Leading U.S. Lenders Believe Collections to be Digitally Transformed in Next Two Years, says FICO and Aite Group
- 42% of consumer lenders plan to increase IT investments for collections.
- Lenders see the increasing importance of monitoring external and internal risk indicators and anticipate negative changes in a credit cycle, while continuing to expand the borrow base.
- By applying data analytics, machine learning and artificial intelligence (AI) to the collections process, lenders can preserve and improve overall customer relationships.
FICO, a leading analytics company, today announced results of a research report with
"Consumer expectations have been raised due to the personalized digital experiences offered by non-bank providers like
The report surveyed senior leaders from large U.S. banks, credit unions, and nonbank lenders to assess their roadmap to a more customer-centric approach to debt collection and its associated challenges. The report noted that while delinquencies remain relatively low, many believe that a downturn of some magnitude is on the horizon. This expected change in the credit cycle – coupled with the need to continue to expand the borrower base – raises the importance of monitoring external and internal risk indicators. Solving for increased delinquency volumes and rates after the signs have been spotted is too late.
Lenders recognize the need to further investment across the entire credit lifecycle. Nearly two-thirds of consumer lenders (63%) report increases in technology investments for originations and compliance. Marketing-related investments follow with just over half (53%) and 42% of consumer lenders note increased IT budgets for collections in 2018.
Of the new resources being allocated to collection-related activities, half the respondents report that these investments are for data and analytics to inform their collections practice. More than 40% report investments in operational or business processes and technology.
However, in the next two years, debt collection professionals expect a shift in spending to focus on building or acquiring collection software platforms that integrate with analytics tools broaden the communication channels options for their customers, and digitally transform the collection process. As a result, collection departments can realize greater efficiencies by taking a digital first, customer-centric approach.
A large majority (86%) of consumer lenders believe that machine learning and AI technologies may be useful at many stages of the credit lifecycle. Some specific applications of machine learning and AI mentioned by collection executives include:
- Improving collectors' understanding of optimal times and channels to contact delinquent borrowers
- Assigning the right type of agent for the right type of activity or contact
- Identifying early warning signs of distress in not-yet-delinquent accounts
- AI enabled chatbots to engage lower-risk customers
According to the report, debt collectors increasingly want to understand how to better engage with their customers by delivering personalized communications. By leveraging data-driven communications platforms, lenders can improve customer communication by better understanding customer preferences and use this within the context of their broader relationship with the financial institution. By having the insights into what messages resonate with which customers over certain channels, lenders can vastly improve customer relationships which leads to improved collection rates on delinquent accounts.
For institutions that have traditionally managed collections at the branch level, part of this transformation has included centralizing some collection functions, particularly for those accounts that are high-risk, highly, or burdensome from a compliance perspective.
"Regardless of where they are in the process, debt collection executives know it's vital for future success that their processes undergo a digital transformation in the coming years," said
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956 and based in
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Greg Jawski for FICO, Email: firstname.lastname@example.org, Phone: +1 212-601-8248