely on:

• Basic analytics (e.g., behavior scores, roll-to-default predictions).
• Product-level views without cross-product insights.
• Month-end campaign structures driven by diallers.
• Independent multichannel outreach lacking integration.
• Policy rules as a safety net due to limited analytics.
• Basic forbearance tools like term extensions.

Occasionally Seen Strategies

More advanced approaches include:

• Cycle-specific predictive analytics to avoid IFRS9 stages.
• Customer-centric views with cross-product data.
• Engagement across all activities, not just collections.
• Forbearance based on delinquency reasons and disposable income.

Rarely Seen and Best Practice

Cloom’s best practices include:

• Real-time prescriptive decisioning for optimal actions.
• Optimization across 11 key areas of collections cycles.
• Bi-directional auto-resolution for self-service.
• Dynamic forbearance to retain future customers.
• A single policy: follow data-driven screen prompts.

Cloom’s data-driven, customer-centric solutions transform collections for today’s digital landscape. Schedule a demo with Cloom today to optimize your strategies and stay competitive!