Delinquency Management Archives

Effective delinquency management is a looming concern for lenders of all types and sizes. Every lender’s operations may account for some level of loan delinquency. But if that level becomes too high, it can negatively affect your business, including increased collection costs, reduced profitability, and reputational risk.

According to reports by a credit information bureau, retail credit has experienced an increase in serious delinquencies, with mortgage loans such as loans against property and credit cards being the most affected segments. The COVID-19 pandemic will only exacerbate this disruption, thanks to the widespread layoffs, looming recessions and economic downturn.

From a lending institution perspective, retail loans extended by non-bank finance companies (NBFCs), which typically take riskier loan bets, reported a 0.49 per cent increase in delinquencies compared to 2019.

With delinquencies showing signs of stress and a growth in overall loan origination volumes, NBFCs and their banking counterparts need to adopt proactive strategic measures to tackle delinquency management and monitor repayment schedules.

Effective delinquency management plays a critical role to reduce the lending institution’s credit risk and improve profitability. The ultimate goal is to maximise recoveries while keeping overheads lower.

Advanced technology powered by AI can help streamline the entire loan collection process, eliminate errors, and help maintain a robust loan portfolio.

Finezza’s Debt Recovery and Collection Management System to Monitor and Manage Loans

Finezza’s delinquency management feature aims to simplify debt collection for lending institutions. This platform automates loan collection framework with a sophisticated and customer-centric solution that leverages AI and data analytics.

While late payment penalties are ubiquitous, too few lenders realise that simple modifications to the payment process can drastically reduce delinquency.

The solution manages the entire loan collections lifecycle from the soft calling of delinquent customers to tackling hard bucket collections until final closure. It provides a complete picture of the team’s collections efforts and prompts telecallers and field collectors for the following best action.

All in all, it keeps track of the delinquencies and provides visibility to shorten collection cycles and minimise the overall cost and effort in NPA management.

Here are some of the critical features of the delinquency management system:

1. Case Allocation

Finezza’s delinquency management automatically assigns collection cases to specific agents according to configurable rules. This way, you can ensure that the right people work on relevant issues. In addition, the rule-based system enables you to configure the classification and allocation logic of delinquent cases to the field staff.

The rule-based classification of queues helps by assigning customer accounts to the suitable collectors at the right time while also allowing manual allocation for cases that need special attention. In addition, escalations can be easily configured to ensure visibility and timely action.

2. Calling and Follow-Up

The system generates a call and follow-up list for the operations team to act fast and take complete control of collection activities. As a result, the operations teams can quickly communicate with customers.

If multi-level follow-ups are needed, all the aspects can be maintained and tracked within the follow-up dashboard of the system. In addition, the system supports a follow-up trial of communication between the collector and the customer.

3. MIS Reporting

The reporting module includes an MIS (Management Information System) to track progress, control productivity, scheduling, allocation, and early identification of delinquencies.

You can also measure key metrics to assess and evaluate collection management and the likelihood of NPAs. This includes performance metrics like collection profitability, agent effectiveness, delinquency level, and more.

4. Generate Secure Payment Links to Customers

The delinquency management system empowers lenders to interface with multiple payment gateways as per their requirements and sends customised payment links to customers. This facilitates faster and secures digital payments at the customer’s convenience.

5. Real-time Updation of Data for Communication

The system has an embedded capability to update all information in real-time to and from host systems. So whether you need to relay information to the customer or enable access of information to collection agents, you can ensure 24/7 accessibility to all parties involved in the process.

6. Transaction Addition and Approval Management

Agents and managers have the flexibility to add transactions and submit for approvals. There is no need for cumbersome documentation and filing work to maintain all collection records.

Instead, you can rely on a single point of truth and a unified source for all collection-related workflow processes. For example, if there is a necessity to arrive at a settlement for waiver repayments on loans, it can be added and submitted for approvals within a given period.

Benefits of Using a Delinquency Management Solution

Below are the benefits you can reap by using a modern solution to proactively and effectively manage delinquent customers:

Customer-Centric Focus – A 360-degree view of customers and their accounts for continued credit monitoring
Simplified Collection Workflows – Provides critical information for easy decision-making and a hassle-free recovery process.
Adherence to Policies – The configurable rule engine enables compliance to business processes as per the policies and aids easy classification of cases
Easy Integration – Software and platform agnostic with secure APIs and data pipelines that can be easily integrated
Performance Tracking – Facilitate enhanced collections process with convenient tracking and reporting features
Enhanced Collections – Decide the best course of action with automatic case allocation, classification, and follow-up actions
Transparent and Paperless Processing – Deliver faster and paperless transaction processing with reduced risk and greater transparency than manual processes
Reduce NPAs – A structured process and collection workflow can help you work on high priority cases first and reduce NPAs.
Faster Deployment – Solution can be deployed on cloud, thereby reducing upfront expenditure and aiding more immediate implementation
Integrated Mobile Platform – Empower field staff with easy to use mobile apps throughout the collections process

While collections have been traditionally dominated by manual processes, legacy systems, or outsourcing to third-party agencies, these approaches tend to consume more time, effort, and resources.

Moreover, they are ineffective in dealing with the growing number of delinquencies. Hence, what is needed is an automated and advanced platform that enables tracking and management of delinquent accounts in a single place and streamlines the lending institutions’ efforts across multiple accounts at the customer level.

Whether it be secured loans of mortgage loans, auto loans, etc., or unsecured loans like personal loans, Finezza’s innovative delinquent management feature delivers process efficiency and superior customer-centric experience all at once. Get in touch with us for more details.

What does the post-COVID world look like? Well, no one really knows but the world is slowly inching toward it for sure.

In the course of a year, the COVID-19 pandemic has affected people in every sector, however, the most damage was perhaps felt by the financial sectors, including non-banking financial institutions (NBFIs), banks, fintech, etc. With the economies being shut down for a certain time, payment moratoriums were delayed, skyrocketing the unemployment rate, and even today, consumers face an increased challenge in making debt payments.

Why are Loan Delinquencies on the rise?

Broadly speaking, there are two main reasons why someone fails to make a repayment:

They lack the money to make the repayment
They have the money needed but fail to make the repayment

Out of 100 borrowers:

34% might suffer from technology issues while making the payment,
32% might not be aware of the repayment due date, and
21% might not know how much to repay.

Loan Delinquencies – A Segment-Based Approach

Financial institutions must think of both delinquency and consumer interactions from a behavioural approach to formulate plans to smoothly tackle the situation.

Currently, consumer behaviours may be altered by either temporary or permanent hardships. These delinquent customers always face a stage of negative appraisals along with it and slowly enter the delinquent funnel. In the light of the COVID-19 pandemic, the customer’s resolution orientation is less than in the normal case, and that must be dealt with accordingly.

Delinquency becomes a coping mechanism for some with low control and scarcity of resources. Customers at this stage prioritise their lifestyle needs over their pending bills and forget about delinquency resolution. At some point, the relationship between the customer and financial institutions gets bitter due to a perceived lack of empathy from either side. This exists more during such pandemic crises, where there will exist a strong expectation of allowances from the institutions.

Over time, this completely turns to avoidance. The longer the customers stay in the delinquent funnel, the more difficult it becomes for either side to reach a satisfactory resolution. It is important to find out if any of the corrective measures adopted by the financial institution would lead to more avoidance or not.

Best Ways to Tackle the Delinquency Problem in Customers

The best way to solve the issue is by turning avoidance into a nuanced approach. With this in mind, here are few tactics you need to tackle delinquency in 2021:

1. Maintain Effective Member Communication

Reinforce to members that you are a trusted resource throughout this crisis by providing helpful information and vital updates often that are easily accessible. Create a dedicated support page on your website and make use of all communication channels like email, social media, etc. directing your members to know about relief programs and ways they can request help.

Be proactive in offering financial counselling and try to stay in contact with those who may be heading towards delinquency. Actively listen to what they have to say and empathise with their concerns and provide a plan based on the information provided.

2. Retooling Segmentation

Segmentation needs to be done by analysing historical data in order to identify the risk of customers. Retooling segmentations quickly adapt and reassess the significant variables in the post-crisis segment. The segmentation strategy can be as effective for predicting risk and behaviour.

Accurate segmentation acts as a crucial tool in optimising the effectiveness and efficiency of a lender’s operation, especially when there are certain constraints. Additionally, customer-based segmentation can be used beyond risk and customer optimisations.

3. Adding Digital Channels

As many people demand more mobile and online solutions for conducting their businesses, lenders have already made their move towards digital channels being part of their strategy. However, the impact of the pandemic outbreak has triggered an onslaught of payment deferrals, forcing many lenders to use SMS, messaging apps, robot calls, etc.

To get the most from digital channels, lenders must set an end-to-end multichannel strategy and create a consistent message for customers to ensure seamless customer expertise. They can also make use of low-touch methods to remind the not-yet-delinquent customers of their payment due date.

4. Readily Available and Accurate Payment Information

Around 91 per cent of borrowers feel it is important to see the status of their repayments. Try to find out, by just looking at your service can a borrower without needing to speak directly to one of your employees, know exactly how much they have paid, how much is pending, and when each payment is due?

If the answer is “no”, then you have an obstacle to payment success. Whether the payment is through online login or a mobile app, create a place where borrowers can know exactly what they need to pay and when they have to pay.

5. Make Failed and Missed Payments Easier to Retry

Payments can fail for several reasons, especially during such crisis times. But when a payment fails, what can you do to rectify it quickly even if the borrower has attempted to pay?

Offer reminders to your borrowers ahead of an agreed payment date to reduce the likelihood of a missed payment. Include repayment reminders across the contact methods you are available with, including SMS, email, or a phone call. Always ensure to provide clear follow-up steps for the borrower to follow when sending reminders.

How Finezza helps In Delinquency Management?

Finezza offers a unique collection app which is a form of delinquency management solution, making debt recovery hassle-free. This has been created to meet the demands of today’s lenders, especially for such uncertain times.

This simplifies monitoring and management of loans, delinquency management, and debt collection, and the information related to them accessible 24/7. This is highly beneficial to collection agents as they can easily track the status of particular customers who have to repay the loans or who have already missed their repayments. Finezza offers a whole end-to-end mobile ecosystem that facilitates all requests, finds delinquencies and ensures seamless loan servicing and repayment options.

Our system leverages the power of Artificial Intelligence automating the workflow and thereby safeguarding your business from risks and fraudulent activities adhering to all the business and regulatory mandates.

How Finezza’s Delinquency Management Helps Streamline Loans?