Over the past 10 years, some of America's most venerable industries have found themselves threatened -- if not put on virtual life support -- by aggressive Web-based "disrupters." Traditional hotels and motels now face stiff competition from AirBnB. Old school taxi companies are losing riders to fast and nimble ride-sharing services like Uber and Lyft. Blockbuster Video? Killed by Netflix, Hulu and Amazon Prime. The Yellow Pages? All but killed by Google. And anyone who's been following the brick-and-mortar retail industry knows that Amazon and its digital brethren are in the process of making retail department stores -- along with the shopping malls they anchor -- as quaint as hydrogen-filled balloons.
So what's the next industry likely to find itself up-ended by digital disruptors? It may very well be debt collection.
Granted, the words “Debt Collection” will sometimes send a shiver through your spine. But past-due accounts are a serious problem for the affected businesses. Not to mention being a drag on the economy as a whole.
In an April 27, 2017 article in Forbes, contributing writer Robert J. Sczcerba offers the following statistics:
- At any given time, there is an estimated $12 trillion in outstanding consumer debt, with $672 billion of that debt being at some stage of delinquency.
- At least 7,000,000 small businesses in the U.S. have trouble collecting payments from customers.
- Of these 7,000,000 small businesses, 49% of them had to write off bad debt in the past year and 43% have customers who are more than 90 days late on payments.
So, yes, the collection of outstanding debt is a big deal. Which is why the debt collection industry has to innovate. While many hotel chains, retail stores and transportation services have at least tried to keep pace with technological advances -- and customer expectations -- the debt collection industry has remained relatively unchanged for decades. As quoted in the same Forbes article, Christoph Bene, Managing Director at Brock Capital Group, describes it this way: "Fifty years ago, debt collections agencies relied on annoying phone calls and form letters sent through the mail to encourage people to pay their past due accounts. Today, with the ubiquitous use of smart phones, texting, e-mail and social media, the debt collection industry -- yep, you guessed it -- still mainly relies on annoying phone calls and form letters."
Which is where Artificial Intelligence (AI) comes into play.
AI has the potential to revolutionize debt collection by reaching out to debtors via the media they use, speaking to them in a language they understand, and developing customized solutions based on each person's individual circumstances.
The Medium is the Message. There is a growing cultural divide between generations. A business that tries to communicate with recent college graduates the same way they do with retired Baby Boomers isn't going to be in business for long. The choice of communications media -- be it email, text message, live phone call, printed letter -- depends largely on the character of the recipient. And when an agency is dealing with hundreds -- perhaps thousands -- of delinquent customers, it takes a very "smart" application to choose the channel best suited for each message.
Context is King. You don't speak to an employer the same way you speak to a sibling -- or a police officer. Similarly, a collection agency can't use the same language when reaching out to a top-earning corporate executive as they do when trying to collect from a single mother of five who's holding down two jobs. With AI, companies will be able to communicate with the tone, vocabulary and incentives most likely to engage the individual recipient -- automatically.
Staying Within the Lines. There are myriad state and federal regulations designed to prevent abuses by over-zealous debt collectors. Unfortunately, the industry remains notorious for its use of off-hour phone calls, intimidating language, and other aggressive techniques to try and pry money out of resistant hands. Using sophisticated rules engines, collections agencies can now make sure that they stay on the right side of the law while still disseminating strong, effective communications.
Personalized Solutions. If there is one industry where "one size fits all" makes no sense, it's debt collection. Every situation is different. Every debtor has his/her unique set of challenges. Counselors, working one-on-one with customers, may be able to work out win-win payment solutions, but this takes time, talent, training, sensitivity, creativity and money. For many companies, it's just not worth the investment. AI can make this ideal a practical reality. A truly "smart" tool can analyze and weigh literally thousands of payment scenarios in a second, offering up a solution perfectly tailored to the customer's cash flow and competing obligations.
Learn as You Earn. Perhaps the biggest selling point about Artificial Intelligence is that it is, well, intelligent. AI does not more than blindly follow a set of instructions. It learns. It adapts. It grows. It improves. Each failure is a lesson. Each success is an insight. As AI becomes increasingly common in the debt collection industry, expect its efficacy to improve by the month. That not only means more cash in the hands of the companies to which it is owed, but also happier, more satisfied customers.
Companies such as Intellaegis with their masterQueue product, have been working to streamline the skip tracing space for the past six years taking a smarter BigData approach to vehicle recovery and debt collection. And Experian, always a leader in financial risk and credit management, recently released two advanced tools designed to help businesses improve their collections results. eResolve is the first self-service platform to help consumers negotiate and resolve past due obligations. PowerCurve Collections brings together data, decisions, and the collections workflow in a single, unified system.
These are just the first steps in what promises to be a genuine revolution for business collections as artificial intelligence, Big Data analysis, and predictive analytics combine to create automated workflows that work to the benefit of the creditor and the debtor. Businesses will receive more of the money they're owed. Customers will have less debt to manage.
And best of all, no more of those annoying dinner-time phone calls.