27/08/2024 | Press release | Distributed by Public on 27/08/2024 10:19
The current economic climate is challenging worldwide, marked by unprecedented global debt levels - $235 trillion - and the compounding challenges of high interest rates, rising unemployment, and inflation. In a presentation at FICO World 24, Shivani Landie of FICO's collections consulting team called this the "combination of all previous recessions," which has resulted in a growing number of customers in financial distress, leading to higher impairments and losses for banks and retailers.
Landie and FICO collections expert Ulrich Wiesner discussed how the digital tools and debt collection software collectors use today can help them cope with the rise in customers facing debt problems. The session provided fascinating insights into "clairvoyant collections" - using today's analytic advances to identify the right treatment path and contact strategies for every customer.
Landie identified four themes that are critical for organizations to address in today's collections environment:
As an example, Landie noted, "Years ago we had five big banks in South Africa. Today we have potentially around 20 to 30 banks. Competition is rife within the global banking environment and customers are no longer as loyal to banks. They're more interested in who's going to help them today when they're in distress."
One of the most significant trends in collections is the move towards digital self-service. Customers, especially younger ones, prefer to interact with their banks on their own terms, using channels like WhatsApp or chat services. This shift requires collections strategies that are not only digital but also flexible and responsive to customer preferences. As Landie joked, "I have a 12-year-old son who refuses to answer any phone calls. That's the level of engagement we can expect in the future."
Wiesner, a 20-year FICO veteran, delved into the technical aspects of how FICO Platform supports digital transformation in collections. He highlighted the importance of having meaningful dialogues with customers, presenting them with options that make sense, and continuously refining strategies based on real-time data.
Wiesner emphasized the need for agile, cross-functional teams that can quickly adapt to changes in customer behavior and regulatory requirements. He described how FICO Platform allows businesses to configure changes without the need for extensive programming, thus enabling rapid adjustments to collections strategies.
FICO Platform, he explained, includes four critical capabilities for collections:
Wiesner noted that a test-and-learn approach distinguishes the best performers. "The organizations that are best with this have a very agile approach," he said. "They constantly measure what happens in the customer dialogues and what happens in the strategy - when do customers pay, when do they stop engaging. They use the learnings from this to continuously upgrade their strategies and their dialogues. That works best with a cross-functional team where you have people who have a communication mindset, a marketing mindset, a business mindset and a technical mindset."
The presentation included a glimpse of the results debt collectors can experience using FICO Platform. Irina Vasina, senior project manager at the telecommunications firm Telus, shared with FICO's Jaron Murphy her results implementing FICO Customer Communication Services (CCS), an omnichannel solution.
"Typically, a project comparable to FICO CCS takes six months to a year," Vasina said. "However, what made this project unique is that we were able to launch it from start to finish in just five months, which is likely to be a benchmark for future projects. A key factor that set this project apart was the exceptional collaboration with the FICO team. I must commend everyone at FICO for their knowledge, flexibility, and overall great teamwork."
Tathiana Paredes, a principal consultant with FICO, shared best practices for adopting an omnichannel solution: "When implementing projects, I tend to do them in phases. For the first phase, which includes one-way SMS, IVR, and email, many clients prefer to start slowly due to internal resistance to change. Even with a cautious approach, we often see a 14% increase in payments and a 20% reduction in collection costs. As clients become more comfortable with the tool and gain internal stakeholder support, we adopt two-way SMS and a payment portal. This often results in a 29% increase in payments and a 75% reduction in the cost per promise. I'm being conservative with these percentages because I prefer to under-promise and over-deliver!"
She also provided results from an American telecommunications company, which initially saw a 60% self-payment rate in the first year, which rose to 80%. "100% of their portfolio is managed within CCS across all risk levels. It's hard for some people to believe that 100% of a portfolio is handled through digital collections, with only 3% requiring human intervention, but that is indeed the case. The company is now self-sufficient on FICO Platform. In the first year alone, they reduced call center costs by $2 million, achieved a 40% increase in customer self-service payments, and reduced call center transactions by 50%."
The presentation underscored the complexity and dynamism of the modern collections environment. To succeed, organizations must leverage data-driven strategies, embrace digital debt collection software, and maintain a sharp focus on customer experience. As Landie concluded, the goal is to create a "digitally enabled collections consultant" who can provide the best possible outcomes for both the customer and the business.