Customer Centric Collections

Introduction
Many organisations, including banks, offer their customers multiple credit product offerings. If a customer defaults on a number of these products, there are often numerous collections areas all trying to collect their money from the customer. Marketing offers are sometimes sent to a customer who might be receiving collections calls for another product.

Intuitively, it makes sense to look at a more customer centric collections model where an organisation collects only once on a person who has defaulted on multiple products. This series of tips will discuss some of the issues that should be considered when looking at this approach.

Collections Strategy
A best practice collections strategy for a product or group of products relies on the principles of segmentation and tilting. Segmentation is the grouping of accounts into classes for actioning and tilting is the acceleration or deceleration of treatment on these classes.

Based on this, the simplest way to achieve customer centric collections is to accelerate or decelerate treatment on an account, based on the performance of the same customer on their other accounts. There are two possibilities:

Treatment Acceleration
If a customer is delinquent on one or more products from the same organisation, it is wise to accelerate treatment on all products, as the likelihood of losing the money is higher for such a customer.

Treatment Deceleration
If a customer is performing well on other products and they also have balances in savings accounts, the likelihood of losing the money on the product currently being collected on is lower. In this case, it makes sense to give the customer more opportunity to self cure. The organisation should keep an eye on the customer’s positive savings balances and if that changes suddenly they should remove the treatment deceleration.

This approach ensures that the organisation applies the appropriate treatment to the customer when collecting on a credit product. It can be further enhanced by considering credit bureau information as well as internal product performance.

The customer centric collections approach will not only improve the collections strategy approach to product collections but will also lead to operational benefits. If a collector can collect all outstanding amounts across all products with a single phone call instead of multiple collectors with multiple calls, there is a clear cost benefit.

Part 2 will discuss other factors that need to be considered before deciding on customer centric collections.

Paul Shortridge is a Senior Consultant at PIC Solutions, the largest customer management solutions company based in the Southern Hemisphere. He has over 5 years experience in the financial services industry. Previously with Nedcor as manager – innovation in retail credit, he headed up a team that successfully rolled out projects to reduce risk, increase revenue and reduce costs across all credit and transactional products. In this role, he implemented initiatives that increased revenue by R100 million and introduced their 8-second home loan pre-approval process. As lead consultant at London Bridge Group, Paul was responsible for the business lead in large scale project implementations as well as assisting the sales team with expanding their market in South Africa. He holds a BSc and MSc in Chemical Engineering from the University of Cape Town.