2022 was the year of hiring freezes, interest rate hikes, and supply chain issues heavily impacting inflation. With more financial stress and decreased disposable income, consumer debt is climbing. The Consumer Credit report by the Federal Reserve shows that outstanding consumer credit was valued at a record-breaking $4.7 trillion at the end of October 2022.
The new year is a time for reflection and new beginnings. With shifting consumer behavior and demands, 2023 should be the year to evolve your collection strategy so you can successfully recover your debts. Let's look at the top four debt collection trends your business should implement to streamline your collections, maximize your cash flow, and maintain a healthy relationship with your customers in the new year.
1) Digital Communication Will Lead The Way
We're already seeing the financial industry shift to a more digital experience. By embracing this trend, you will reap the benefits and gain an advantage over your competitors. In our study on early-stage collection trends in 2022, we learned that 69% of customers prefer to be contacted about their due bills via digital notification, such as emails or text messages, over calls and letters.
Regulatory pressure from Federal Communications Commission (FCC) legislation, such as the Telephone Consumer Protection Act (TCPA), limits the number of phone calls businesses can make to customers and guarantees the consumer's right to revoke consent to receive calls or SMS from telemarketers and other vendors. Some digital-savvy consumers also use call-screening apps to block inbound calls from unknown callers. If phone calls are your only debt collection strategy, you need another touchpoint to recover that debt.
Digital outreach has emerged as the better and more effective customer outreach strategy. It provides several touchpoints, like email, text messages, app notifications, and more, to contact the customer early in the recovery process without risking your relationship with them.
2) Automation to Increase Collection Efficiency
Traditionally, debt recovery has been very manual, with collectors calling customers individually to initiate the recovery process. There are several drawbacks to this approach, such as:
- Multiple teams/recovery agents operating in siloes
- Manual payment status and activity updates, leading to human errors
- Language barriers in debt collections and broken communication between customers and internal teams
Debt collection automation helps to overcome these challenges while improving recovery time and collection efficiency. An efficient automated debt collection software can help you:
- Increase debt recovery efficiency by providing access to comprehensive data analytics that monitors debt collection efforts and delivers intelligent reports and insights.
- Reduce your debt collection team's manual tasks and free up their time to focus on other tasks that improve recovery rates.
- Provide customers with multiple communication channels and flexible self-service options to repay debts.
- Reduce operating expenses by decreasing the number of human recovery agents.
- Expand and scale your debt collection operations as the business grows with minimal additional investments.
3) Hyper-Customization to Match Customer Needs
Consumers want choices, and it will be critical for you to adapt to their needs in 2023. Traditionally, standardized debt repayment plans were offered to all customers in the same way, regardless of their financial history. Thanks to new technologies such as data analytics, artificial intelligence (AI), and machine learning (ML), mass personalization is now possible in collections and recovery. You can leverage historical, social, and behavioral customer data to provide personalized repayment plans for each customer through their preferred channel.
Increase your chances of recovering late payments by:
- Changing payment due dates
- Accepting minimum payments
- Offering flexible repayment plans
- Demonstrating empathy and trust
Hyper-personalization is a win-win strategy as it helps reduce outstanding debt while improving customer satisfaction and building customer trust.
4) Self-service to Empower Customers
Your customers want to feel in control, and by giving them a self-service payment portal, you're giving your past-due customers the power to pay their bills at their convenience. A report by the Boston Consulting Group states that customers have adopted digital self-service at unprecedented rates following the pandemic and that 80% of customers report a positive experience with self-service channels.
You can leverage this trend by providing customers with multiple self-service payment options across various channels. For example, you could send a personalized message to a delinquent customer via text or email and include a QR code or link that directly sends the customer to the payment gateway or help page. A self-service strategy eliminates the need for human interaction, keeping your operating costs low while empowering your customers to use their preferred channel.
Leverage These Trends to Improve Your Collection Strategies in 2023 & Beyond
The collection industry is rapidly evolving, and keeping up with these trends can help you build a data-driven, omnichannel collections strategy that benefits you and your customers. If you're ready to optimize your collection strategies and reduce outstanding liabilities, it's time to connect with Lexop. Our digital debt collection platform helps businesses retain past-due customers by empowering them with self-serve and flexible payment options.
Schedule a free demo today to see Lexop in action and adopt future-proof collection strategies.