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 One of the key principles in the consumer credit cycle is the fact that acquisition of a new customer is significantly more expensive than to cross-sell to or retain an existing one. Therefore, the primary objective of collections is to work with customers so they can bring their accounts current and generate revenues for the organisation. For those customers who are unable or unwilling to bring their accounts up-to-date, the objective of collections is to minimise the write-offs by working accounts that fall past due.
Given the objectives of the collections function and the realities of the marketplace today, there are numerous questions currently being asked related to debt management. Some of them are:
How cost-effective are we? Reduction in labour costs, increased retention to protect future revenue and the creation new revenue can be achieved with an automated workflow system. This allows effective use of available customer contact channels and improved customer knowledge derived from the customer’s overall relationship with the creditor and external performance.
How are we going to thrive in a ‘bloated’ market? Consumer debt is at a record high, which has produced very large amounts of delinquent debt and record numbers of insolvencies. To deal with this, strategies must be embedded that are based on scoring models and segmentation. Strategies for phones calls, letters, e-mails, SMS’, visits and settlement offers must be executed effectively at appropriate times.
Customer or account-level debt management? Most multi-product creditors have embraced the concept of customer level management – an approach that brings potential challenges in terms of customer level scoring / prioritisation. The solution here is to aggregate all available account and performance information by using data across multiple products and ensuring that contacts are done at a customer level.
"The primary objective of collections is to work with customers so they can bring their accounts current and generate revenues for the organisation..."
Are we managing our DMAs correctly? Creditors are outsourcing services to Debt Management at all stages of delinquencies, but how effective are they performing? And when and for how long should their services be used? Come to think of it, how does one value distressed portfolios for sale or purchase? The requirement for this is to have a module to allocate accounts to DMAs, with a strong MI to control the outcome and quality of strategies.
Receivables growth is a priority this year. How about its non-performing loan consequences in the following years? Increased market and competitive pressures are exposing firms to higher risk, including sub-prime markets, and this requires a real-time system, a sophisticated segmentation and strategy, and strong MI to monitor performance of debt management strategies.
I cannot possibly be perusing through 100 pages of reports every week. What is going on with the portfolio? Are problems and opportunities identified in a timely manner ensuring rapid response to such business issues, and does the report evaluate the effectiveness of strategies? Operational and strategic reports are key requirements, as is an interactive workspace with up-to-the-minute KPIs. Skilled analytical resources are employed in interpreting information and developing responses to identified problems rather than in the production of data.
How will I make the best use of the credit bureau information? Credit bureau information now available in many countries assists creditors in making informed decisions and, therefore, provides opportunities for creditors to become more profitable. But how does a creditor ensure that it is getting the desired benefits out of it? It must aggregate all available account information and performance at customer level, blending delinquent customers’ internal and external performance and exposure data with a real-time functionality.
The solution
The Tallyman Debt Management solution from Experian enables organisations to address these challenges, increasing the recovery of cash collected,  ensuring earlier recovery of debt through improved automation of decisions and the use of best practice collections techniques inorder to maximise profit, improving cash flowand reducing costs. Additional benefits are represented by debtor rehabilitation, achieved through its profiling and the use of the most appropriate collection technique, and a rapid ROI experienced by utilising an agile deployment and optimised ability to further enhance the solution.
Burak Kilicoglu
Business Consultant
Decision Analytics
Experian
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