It’s hard to believe that the year is already winding down, but consumer debt certainly isn’t. And not having the right collection partner today can equate to missed recovery opportunities tomorrow.
So what makes the end of the year such an important time to evaluate your current collections partner? Let’s take a look at some of the timely factors.
Why Evaluate Your Collection Partner in Q4? To be Better Prepared for 2024
Be Ready for the Aftermath of Holiday Spending
It should come as no surprise that consumer spending typically increases in the last few months of the year—Black Friday, Cyber Monday, Super Saturday, Boxing Day, not to mention the expenses around holiday travel too.
But last year marked a particular surge in consumers putting a lot of that spending on credit, with 41% of Americans putting more than 90% of their holiday expenses on their credit cards, and one-third using credit cards for all their holiday expenses.
With this heavy reliance on credit, nearly 42% anticipate going into debt to pay for the holidays—especially when considering that US shoppers took on over $1,500 in holiday debt in 2022.
It feels almost inevitable that by the end of Q1 in 2024 some consumers will already be rolling over past the 90-day delinquency mark. To be ready, your debt collection should be preparing for Q1 late-stage collections now.
Get a Jump on Engagement Before Tax Season
Even though tax season may feel far off today, now is the time to start preparing engagement strategies to reach and remind consumers to prioritize repayments when tax refunds come around.
And this shouldn’t be a novel concept to customers already dealing with debt: surveys find one in five respondents intend to pay off their holiday spending bills with federal tax refunds. In 2023, 44% of Americans reported earmarking their refunds to pay off their debt overall, according to the CNBC Your Money Financial Confidence Survey.
Although paying off debt is a priority, 34% of those surveyed said they were worried their refunds wouldn’t make as big of an impact due to inflation/rising costs while still reporting that their tax refund would be critical to their household finances—don’t let your collection partner show up late to the competition when consumers are allocating those tax refund dollars.
Bottom line: many consumers will likely fall into debt in Q4 due to holiday expenses, but being prepared to engage them come tax season can help influence opportunities to secure repayment as we roll into 2024.
Why Opt for Digital Outreach? To Meet Consumers Where They Already Are
Your collection partner needs to be prepared for when and where your customers are ready to engage. And after the holidays and gearing up for tax season, many consumers are already active online—so don’t miss the chance to engage them through digital outreach.
By the numbers, consumers are primed for digital communications in Q4 and Q1 considering:
- In 2022 online holiday sales rose 3.5% year over year, marking the largest ever online holiday season
- 68% of Americans report they pay more attention to emails from companies during the holidays
- 93.8% of individual tax returns were filed electronically
- Convenience was one of the top six reasons Americans prefer filing taxes online
Given that consumers will be spending a lot of time online through Q4 and into Q1, digital communications is crucial to stay top of mind as holiday spending rolls into delinquency and competition for tax refund dollars ramps up. Your collection strategy should not only include email but also be ready with the right message at the right time to secure repayment—it takes more than just generic mass blast emails to get consumers to engage.
Does your collection partner have a plan to capture delinquent customers’ attention at just the right time with the right message? And not just looking ahead for Q1 engagement, but all year round.
Consumers Prefer Digital for Financial Services—Any Time of Year
While we see spikes in online shopping during the holiday season and more consumers choose to file taxes electronically, these aren’t the only times of year that financial transactions happen digitally.
During any given month, surveys find that 73% of people worldwide turn to online banking at least once a month, with 59% specifically using mobile banking apps. This marks an increasing adoption rate of digital channels by customers to get their banking done, jumping to 83% in 2023 up from 77% in 2020.
Globally, the number of online banking users is expected to reach 3.6 billion by 2024.
Overall, consumers are opting for a digital experience when it comes to their finances, so using digital channels needs to be an integral part of your collection strategy year-round when you consider:
- 59.5% of consumers prefer email as their first choice for communication
- Contacting first through a customer’s preferred channel can lead to a more than 10% increase in payments
- 14% of bill-payers prioritize payments to billers that offer lower-friction payment experiences
Is your collection partner set to deliver personalized digital communications at scale any time of year?
How to Evaluate a Debt Collection Partner
Selecting a debt collection partner makes an impact regardless of season, but Q4 offers businesses the opportunity to set their recovery efforts up for better success leading into tax season.
But what are the questions to ask and qualities to look for in a partner? Whether your business is looking to work with a collection agency for the first time or want to reassess how effective your current provider may actually be, our latest eBook provides the Top 10 Questions to Ask along with explanations of why each specific question matters and what to look for when evaluating—available for download here»»
Ready to get a jump on your debt collection strategy for 2024? Schedule a consultation with TrueAccord’s experts to get started»»