Tips for Greater Insight Into Every Debt Recovery Stage

Retail banking is undergoing reform. Close scrutiny and calls for regulatory compliance are shaking up the industry and revealing gaps in operational performance. That means banks need to remain on task and on target more than ever.

Under Basel III, insight into debt recovery is a core indicator of available credit and revenue potential. This makes it critical to gain better insights into collections and recovery performance at every borrowing stage, from loan origination to delinquency. 

What should your organization consider as you follow prospects along their loan lifecycle? We’ve outlined a few considerations below. 

Gather Insights Before Delinquency

Each borrower has a unique story to tell, with their own set of reasons for being behind on payment promises. Always discover the full story behind each borrower’s debt recovery journey, and keep this customer-centric approach in mind as the loan progresses. The more information you have upfront, the easier it is to address problems down the line. That includes:

• Past account history.
• Preferred communication channels.
• Number and types of loan obligations. 

It also includes identifying problems early with an early warning system (EWS). Use monitoring models and systems to identify credit problems that might result in delinquency. This gives you key insights early—and results in fewer defaults, better ongoing risk assessment, and possible delinquency prevention.

Appoint Accountable Owners, and Select Robust Tools 

Also, assess your organization or department. How is your team performing? Are they operating in an environment where they’re set up to succeed or destined to fail? You will need your own set of auditory processes, and internal checks and balances to discover where gaps in process execution are holding your team back, including:

• Procedures that are improperly implemented.
• Lack of documentation on completed efforts.
• Poor communication between internal departments.
• Information gaps in borrower records.
• Tools that don’t quite hit the mark, or allow your team to truly track collections and recovery throughout the entire credit risk management cycle.  
• Ignorance of best practices for collections and recovery success.

Consider assigning each account to a unique point person, who is trained to speak directly to that individual borrower’s needs. 

Track Performance Plans to Ensure Success

Make your collection team’s performance trackable. Provide incentives, such as opportunities for feedback, recognition perks, and competitive bonuses, to encourage exceptional performance. Consider including the following in your incentive plans: 

• Dynamic goals that emphasize continuous improvement and don’t allow staff to slip into complacency.
• Monetary rewards—usually around 10 to 15% of monthly salary, but no more than 20%.
• Non-monetary rewards such as vouchers, gift certificates, dinners, etc.

With insight into performance plans, and proper incentives to reward improvement, you’ll see better collections and recovery execution at every stage of the loan cycle.