Self service portal vs. machine learning-based collections

TrueAccord Blog

Consumer behavior is changing. As more of us are glued to our mobile phones, emails, and social media accounts, it’s clear that the old ways of collecting debt are quickly becoming irrelevant. Still, the market doesn’t offer a multitude of collection solutions aimed at responding to the digital consumer. When we present our machine learning-based solution to prospective customers, we’re often asked about the difference between our solution and a self service portal. Although both solutions are digital, they cannot be less alike.

Passive or active? Proactive and reactive strategies in collections

A self service portal is a passive asset, available for consumers to use when they choose to. Often, consumers choose not to use the portal since they would rather not deal with their debt conundrum. It’s only human to do so. Since the portal is passive, the consumers who find it are those who look for a way to pay online, without talking to an agent. They are a minority, and their liquidation is far from worth the price of implementation. In fact, many or the collectors and creditors who use online portals have accepted that less than 10% of their paid dollars may come from their self service portal. Others have given up completely. Compare that with TrueAccord’s whopping >90% paid through our online portal.

A machine learning-based system is an active one. Our collection engine creates collection strategies that are both proactive and reactive. The system proactively reaches out to the customer, automatically and using pre-written content, across multiple channels, to get them to engage online. Every communication has a link to the online and mobile-optimized portal, and phone calls are aimed at supporting this strategy rather than the only tool for contacting the consumer. Once the consumer interacts with our communication and browses the website, the system tracks their behavior so it can react to it – personalizing follow up flows based on emails they opened, pages they visited or words they said to agents on the phone.

Cross channel integration and halo effect

Using a machine learning based collection system has another advantage over passive a self service portal: it is integrated across all channels. Self service portals are often an add-on, their data is separate from the main collection system and dialer. They exist to supplement the main dialing strategy, often giving consumers the feeling that they are “fleeing” the collectors to use the online portal. It’s a wasteful strategy that also yields consumer complaints.

A machine learning based system harvests the halo effect, that causes consumers to react better when they are contacted across multiple channels. For example, for some groups, following up on an email with a single call attempt at the right time and number is twice as effective in getting a response as sending another email. For others, calling within five minutes of a consumer browsing through payment options without paying increases liquidation significantly. Shifting between channels increases effectiveness but also increases efficiency, reducing outbound call volume by up to 95%.

Bottom line

Machine learning based solutions are significantly more effective than a passive, stand alone self service portal. More than 90% of paying accounts in the TrueAccord system are resolved using the online service – and liquidation beats traditional agency performance by 30% and more. Using data and the maturing world of machine learning algorithms is the future of debt collection – and we’re happy to help.

 

Debt collection and President Trump: not much will change

TrueAccord Blog

We’ve heard varying sentiments about the November 8th election results. Behind the scenes, many in the debt collection industry are excited and happy for them. They believe a Trump presidency will put an end to regulation in debt collection, and put the industry “back in business”. This is a short sighted view, focused on the wrong drivers of change for the industry. Debt collection and President Trump may not be the great allies some believe they will be.

No administration can side with debt collectors

First, to put the industry back in business, debt collectors’ well being has to be on the new administration’s mind. Doing so will put it at odds with consumer advocates across the nation. It isn’t just about complying; the industry isn’t measured by its average, law abiding debt collector but by the most horrendous abuse stories one can dig up – and digging those up is still too easy. On the list of battles to take and industries to fight for, debt collection will easily take a back seat.

Deregulation is a rocky road

Second, undoing regulatory impact on the debt collection industry is a complex process. It will require not only dismantling the CFPB and halting all regulatory and supervisory activity, but also reversing the FCC’s TCPA ruling. While handing the FCC ruling might be doable, assuming public sentiment is amenable, it will take a while to implement. The CFPB is much trickier: as the CFPB is asking for a rehearing in the PHH decision, it is unclear whether Trump will be able to impact the identity of the head of the agency until 2018. This means that the debt collection rule will materialize – not the least since debt collectors themselves want clarifications regarding using technology in debt collection. Even if all of the above happens without any roadblocks, CFPB supervisory activity won’t go away; consumer protection is an important goal for every administration.

Compliance isn’t the most important factor

Finally, although regulation gets all the attention, it is far from the most impactful factor in the future of debt collectors. No regulation will reverse the shift in consumer behavior. Consumers will keep disregarding phone calls and letters. They will continue preferring online and self-service portals. Their behavior will continue to shift away from the industry’s standard mode of operation, calls and letters. It is this reality that creditors and collectors must grapple with, instead of fixating on speculation about the future of the CFPB. It’s a generational shift like no other, and it is stronger than any government agency or wishful thinking. Ignore it at your own peril.

TrueAccord at the Debt Collection Field Hearing

TrueAccord Blog

The CFPB put the full video from their debt collection field hearing on their YouTube channel. Participants were allowed 2 minutes to respond, and our CEO took that opportunity (watch here).

His comments:

Thank you for the time today. My name is Ohad, I’m CEO of TrueAccord, a company that uses data and machine learning to fundamentally change the consumer experience in debt collection. We’ve been studying the new proposal since yesterday. We believe it is a big step towards improving consumer protection. Weeding out bad actors is going to level the playing field and create a race to the top that will benefit everyone.

When finalizing the rule, we think the CFPB should continue to encourage innovation in this space by providing clear and unambiguous guidelines on how to use new technology in the collections process. As a data-driven startup company, we have empirical evidence showing hat using new technologies in the collection space – text, email, social media, digitizing the dispute process – significantly improves consumer protection.

One, it improves protection measured by consumer feedback and a marked reduction in consumer complaints. Consumers understand and react to our personalized, targeted communication.

Two, it significantly reduces communication frequency; reduces call frequency by up to 95%, well under the limitations proposed in this new proposal, using channels that consumers feel are much less intrusive.

Finally, it does all of the above while meeting or exceeding traditional performance in liquidation. Nobody is going to go out of business by using new technology (and we’ll add here: versus continuing to insist on hardly-compliant calling tactics).

Again, the CFPB should considering supporting innovation by providing clear guidance for the use of technology. It will improve consumer protection and will help he industry as a whole. We look forward to cooperating with the CFPB and policymakers on this shared goal.

The CFPB’s proposal outline and SBREFA panel

TrueAccord Blog

The CFPB’s proposal outline and SBREFA panel

Last week, TrueAccord participated in the SBREFA panel for the CFPB’s proposal outline for upcoming debt collection rule. The CFPB invited Small Entity Representatives (SERs) to discuss how the outline could influence their businesses. The industry expects a more fleshed out proposal quite early in 2017. One thing is clear: this rule will change the debt collection industry forever. Creditors, collectors and buyers should take note and start adapting to, rather than fighting the rule.

While this isn’t the final proposal, we can observe hints of the huge changes to come; it’s such a departure from current practices that applying this proposal retroactively may erase the majority of the debt buying industry. We don’t believe this is what the CFPB is aiming for. We see true desire to change operating principles in the debt collection and buying space, while showing a path forward. The outline included explicit references to new technologies, and some discussion of proper use of email. It also signaled the CFPB’s intent to provide safe harbor where it can, promoting best practices in the process. You can read our initial response here.

How should the industry respond to the CFPB’s proposal outline?

The industry’s responses to the outline have been mixed. While some SERs came to the panel prepared to discuss key issues (with tremendous help from the Debt Buyers Association), some focused on dissenting or simply pleading with the CFPB. However the time to dissent has passed. The outline’s broad strokes won’t change. These are our top suggestions for dealing with the coming changes:

  1.     Collectors must prepare for a world with almost no phone calls. Between the FCC’s TCPA ruling and the CFPB’s proposed rule, calling en masse is going away. The CFPB could issue a hard limit on calls or simply significantly increase litigation risk, by defining more than 6 calls a week as harassment. Either way, collectors must start adopting better data science for call prioritization and moving to alternative channels like email. There will be a significant reduction in the number of Right Party Contacts as the industry currently defines the term.We discussed in the past how using an integrated, multi channel approach can match and exceed current collection rates.
  2.     Collectors must prepare for a fundamental change in consumer interactions. One of the SERs noted that “[collection companies’ role] is to get the consumer on the phone.” The CFPB is changing that by mandating more data requirements, easier disputes, and improved consumer understanding initiatives. Clearly, collectors’ role is shifting from a glorified call center to a sophisticated service that guides consumers through repaying their debt, with more flexible payment options and much more information exchange. This model won’t support large call centers making millions of calls and commission based compensation.
  3.     Creditors must prepare for changes to their first party operations, while also changing the way they provide data to their agencies. Data integrity will become an even bigger issue when working with collectors, and old systems may not be a fit anymore. Using eDisputes, collecting feedback from consumers and making account data easily available in collections all require big changes – but will result in a leaner and better collection funnel.

Bottom line

We see early adopters already thinking ahead about these changes. Our clients work with us to adopt advanced servicing models for consumers, better data availability and flexible options across multiple channels. Still, many are behind, refusing to adopt new technologies or experiment with better customer care in the debt collection process. Clearly, the CFPB is ushering change and is not shy about it. It’s time to adopt before a new rule comes into effect.

Want to learn more about TrueAccord’s perspective and how we can help you adapt to this new world? Get in touch with our team!

It’s lonely in the Debt Collection Startups box…

TrueAccord Blog

The Startup culture has always been characterized by herd-style behavior.  There is a tendency to focus on a bunch of areas that are “ripe for disruption”. After a promising / well-publicized startup draws attention to a area – be it ride-sharing, marketplace lending, payments processing, risk management, or one of many others – many more rush in, attempt to differentiate themselves and get a piece of the action.  

Call me a skeptic – but when I see new entrants rushing into an already crowded niche, their reason for being there (Differentiated value prop? Superior talent? Can’t come up with a new idea, and investors are giving out free money here?) is rarely obvious.

There is one industry I can think of that has been aching for innovation, and yet has seen next to no startup activity.  This industry

  • Touches ~80 million Americans a year, in a way that is highly inconvenient, even disturbing
  • Makes little-to-no use of digital communication
  • Often burdens consumers with hefty service fees
  • Is responsible for more consumer complaints to the Federal Trade Commission than any other

This industry offers an experience that many go to great lengths to avoid – and yet, because consumers have no voice in the selection of the “service provider” they deal with, customer experience is frankly not a factor industry players optimize for.  The only party looking out for the consumers’ experience in this ecosystem are the regulators, who have recently proposed new rules that will improve customer experience – and, in doing so, may endanger the livelihood of the traditional service providers.  Do I have you on the edge of your seats yet? The industry is Debt Collection.

If this industry isn’t begging for innovation through usage of technology and analytics to interface with consumers in a more friendly, convenient, compliant, and effective way, what is?  And yet, in the infographic CB insights published last week (see below) which shows startups bringing AI / Machine Learning to Fintech, the Debt Collection box is not crowded at all – in fact, TrueAccord is the only player in it.  

AI-in-finance-20160722

This is not totally a mystery to us.  Debt Collection is not a “sexy” space.  The barriers to entry are also significant – it has taken us over two years to become fully licensed (as most States have separate licensing processes and requirements), and procedural Compliance requirements are complex and State-specific as well.  What makes it all worth the hard work is the opportunity to make a difference for tens of millions of people, many of whom don’t know where their next rent payment will come from, who are desperately struggling to attain financial stability, and can use a service provider who is on their side and is looking to make the experience less difficult for them.  

We are proud of making significant headway in a space few other startups have ventured into.  Over the past three years, through a massive investment of Data Science, Analytics, and Engineering talent, access to millions of records of data, and multiple iterative optimization efforts, we have built an intelligent, automated, highly scalable Collections engine.  We are excited to hear consumers tell us “We’ve never worked with a friendly collections agency before – where did you come from?”.  And we are overjoyed to work with over 100 corporate clients, including several large financial institutions, that care about treating their customers (even former customers) well and are excited about the recoveries we bring (compliantly) to the table.

Will other startups join us in the Debt Collection box? If they do, we are ready – with our 3-year first-mover advantage and a product-market fit that took several years to find and build for, we are uniquely positioned to continue driving innovation, taking share in this market, and making Debt Collection a less unpleasant experience for millions of people.  

New white paper: code driven compliance keeps you safe

code driven compliance keeps you safe

Compliance is top of mind for the debt collection industry. Highly regulated at the State and Federal levels, collectors are subject to dozens of laws and regulations that govern every aspect of their operations. A highly litigious culture based on strict liability laws means a constant threat of lawsuits, resulting in shifts in courts’ interpretations of various statutes. To pile on, debt collectors are subject to active enforcement and rulemaking activity and attention by lawmakers, leading to ongoing updates in debt collection laws. What can debt collectors do to get ahead of them curve? At TrueAccord, we know code driven compliance is the answer.

While compliance pressure mounts, the industry hasn’t changed its traditional operating model. Hundreds and thousands of human operators use dialers to continually ring up those in debt. They spend hundreds of hours discussing sensitive issues with customers, and are oen compensated with a commission on debt repayments. This model has survived TCPA rulings, enforcement actions, class actions and dramatically soaring legal and compliance costs. Its combination with a rapidly changing regulatory environment is a challenge that many lenders and collectors are struggling with. Compliance officers at these companies are trying to solve an extremely hard optimization problem: how to design and implement a control structure that effectively detects and mitigates compliance exposure, while optimizing on compliance resource allocation and exposure.

Code driven compliance: a fundamental change in compliance management

In this white paper, we review a code-first approach to compliance. Developed as part of a machine learning-based alternative to debt collection via large call centers, it solves the major pain points the industry is facing with regulators and legal experts. We discuss how this model works for TrueAccord, a machine learning based collection service, and for its clients. If you’d like to learn more about our service, check out our website.

To read more, download the free white paper here.

Augmenting your strategy with automation: part three of three

Augmenting your strategy with automation: part two of three

Automation and digitization offer new tools for the collection strategist, augmenting the traditional building blocks. These new tools, introducing flexibility and sophistication that are usually attributed to other parts of the business, can mitigate common pitfalls.

In this series, adapted from our free eBook Automating Debt Collection 101, we’ll review the three major areas where automation and digitization can boost a collection strategy:

  • Early contacts and improved segmentation
  • Persistent communication
  • Improved customer satisfaction

In this last part, we’ll focus on improving customer satisfaction with automation.

The daily grind of agents talking to customers in difficult situations coupled with tight regulation is complicated to control. While talking points and call scripts are used, it’s impossible to control what actually happens in a call in real time, and no amount of QA can solve that.

When debt collection is automated, many of these problems are mitigated: machines aren’t baited or biased by angry customers, and maintaining code-controlled compliance is much easier than controlling hundreds and thousands of human agents. Machine based communication is pre-written, with no way to deviate, and every action is properly logged to offer incredibly auditability. The system stays on brand, and delivers a consistent experience to all customers based on pre-set requirements. When something changes in regulation, propagating the change via code is significantly easier than retraining hundreds of agents.

A great experience has other benefits. Finding the way to get late customers to work with you again also increases Life Time Value and increases revenues in the long run. Some of TrueAccord’s customers see more than $2 in added business from paid-up debtors for every $1 recovered. Providing a flexible service improves recovery, contributed to Net Promoter Score, and even reduces your legal risk and number of complaints.

Want to use our tools to optimize your strategy? Visit our website to learn more.

Common pitfalls of collection strategies: part three of three

Common pitfalls of collection strategies: part three of three

There are multiple reasons for preferring certain collection strategies over others. Every strategy has built in areas of weakness that cause it to make less money than possible. Strategies shouldn’t be stagnant, and as new tools present themselves, strategists can continue to fine tune their strategy and improve returns.

In the following three post series, adapted from our free eBook Building a Collection and Recovery Strategy, we’ll review the top three pitfalls we see with common collection strategies. They are:

  • Under-charging when selling or over-paying when outsourcing
  • Only focusing on a small percentage of customers in an outsourced strategy
  • Losing customer relationships in a sell or litigation heavy strategy

In this final part, we’ll talk about sacrificing customer relationships with an aggressive strategy.

A common wisdom is that retaining customers is a much more profitable activity than acquiring them. Yet when reaching recovery, most companies default to relatively aggressive tactics with limited regard to the customer’s unique situation and the chances of retaining them.

Large financial institutions now realize that during the lifetime of a customer, they may end up in collections but recover over time and get back to being a profitable account. This is why more banks and non-bank lenders adopt a customer-friendly approach in recovery, giving customers flexible repayment options with the goal of keeping them engaged. Long term, this approach is more profitable, but harder to maintain with traditional sell/outsource tools because of their limited scalability and lack of commitment to the lender’s brand.

Want to use our tools to optimize your strategy? Visit our website to learn more.

Augmenting your strategy with automation: part two of three

Augmenting your strategy with automation: part two of three

Automation and digitization offer new tools for your collection strategy, augmenting the traditional building blocks. These new tools, introducing flexibility and sophistication that are usually attributed to other parts of the business, can mitigate common pitfalls.

In this series, adapted from our free eBook Automating Debt Collection 101, we’ll review the three major areas where automation and digitization can boost a collection strategy:

  • Early contacts and improved segmentation
  • Persistent communication
  • Improved customer satisfaction

In this second part, we’ll focus on improving performance with persistent communication.

Customers in debt are in a dire situation, cannot pay the balance in full, and many times even a payment plan isn’t feasible. A call center is limited in its flexibility – beyond a certain number of payments or customizations, a human agent is just too expensive. These accounts risk being mishandled, and end up paying less than they could with some “hand holding”.

Automated collections have a tremendous advantage in handling complex cases. The platform consistently follows up with customers using multiple channels, offering various solutions according to an optimized offer strategy, and administers changes in those solutions (split payments, rescheduling and more) over time as needs change. These tools can accept and administer a monthly $5 payment that increases over time, even if the customer misses a few payments and needs consistent follow-ups. When the vast majority of contacts are automated, even small amounts are profitable – and add up. The system doesn’t get tired, doesn’t get angry, and doesn’t need to go home by the end of the day. It’s there to service the customer.

TrueAccord sees more than 35% of customers in an average placement click on a link and negotiate with an automated system, thanks to diligent and relevant follow ups. In tests, working on the long tail of underserved accounts yields 4-8% of additional recovery – dollars that would otherwise be considered lost.

Want to use our tools to optimize your strategy? Visit our website to learn more.

Common pitfalls of collection strategies: part two of three

Common pitfalls of collection strategies: part two of three

There are multiple reasons for adopting one strategy over the other. Every strategy has built in areas of weakness that cause it to make less money than possible, but all have common mistakes – some shared and some unique. Strategies shouldn’t be stagnant, and as new tools present themselves, strategists can continue to fine tune their strategy and improve returns.

In the following three post series, adapted from our free eBook Building a Collection and Recovery Strategy, we’ll review the top three pitfalls we see with common collection strategies. They are:

  • Under-charging when selling or over-paying when outsourcing
  • Only focusing on a small percentage of customers in an outsourced strategy
  • Losing customer relationships in a sell or litigation heavy strategy

In this second part, we’ll touch on another one of the common mistakes we see: having a narrow focus when collecting.

Traditional debt collection is difficult to scale, and heavily relies on humans making phone calls. Collection agents try to stay away from accounts that require a lot of interaction to recover. Because of the high cost of a call, agencies focus on calling accounts with the highest yield for them. Agents are also human, and humans – especially those making commission – want the home run, not the singles and doubles. Low balance accounts, accounts that cannot currently pay or ones that require a long time to convert will get less attention. That creates underserved segments and lower returns for the lender.

We think the issue is the limited set of tools offered to collection strategists. The low margin problem is inherent to call centers, and most debt collectors are exactly that: specialized call centers. They have no ability to provide the type of flexibility required by a lender that doesn’t have homogenous portfolios with high average balances. A lot of money is left uncollected in the long tail.

Want to use our tools to optimize your strategy? Visit our website to learn more.