The lending business has become much more competitive over the last few years, with banks, Non-Banking Financial Companies (NBFCs), neo-banks, and even newer players, such as payment apps, vying to expand their customer base.
In this landscape, lenders invest a significant amount of time in building robust revenue-optimising strategies. Typically, they tend to focus their resources on marketing, sales, and an expedited underwriting process. While these are important, lenders must also prioritise the debt recovery process, which needs to be high-trust, holistic, and cost-effective.
Unfortunately, many lenders often lack a fully-developed strategy to optimise the debt recovery process. This is where the use of superior AI-powered loan recovery software helps lenders get creative and finetune in their approach to recovering debt owed to them.
Let’s understand the key advantages delivered by superior automated debt recovery software solutions.
What Is Loan Recovery Software?
Loan recovery software is an automated, cloud-based, and AI-powered solution that automates the loan recovery process from end to end.
Conventionally, lenders start the loan recovery process once a borrower stops making payments or significantly delays them. The go-to response is to start sending reminders, initiating phone calls, and approaching the borrower for payments.
Some lenders outsource the process to an external agency, which may negotiate, urging the customer to make payments.
However, these are time-consuming, labour-intensive, low-trust reactions, which also come at a significant cost of reputation.
Therefore, these methods may also not yield the results lenders seek. Such a process also has a tendency to alienate borrowers struggling with genuine challenges when making repayments.
The adoption of superior loan recovery software helps lenders transform the entire function to make it data-driven, automated, and personalised based on the unique borrower’s circumstances.
A holistic, tech-enabled approach helps lenders streamline the loan recovery process right from the time the borrower enters a lender’s ecosystem.
6 Advanced Features of Loan Recovery Software
Here is a snapshot of salient features that help lenders optimise the debt recovery workflow:
1. Superior Risk Assessment Capabilities
Loan recovery software comes with superior credit risk management capabilities, which enables lenders to do a thorough audit of a potential borrower’s financial status. This enables lenders to trigger the debt recovery process much before borrowers miss or delay payments.
All banking transactions are accurately categorised into inflow and outflow sub-categories. This step helps businesses get deeper data-driven insights into a borrower’s revenues, expenses, liabilities, and consumer behaviour.
Based on the data, loan recovery software offers an accurate, data-driven creditworthiness score, which helps lenders with debt recovery prediction.
2. Clear Communication of Repayment Terms
Some borrowers have the potential to misunderstand the terms and conditions of loan repayment. This can jeopardise their ability to repay the loan on time and in full.
Loan recovery software enables clear, automated communication of all aspects of repayment, such as the repayment timelines, the value of the EMI, and the loan repayment dates. Also, it highlights late fees and penalties borrowers can expect.
3. Flexible Repayment Options
Borrowers display a wide range of repayment options, from debit cards, net banking, credit cards, digital wallets, and UPI apps.
By offering all options to borrowers, the loan recovery software makes the repayment process user-friendly, convenient, and inclusive. If one payment option fails, borrowers can use another and make on-time EMI repayments.
4. Personalisation of Repayment Plans
Borrowers default on payments for several reasons. They can range from a delay in receiving a major payment from a client to a job loss. Traditional loan recovery processes focus more on extracting the owed amount by any means, as opposed to leveraging updated borrower data and customising repayment plans.
As a tool befitting the nuanced context, Loan recovery software enables the personalisation of repayment plans based on available data. This approach allows lenders to be flexible with borrowers facing temporary setbacks while maintaining customer trust and continuing to receive repayments.
5. Personalisation of Payment Reminders
Payment reminders play an important role in helping borrowers make repayments on time. Lenders can personalise payment reminders to make them more effective in delivering repayment information promptly.
Loan recovery software helps lenders automate the customisation of messaging for multiple borrowers simultaneously. This approach enhances the effectiveness of payment reminders.
6. Automates Early Payment Rewards
Loan recovery software enables lenders to design an effective reward programme that incentivises borrowers to make on-time payments. Gamifying the loan recovery process helps foster brand loyalty and improves borrower behaviour.
For instance, they can reward positive borrower behaviour by introducing discounts, rewards, and improved credit terms.
Impact of Adopting Loan Recovery Software
Here’s a snapshot of key outcomes lenders can expect through the usage of loan recovery software:
- It enables lenders to have a holistic approach to debt recovery that nurtures a high-trust experience for customers. They are more likely to be repeat customers once the loan is repaid.
- With access to updated borrower data, lenders can identify relevant solutions that enable borrowers to continue making repayments on updated terms.
- A tech-enabled debt recovery process helps seed positive loan repayment behaviour, thus paving the way for an on-time repayment culture.
- Lenders can reduce the volume and value of non-performing assets and incidents of loan fraud.
- The entire loan recovery process is more efficient, enables lenders to function with lean time, and drives up operational ROI.
Key Takeaway
Lenders that make early investments in loan recovery software can reimagine their loan recovery management, an important step toward business transformation. By doing so, they can deliver more value to borrowers, stay relevant in a competitive lending landscape, drive revenues, and run a sustainable, profitable business.
Finezza’s comprehensive and seamless financial data analysis solution simplifies and speeds up the process through recovery automation. The software provides actionable and analytical insights on a customisable dashboard, thus helping companies make informed business decisions.
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