The lending landscape is continually growing, with a mix of banks, neo-banks, Non-Banking Financial Companies (NBFCs), and payment apps offering a mix of consumer and business loans. However, collection delinquency management is emerging as a key challenge for lenders in an era when it is considerably easier to access a loan.
However, traditional collection strategies, such as outsourcing this function to a collection agency, can reduce trust and alienate customers.
To solve this, data-driven and proactive loan recovery management platforms like Finezza can help lenders transform collection processes.
In this blog post, we outline key collection delinquency management strategies that can help lenders turn around debt recovery operations. In turn, they can reduce Non-performing assets (NPAs), retain customers, and drive revenues.
What is Collection Delinquency Management?
Borrowers stop their Equated Monthly Installment (EMI) payments for a range of reasons. However, they may face a temporary bump in the road.
For instance, they may have lost a job or been hospitalised. Micro, Small and Medium Enterprises (MSME) may face a cash flow crunch due to delayed invoice payments. Despite well-intentioned efforts, they may temporarily delay or stall payments.
On the other end of the spectrum, lenders may get entangled in loan fraud, which results in bad debt cases. This means that they cannot expect any repayments.
Differentiating between these various scenarios and responding appropriately to borrowers is an important aspect of debt recovery. However, real-time data on a borrower’s situation is often missing.
This is where an efficient collection delinquency management function enables lenders to recover debt from borrowers who have stopped making payments. Technologies like Artificial Intelligence and automation can empower lenders to practice data-driven management strategies.
Top Collection Delinquency Management Strategies
Here’s a snapshot of key strategies that bring customer-centricity to their debt recovery process:
Real-time Updation of Communication Data
One of the key challenges lenders face is that their databases lack real-time updation of data, making it challenging to know the progress of each case.
Finezza’s delinquency management software, for instance, automatically updates all information, thus making communication with borrowers an ongoing, sustainable process. On the other hand, outdated information derails debt recovery and lending cash flows.
Timely & Automated Case Allocation
Automating the assigning of cases to relevant agents comes with significant benefits. This process ensures that borrower cases are assigned promptly.
However, there is still scope for manual allocation of complex cases based on their specific needs. Lenders also have visibility on cases that require swift escalation.
On the other hand, borrowers are not bombarded with calls from multiple agents. A superior software offers a rule-based system that streamlines the configuration of allocation logic for delinquent cases.
For example, allocation can be based on multiple factors, such as location, loan tick size, and category.
Automated Generation of Calling & Follow-Up Lists
This strategy ensures that the collections operations team can access a system-generated calling and follow-up list. This list enables team members to intervene promptly, make calls to customers, and automate the scheduling of follow-ups.
Finezza’s follow-up dashboard displays the progress on the case and a future communication itinerary. With such visibility, agents can understand a borrower’s situation and proactively identify solutions.
Superior Payment Experience
Today, the payments industry has made great strides in introducing more diversity in payments—from debit cards and Internet banking to UPI apps. A collections delinquency management system automates the process, generates customised and secure payment links, and offers borrowers the power of choice.
Borrowers can experience a seamless payment experience. This approach seeds trust and convenience for borrowers and expedites the payment process.
Automated Transaction Addition and Approval Management
Debt recovery may require proactive actions, such as redesigning debt repayment plans and waiving fees and interest. Agents and managers may have the authority to consider such changes.
However, keeping track of them and getting quick approvals is a challenge. By using automated collection delinquency management software, lenders can facilitate easy transaction addition by agents and expedite request approvals.
They can eliminate activities such as documentation and filing work related to collections. Borrowers, on the other hand, emerge with quick, hassle-free service from the collections team.
24/7 MIS Reporting
Superior collection delinquency management software comes with sophisticated reporting modules – the Management Information System (MIS). Lenders can access necessary information they need 24/7, including early identification of delinquencies, tracking the progress of each case, allocation information, and scheduling of all actions.
They can also track important performance metrics such as the effectiveness of agents and collection management strategies, profitability, and the potential for NPAs. Access to such detailed, predictive reports empowers lenders in their decision-making early on.
Advantages of Automated Collection Delinquency Management
Here is a round-up of benefits for lenders who get proactive in pursuing tech-enabled collection delinquency management strategies:
- Boosting Customer Satisfaction: There’s a shift towards customer-centricity because lenders have access to updated, real-time customer data and follow customer-centric processes.
- Streamline Operations: Lenders can save on costs due to the reduction of manual interventions, elimination of paper processing, errors, and delays in an escalation of cases.
- Proactive Risk Management: Lenders can adopt a data-driven approach to collections, intervene early on, and predict and reduce the growth of NPA cases.
- Enhanced Team Access: The collections operations team can access data anytime from anywhere via their mobile phones.
- Effortless Performance Monitoring: The technology enables easy performance tracking across all cases.
- Compliance Confidence: The use of superior software facilitates rule-based compliance across all cases
- Improved Profitability: As collections improve, businesses can drive revenues.
- Lower Customer Acquisition Costs: Customer-centric and data-driven collections increase repeat borrower pipelines, lowering customer acquisition costs.
Key Takeaway
Traditional debt recovery methods tend to antagonise customers. However, the adoption of AI-powered collection delinquency management software enables lenders to bring customer-centricity to this function.
Lenders can streamline their debt recovery processes with the smart use of technology and be more strategic in debt collections. When lenders provide a superior customer experience, borrowers are more likely to pay off debt faster and be repeat customers, thus simultaneously bringing down customer acquisition costs.
Web-based platform Finezza’s Collection Delinquency Management system transforms debt recovery. You can harness the power of AI to streamline collections, reduce fraud risk, and make data-driven decisions – all while ensuring regulatory compliance.
It also helps lenders maximise efficiency with automated workflows, real-time updates, and powerful analytics.
To learn more, request a demo today!
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