Four Ways to Refresh Your Recovery Strategy

Banks and lenders have under-invested in their recovery strategies in the past few years, but  losses increasing to pre-pandemic levels should serve as a wake up call: it’s time to do a refresh of your recovery strategy.

2nd Order Solutions’ recent whitepaper, Recoveries Strategy Refresh, breaks down all of the reasons why now is the best time for lenders to focus on recoveries, and how their investments could pay off big time in the long run.

Here are four major takeaways from their analysis:

1 - Inventory management is critical.  

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Collections & recovery strategies cannot work if there is not a robust inventory management approach. There are a lot of options for recovering past-due debt, and pulling the right lever for the right account is key to seeing increased revenue through an economic downturn. 

2 - A good recovery strategy is diverse. 

No one strategy will work for all past-due accounts. An effective recovery strategy will include at least some mix of the internal collections, first party outsourcing, third party agencies, legal firms, and debt buyers. Coupled with killer inventory management, using the right tool to collect is the key to collecting on past-due debt and higher liquidation rates.

3 - Investing in digital collections will pay dividends.

 According to 2oS, digital-first recoveries are worth a 10-30% increase in recoveries liquidation, depending on the segment. This means investing in a self-service portal which customers can visit after receiving outbound communication about their debt. It will result in two things: more repayments, and lower cost to collect. 

4 - Debt settlement companies can be your friend. 

The relationship between collections & recovery departments and DSCs has been historically antagonistic. But engaging with DSCs can bring a ton of value for issuers. In fact, working with DSCs proactively often means your past-due debts get prioritized, which is a huge win in a downturn.

Read a full breakdown of how to refresh your recovery strategy here.

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