Marginal gains for maximised debt collections: 5 small things that make a big difference

The British cycling guru Dave Brailsford famously introduced the idea of ‘marginal gains’ to professional cycling. The logic goes, according to Brailsford, that when you improve every little thing by 1%, you'll get a significant overall increase in performance.

Brailsford’s Team Sky went to extreme lengths to identify and leverage opportunities for aggregating marginal gains. There were the obvious things - equipment, fitness - but the pursuit of marginal gains went further.

It included the pillows riders slept on, testing for the most effective type of massage gel, and teaching riders the best way to wash their hands to avoid infection.

Brailsford’s obsessive attention to detail offers a lesson to collections teams: The collections process features many small moving parts, and improving them - even by 1% - can add up to an amazing increase in efficiency overall.

Debt collections software has the functionality to enact these improvements. Let’s look at the five areas that, when they’re added up, can make a big difference to a bank’s bottom line.

1. The right segmentation

Despite the quirky lengths that Brailsford went to, every action was tied to one goal: winning races. No effort was wasted on facets that didn’t build towards this.

Segmentation plays a similar role in the collection process. Done right, it enables your teams to focus only on the customer accounts that are riskier than others. This pre-collections - or pre-delinquent - stage is a crucial part of speeding up debt recovery.

Segmentation matters because customers have complex differences. Each customer is in a different collections stage and a unique financial situation. Segmenting helps create interactions that are relevant to your customers while improving your collections rates.

You can identify when an account begins to slip. And identifying someone who is pre-delinquent gives you the ability to control how best to help them.

Collections software can rate risk and flag the likelihood of delinquency and segment portfolios based on recovery needs and risk scores for more effective collector targeting.

Specifically, customer segmentation means identifying the right predictive metrics and moving swiftly when a customer account begins to exhibit these signs. Examples include changes in repayment amounts, increase in usage, late payments, or cancellation of the direct debit.

2. Easily designing and testing collections strategies

Given the dynamic nature of modern debt, a one size fits all approach can’t work for your collections strategy.

Effective segmentation and data are steps in the right direction, but the strategies they lead to can and should be tested and tinkered with. Technology allows you to explore different scenarios and provides the tools for testing frameworks and measuring success.

By rolling out a tailored strategy to a small number of accounts, you can test your assumptions. And crucially, you can see where your users encounter problems and get stuck. You can then steadily and simply improve your processes with each iteration.

3. Templated designs for reaching customers

Traditional customer service methods have struggled to cope with large customer portfolios.

Over ninety percent of consumers report having to contact a company multiple times for the same reason, and ninety percent in the same survey reported being on hold for too long.

A contact centre remains a vital part of your customer outreach, but it can’t be your only avenue. Collections software allows you to easily design templates for reaching customers via various channels, like SMS, email, and even old-fashioned letters.

These communication templates can be tailored to different segments. Certain customers might respond better to SMS and email than a phone call. Others might prefer a letter. You can design how and when you reach out to specific customers with different needs.

4. Flexible assignments to external debt collections agencies

Effective collections software makes monitoring the performance of external debt collections agencies (DCAs) simple. One flexible system can manage multiple customer journeys and multiple debt collection agencies.

We’ve written before about the crucial role that reputation plays in the debt collections process. Effective monitoring of DCAs means you can distribute accounts based on the performance of each agency.

If you’re using an external agency for collections, everything they do reflects on you. If you can monitor the DCA’s performance and methods, it’s easier to enforce your rules and norms across your entire collections operation.

In other words, you can reward DCAs doing good work and quickly eschew agencies pursuing methods that reflect poorly on your institution.

5. An easy-to-use customer self-service portal

The simplest way to empower your customers is to help them help themselves. Self-service has had a transformative effect on the banking industry, and there’s no reason why collections should lag behind.

The question for banks isn’t how to make customers pay: it’s how to make it easier for them to do so. Self-service is the answer. The latest collections software has in-built, customizable customer self-service (CSS) portals.

There are customer service advantages, of course. Half of the consumers think it’s important to solve product or service issues themselves and 70% expect a company’s website to include a self-service application. Self-service isn’t a nice-to-have, it’s a business requirement.

And with the right tools, a CSS portal has another advantage: it increases the touchpoints between you and your customer. And the portal, which can be implemented with minimum fuss, feeds into your existing systems.

It’s a healthy source of customer data to create insights like collections scoring and risk segmentation. This enables you to make the right offer, to the right customer, at the right time.