The Evolution of Debt Collection: Embracing Digital Solutions

By Joe Hepple

In the last 3 years we have seen a 33% increase in online payments. When compared to 2021 we have observed a 200% increase in web portal usage and in the last 12 months engagement through web chat has increased by 50%.

The Covid-19 pandemic turbocharged digital adoption for 89% of UK banks by five years, according to research conducted by UK-based analytics software provider SAS.

It found that traditional banks witnessed a notable rise in the adoption of new technologies, with 93% reporting accelerated digital adoption by five years.

This is in comparison with 87% of challenger banks, which are often digital-first and are able to embrace newer technologies more easily.

Traditional methods of debt recovery are gradually making way for more efficient, streamlined, and customer-friendly digital debt collection solutions. That's not to say that traditional collections methods don’t still work, knowing what best works for you means understanding your customers needs and requirements and responding with their outcomes in mind.

So what are the benefits of digitising?

  1. Automation for Efficiency: Digital debt collection solutions leverage automation to streamline and expedite the collections and recoveries process. Tasks that were once labour-intensive, such as sending reminders, processing payments, and tracking debts, are now seamlessly automated. This not only reduces the workload on collection agencies but also minimises the chances of errors, ultimately enhancing overall efficiency.
  2. Data-Driven Decision Making: The wealth of data available today allows debt collection agencies to make more informed decisions. Digital solutions utilise advanced analytics and algorithms to assess a consumer's financial situation, predict payment behaviours, and tailor collection strategies accordingly. This data-driven approach enhances the likelihood of successful consumer outcomes while ensuring a more personalised and empathetic experience for consumers.
  3. Enhanced Communication Channels: Digital debt collection solutions offer a diverse range of communication channels, including email, text messages, and online portals. This flexibility allows agencies to connect with debtors in ways that are convenient for them, fostering better communication and understanding. As a result, the stigma associated with debt collection is gradually diminishing, and people are more likely to engage positively with the process.
  4. Improved Compliance and Transparency: Compliance with ever-evolving regulations, particularly the consumer duty, is a critical aspect of the financial services industry. Digital solutions come equipped with features that ensure adherence to legal standards and enhance transparency in the recoveries process. Automated documentation, audit trails, and secure online platforms contribute to a more compliant and accountable system.
  5. Personalisation and Customer-Centric Approach: Digital solutions allow for a more personalised and customer-centric approach. Agencies can tailor communication strategies based on individual debtor profiles, creating a more empathetic and understanding interaction. This shift from a one-size-fits-all model contributes to a more positive experience, potentially increasing the likelihood of successful consumer outcomes.
  6. Integration with Fintech: The integration of digital debt collection solutions with financial technology (fintech) platforms has further accelerated the industry's evolution. Seamless payment processing, real-time financial data access, and innovative debt settlement options contribute to a more dynamic and responsive collections and recoveries ecosystem.

The rise of digital customer engagement solutions signifies a positive shift in an industry traditionally marred by negative perceptions. Embracing technology not only improves but also fosters a more empathetic and personalised experience for consumers. As the landscape continues to evolve, the collaboration between technological innovation and debt collection is poised to redefine the industry for the better.

Want to learn more about our digital solutions? Have a read of Mark Bruckshaws blog on Engaging with People in Debt: A guide for Embracing Digital Solutions