Author: Cali Thompson

How Holiday Spending Trends Should Influence Your 2025 Debt Collection Strategy

By on December 11th, 2024 in Customer Experience, Industry Insights

It’s that time of year again—the season of giving, which has landed nearly half (47%) of consumers in debt thanks to holiday spending in the past. And the struggle continues to be real for consumers with 68% reporting that inflation is stretching their holiday budgets thin and 89% of consumers reporting they feel tempted to spend more than they should.

For businesses, preparing for this almost inevitable holiday hangover should start now before the wave of past-due consumers comes rolling in (and rolling into late-stage delinquency further in the new year).

Let’s look at how 2024’s holiday shopping and consumer spending trends should influence your 2025 debt collection strategy.

Record-Breaking Holiday Consumer Spending

Although there are five fewer shopping days in this year’s holiday calendar, that hasn’t slowed consumer spending: the average US consumer intends to spend $1,063 in nominal terms on holiday-related purchases this year, up 7.9% from $985 in 2023. Online sales for Black Friday alone reached a record $10.8 billion, with roughly $11.3 million spent per minute between 10 a.m. and 2 p.m. for online shopping.

And how are consumers paying for these shopping sprees? Credit cards are a top choice for 59%, with half of those saying they plan to use two or more credit cards, but higher interest rates are curtailing the use of credit cards compared to previous years for 44% of consumers. Buy Now, Play Later (BNPL) options are another popular method to purchase items outside their immediate budget with 67% of parents reporting they are likely to use pay later plans to finance their holiday shopping.

Despite a determination to resist that temptation this year (67% of consumers said it’s more important to save money than to give the best gift), the record numbers in spending and the trends towards credit cards and BNPLs foreshadows how businesses across industries need to brace for the post-holiday uptick in delinquencies.

Why Holiday Spending Trends Affect Businesses Across Industries

Before they even bust out the wrapping paper, 30% of consumers reported being prepared to break their budgets and go into debt due to holiday spending.

While historically, credit card balances will rise significantly in the fourth quarter but then go down again in the first quarter of the new year, more consumers are carrying those heavier balances for longer—six in 10 consumers with credit card debt have had it for at least a year, up 10% from three years ago. And separate surveys found that about a third of consumers entered the shopping season with more than $5,000 in debt and 28% of shoppers who used credit cards have not paid off the presents they purchased last year.

So even if your organization isn’t directly selling holiday gifts, consumers’ ability to stretch their budget to cover all their expenses can be impacted.

How to Adapt Your Collection Strategy Based on Holiday Spending Trends

Acknowledging this record spending and rolling debt, what are the key takeaways to help improve your collection strategy moving into 2025?

Meet consumers where they are with digital-first communication
Consumers aren’t just shopping online—surveys find that 72% of respondents prefer to manage all their finances online or through a mobile app, so your outreach to collect on past-due payments should start there too. In fact, 98% of delinquent consumers serviced by TrueAccord resolve their debt without any human interaction thanks to our digital-first approach and self-serve portal.

But take an overall omnichannel approach to consumer engagement
While digital may be the growing consumer preference, don’t completely write-off traditional collection methods like phone calls and letters. There are many situations when digital may not be the ideal choice for outreach (such as lack of email contact, acquiring consent for digital communications where required, connecting with consumers unresponsive to digital outreach, among others), and not working with a collection partner that offers the full suite of communication channels means your business is missing out on recouping more.

Be empathetic to consumers (all year round)
More than half of consumers reported feeling stressed about their finances during the holiday season and, just like their gift-giving bills, these feelings can roll into the new year. But engaging with delinquent consumers through an empathic approach can encourage them to get back on track better than a generic template soliciting repayment. TrueAccord’s vast content library ensures consumers are getting the right message through the right channel at the right time thanks to our machine learning engine, HeartBeat, driven by data and insights from over 35 million consumer engagements accumulated over TrueAccord’s 12 years of service.

Ready to scale-up your debt collection strategy for better engagement and liquidation rates? Schedule a consultation with TrueAccord experts today!

Sources:

Client Success Story: TrueAccord Delivers Industry-Leading Engagement, Repayment for Scale-Up BNPL

By on November 13th, 2024 in Client Success Story, Customer Experience, Product and Technology, User Experience

With its growing popularity, one Buy Now, Pay Later (BNPL) faced challenges with the complexity of managing late-stage collection—a hurdle many start-ups face since the majority of a scaling company’s resources are dedicated to bottom-line business goals rather than debt collection.

So as the BNPL continued to expand, accounts overdue by 90 days or more accumulated without a scalable strategy for resolution, making the BNPL vulnerable to revenue loss. But partnering with the experts at TrueAccord would set a plan in place with impressive liquidation and engagement results.

As their first debt collection provider, the BNPL leveraged TrueAccord’s decade-plus of experience to develop a comprehensive debt recovery strategy from the ground up. TrueAccord’s digital-first approach to collections was particularly appealing to the BNPL, aligning with their tech-forward, consumer-centric philosophy, and delivered on several key benefits:

  • Cost Savings
  • Automation and Scalability
  • Enhanced Consumer Experience
  • Compliance and Expertise

Through this partnership and late-stage debt collection strategy, delinquent accounts were managed thoroughly and efficiently—and their engagement rates were the first in a domino effect of improved results:

  • 45% Email Open Rate compared to industry average of 22.5%
  • 14% Email Click Rate compared to industry average 2.3%

Discover the impressive liquidation rates and detailed benefits TrueAccord provides in the full in-depth case study here»»

Ready to scale-up your debt collection strategy for better engagement and liquidation rates? Schedule a consultation with TrueAccord experts today!

Industry average statistic sources:

  • Hubspot
  • Campaign Monitor

The TrueAccord Difference for a Better Self-Serve Consumer Experience

By on October 18th, 2024 in Customer Experience, Industry Insights, Machine Learning, Product and Technology, User Experience

While many financial service institutions can offer basic payment portals, these are often limited when it comes to collecting on delinquent accounts. TrueAccord delivers a robust difference.

Self-serve options should be a key part of any collections operation. In fact, research from McKinsey found that consumers who digitally self-serve resolve their debts at higher rates, are significantly more likely to pay in full, and report higher levels of customer satisfaction than consumers who pay via a collection call.

At TrueAccord, we provide more than a basic payment portal—the power of our self-serve solutions gives your business and your customers better control over the repayment process. TrueAccord’s self-serve portal delivers less friction for delinquent consumers ready to manage their debt, while your organization determines the extent of account details to display, what flexible payment options you’d like to provide, and more.

Let’s look at how TrueAccord provides a superior consumer experience and better bottom-line results for your business through our self-serve portal and solutions.

Why Offer Self-Serve Options on Top of Traditional Collection Methods?

Two of the most prominent use cases for deploying self-serve channels are consumer preference and compliance—and both are success stories for TrueAccord.

The numbers cannot be ignored: 98% of delinquent consumers serviced by TrueAccord resolve their debt without any human interaction, which in turn saves time, resources, and headcount. When asked why they pay bills online, three in 10 consumer survey respondents said they like the flexibility to pay whenever and wherever they want—a convenience traditional call-and-collect methods cannot extend to consumers due to FDCPA’s “Inconvenient Times” rule under Regulation F.

The “Inconvenient Times” rule prohibits calls to consumers before 8 a.m. or after 9 p.m. in the consumer’s local time zone, because calls made during those times are presumed inconvenient. But self-serve options put the power in the consumer’s hand 24/7. At TrueAccord, 29% of online payments are made outside of traditional FDCPA hours.

Self-Serve Success with Advanced Machine Learning and Omnichannel Engagement

Does your digital debt collection outreach strategy extend beyond email or SMS? A true omnichannel approach goes further to interweave self-serve options—and TrueAccord delivers.

Whether via email, text message, or even physical letters, there are several ways TrueAccord reaches consumers in debt collection and empower them to take charge of their repayment journey through the self-serve portal.

And even if the first engagement attempt is unsuccessful, HeartBeat—TrueAccord’s patented machine learning decision-engine—will adjust communication cadence, content, and even channel dynamically.

Studies show that 54% of consumers expect their financial provider to leverage the data they have about them to personalize their experience, so HeartBeat looks at individual account characteristics—like debt type, creditor, balance size, age of debt, etc.—and selects a message (written by experienced debt collection content creators) based on previous interactions with consumers that have similar characteristics. Thanks to our 35 million consumer interactions collected, HeartBeat drives both the optimal engagement and repayment rates while working within both our client’s guidelines and regulatory requirements.

Want to take an even deeper dive into the consumer experience-side of TrueAccord’s self-serve portal? Download our free eBook for more details and a visual walkthrough of the consumer experience when using our portal here»»

What Do TrueAccord Consumers Have to Say?

Don’t take our word for it—read testimonials and feedback from real consumers who have resolved their delinquent accounts through TrueAccord’s self-serve portal:

  • “This was a great experience for me. The portal was so easy to operate quickly and easily. Thank you.”
  • “Easiest to work with, never had to speak with a representative, was able to fully manage and pay off the account via their online portal.”
  • “I appreciated the zero harassment, easy portal interface. I have been stressed about this for a while, hardship came up, but you made it easy and less stressful to take care of.”
  • “Thank you for being patient and for having a portal that makes it easy to make the payment without filling out a bunch of stuff and having to make an account.”
  • “I appreciate you notifying me via email and having a great online payment portal. It made the process really easy.”

Ready to Get Started?

Empower consumers with a self-serve experience—and collect faster from happier people. Schedule a consultation and get set for a live demo of the TrueAccord self-serve portal»»

Sources:

Consumers Prefer Self-Serve Options for Debt Repayment—and Businesses Cannot Afford to Ignore Consumer Preferences

By on October 17th, 2024 in Customer Experience, Machine Learning, Product and Technology, User Experience

Self-service portals are an empowering way to get consumers back on track. In fact, research from McKinsey found that consumers who digitally self-serve resolve their debts at higher rates and are significantly more likely to pay in full. Just take into consideration that surveys have found that four in 10 have used an online portal supplied by a financial institution for bill pay, while only a quarter have paid by phone, mailing a check, or in person.

But along with helping your bottom line, consumers just prefer these kinds of self-serve methods for payments.

Let’s dive even deeper into consumer behavior and preferences when it comes to handling payments and account management via self-service—and why organizations cannot ignore the numbers.

Self-Serve Preferences by the Numbers

The numbers don’t lie—more consumers want and use self-serve online portals for bill pay:

  • 60% of consumers prefer self-service options
  • 54% of surveyed consumers have used an online portal supplied by a biller
  • 47% prefer self-serve portals because of the convenience and flexibility

And businesses cannot afford to ignore these preferences:

  • 81% of customers want more self-serve options
  • 14% of bill-payers who prioritize at least one bill over others identified the ease of making payments as a key factor in that decision-making process
  • According to one study performed by McKinsey, a bank saw a 15% increase of cured accounts after implementing a self-service option
  • 70% of customers expect a company’s website to include a self-service application

Despite this data, a 2023 Transunion report shows that 64% of collections agencies don’t have self-serve capabilities, and simply increasing customer calling won’t improve contact and recovery rates.

But don’t worry—TrueAccord’s self-serve portal has proven to be a win for both businesses and their customers, with 98% of delinquent consumers serviced by TrueAccord resolving their debt without any human interaction.

TrueAccord’s Machine Learning Engine Powers a Better, Compliant Self-Serve Experience

At TrueAccord, we know that every consumer’s delinquency situation is unique and so are their repayment and engagement preferences. So from our initial outreach, we tailor our consumer communications using our patented machine learning engine, HeartBeat, to determine the right message, right channel, and right time to engage.

HeartBeat uses a machine learning model that looks at account properties and chooses a communication (written by experienced debt collection content creators) based on previous interactions with consumers that have similar characteristics.

This is important since studies show that 53% of consumers expect their financial provider to leverage the data they have about them to personalize their experience. From messaging that resonates to flexible payment options within our self-serve portal, TrueAccord uses advanced machine learning to drive the optimal engagement and repayment rates while working within both our client’s guidelines and regulatory requirements.

Our self-serve portal meets collections compliance rules while also meeting a consumer preference at the same time. When asked why they pay bills online, three in 10 survey respondents said they like the flexibility to pay whenever and wherever they want—a convenience traditional call-and-collect methods cannot extend to consumers due to FDCPA’s “Inconvenient Times” rule under Regulation F. The “Inconvenient Times” rule prohibits calls to consumers before 8 a.m. or after 9 p.m. in the consumer’s local time zone, because calls made during those times are presumed inconvenient. But self-serve options put the power in the consumer’s hand 24/7. At TrueAccord, 29% of online payments are made outside of traditional FDCPA hours.

By following all compliance regulations and your business’s guidelines, our consumer outreach aims to drive the most engagement and commitment to repayment through the self-serve portal.

What Consumers Have to Say About TrueAccord’s Self-Serve Portal

We’ve looked at a lot of statistics supporting consumers’ preference for self-serve options, but let’s hear from real consumers that have used TrueAccord’s portal:

  • “This was a great experience for me. The portal was so easy to operate quickly and easily. Thank you.”
  • “Easiest to work with, never had to speak with a representative, was able to fully manage and pay off the account via their online portal.”

“I appreciated the zero harassment, easy portal interface. I have been stressed about this for a while, hardship came up, but you made it easy and less stressful to take care of.”

  • “Thank you for being patient and for having a portal that makes it easy to make the payment without filling out a bunch of stuff and having to make an account.”
  • “I appreciate you notifying me via email and having a great online payment portal. It made the process really easy.”

And put quite simply, our consumers “love this online payment portal.”

Want to take a peek at TrueAccord’s Self-Serve Portal? Download our free eBook for more details and a visual walkthrough of the consumer experience when using our portal here»»

Ready to see a demo in action and learn more about all of TrueAccord’s omnichannel, machine-learning powered collections? Schedule a consultation today»»

Sources:

The Low Friction Way For Consumers to Repay: Self-Serve Options for Debt Collection

By on October 7th, 2024 in Compliance, Customer Experience, Industry Insights, Machine Learning, Product and Technology, User Experience

After months of inflation woes, both economists and consumers are starting to see a glimpse of optimism.In the first interest rate cut since the early days of the Covid pandemic, the Federal Reserve announced in September 2024 that it is slicing half a percentage point off benchmark rates. So it’s not surprising that Americans are getting more confident that inflation is cooling off, but optimism for the U.S. economy doesn’t extend to personal finances—consumer expectations for going delinquent on their debt in the next three months hit their highest level since the start of the pandemic.

And the share of severely delinquent credit card debt rose to 10.7% during the first quarter of 2024, according to the Federal Reserve Bank of New York, compared to just 8.2% of credit card debt more than 90 days overdue in 2023.

But better customer engagement strategies can help businesses recover more debt—and self-serve portals are an empowering way to get consumers back on track.

What is a “self-serve portal” in financial services and collections?

In the financial services sector, a self-service or self-serve portal is a secure online platform or application designed to empower consumers to make payments and, ideally, allow them to manage their accounts and payment terms independently (although not all portals offer the same functionality). Self-serve portals aim to grant customers the ability to manage their finances without the help of a service representative.

For both businesses and consumers, reducing the need to engage directly with human agents to make payments or access account information saves time and resources. Overall, these self-service solutions represent a shift towards greater consumer control over their financial health, providing an efficient way for individuals to address and manage their finances—and debts specifically—on their own terms.

What are the benefits of offering self-service options in debt collection?

Similar to any other financial institution or ecommerce business, self-service portals in collections intend to foster a sense of autonomy for the delinquent consumer to manage their debt without the pressure or inconvenience of interacting with a call center agent. Besides creating a more preferred experience for the consumer, organizations needing to recoup funds will reap several benefits by providing self-serve options as well:

Cost Savings:
In today’s digital world, call centers or full-time employees (FTEs) dedicated to late-stage collections have proven to be an expensive and less effective path for debt recovery. Employees often spend a significant amount of time arranging repayment plans, providing account details, and processing payments—and that’s if the consumer actually answers the collector’s call. So when it comes to cost savings, just consider this: the average cost of a contact center call is $8.01, which is 80x more expensive than a self-service interaction.

Scalability:
Unlike human agents who can physically only make a certain number of calls per day and are legally only allowed to call consumers during convenient hours (as defined by Regulation F), self-serve portals are available to consumers 24/7. These platforms can handle any number of collection cases at any time of day without compromising user experience, making it easy to scale your capacity as delinquency volumes rise—no additional headcount required.

Compliance:
Non-compliance can be costly in the collection landscape heavily regulated by the Consumer Financial Protection Bureau (CFPB). Whether partnering with a third party or training FTEs, the risk of human error resulting in compliance violations is easily mitigated with digital self-serve solutions that have compliance controls built in—but this does require due diligence on the business or lenders’ part to ask and verify that the solution is keeping up with all necessary regulation and industry security standards.

Frictionless Consumer Experience:
Surveys have found that consumers both prefer and want more self-serve options to repay, but that is just the tip of the iceberg of what consumer preferences can mean for your recovery and resolution rates. Research from McKinsey found consumers who digitally self-serve (versus consumers who pay via a collection call):

  • Resolve their debts at higher rates 
  • Significantly more likely to pay in full 
  • Report higher levels of customer satisfaction

Proven Success with TrueAccord’s Self-Serve Portal

While many financial service institutions already offer basic payment portals, these are often limited when it comes to collecting on delinquent accounts. And traditional call centers typically cannot provide self-serve options, even if they can offer other digital options like email or SMS for consumer outreach.

But TrueAccord provides more than a simple payment portal—the power of our self-serve solutions gives your business and your consumers better control over the repayment process for better results.

TrueAccord delivers less friction and frustration for delinquent consumers ready to manage their debt, while your organization determines the extent of account details to display, what flexible payment options you’d like to provide, and more.

In fact, 98% of delinquent consumers serviced by TrueAccord resolve their debt without any human interaction, with 29% of online payments made outside of traditional FDCPA hours—saving time, resources, and headcount while meeting consumer preferences compliantly under Reg F’s inconvenient time rule and beyond.

Want to take a peek at TrueAccord’s Self-Serve Portal? Download our free eBook for more details and a visual walkthrough of the consumer experience when using our portal here»»

Ready to see a demo in action and learn more about all of TrueAccord’s omnichannel, machine-learning powered collections? Schedule a consultation today»»

Sources:

Client Success Story: Online Lender Achieves 30% Better Late-Stage Collection Result Through Empathetic, Omnichannel Approach

By on September 12th, 2024 in Client Success Story, Customer Experience, Product and Technology, User Experience

TrueAccord proved more effective for late-stage collections and better aligned with online lender’s empathetic approach to financial services.

For one online lender, providing online personal loans to underserved consumers was not only a core service for their business but also a key part of their company mission. This tech-enabled financial platform offers safe, simple, and affordable credit access to consumers with varied financial histories who lack traditional options, emphasizing empathy and support in their customer interactions.

Historically, the online lender relied on legal avenues for debt collection, a tactic not always in line with the empathetic approach the company championed in their other services. While they wanted to improve their liquidation rates, the lender recognized they needed more of a traditional agency along with their existing legal strategy—but the challenge was to find a collection agency that could balance effectiveness with a consumer-centric approach that could mirror the lender’s empathetic mission throughout the borrower lifecycle. Simply adding a call center-based agency would be counter-intuitive for an online lender with digital and omnichannel collection partners available to provide a smoother customer experience.

During their due diligence looking at potential debt recovery partners that have integrated digital into the consumer communication mix, a new question arose: how would they decide between the newer, digital-focused agencies that have entered the collections space?

Enter the champion-challenger evaluation method pitting TrueAccord against another digital collections provider.

Over a six-month period, the online lender evenly split their available late-stage collections market share 50/50 between TrueAccord and the competitor agency. Although the challenger collection agency provided somewhat similar services for consumer engagement by including some digital outreach along with traditional outbound dialing and letters, TrueAccord’s robust omnichannel approach was backed by over a decade of experience using digital-first communication methods.

And the results would prove that TrueAccord was not only superior in effectively collecting from late-stage accounts, but also in overall mission alignment with the lender’s efforts towards a more empathetic approach to financial services. Even before the online lender began to explore options for collecting on late-stage debts, both the lender and TrueAccord shared a focus on helping consumers; and by partnering together, they were able to provide that consumer-centric approach to financial services throughout the entire borrower lifecycle.

TrueAccord consistently outperformed the challenger to the point where it became clear that the lender was actually losing money by continuing to give 50% of their available market share to the competitor. In fact, over time, TrueAccord’s liquidation rates were 30% higher than that of its competitor.

Together, TrueAccord not only enhanced and improved the lender’s debt recovery efforts but also reinforced their company values to deliver empathy even after delinquency—no small feat in the traditional debt collection industry.

Discover the TrueAccord difference that helps clients achieve better liquidation rates and happier consumers in the full, in-depth case study available for download here»»

Are you ready to evaluate your legacy collections servicer against TrueAccord’s proven digital-first, omnichannel approach? Schedule a consultation today!

Understanding the Consumer Spending Split and How to Recover More Across the Divide

By on July 24th, 2024 in Customer Experience, Industry Insights, Machine Learning, User Experience

It’s becoming a familiar headline: US household debt keeps climbing and delinquency rates keep rising. According to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit, household debt rose to $17.69 trillion in the first quarter of 2024. The report showed 6.9% of credit card debt transitioned to serious delinquency in the first quarter, with approximately 4.8% of consumers holding some debt in third-party collections.

Overall, 77% of American households have at least some type of debt, but that debt isn’t evenly distributed—and consumer spending habits can vary just as much depending on income level.

Understanding the split in consumer spending and its impact on household debt—and in turn, collections—is critical for today’s debt recovery strategies. While across the board debt may be climbing and delinquencies rising, your consumer engagement approach and communications to secure repayment cannot be one-size-fits-all for all consumers.

What is the Consumer Spending Divide?

Spending divide. Split-spending patterns. A tale of two consumers. Two-speed economy…all of these naming conventions describe the widening gap between income levels, spending habits, and inevitably types of debt accumulated.

While the last few years showed consistent spending rates across all income groups as a result of pandemic-era benefits, savings surplus, and wage growth, this is no longer the case. More recent data has revealed that as pandemic savings declined at the same time as both inflation and interest rates increased, lower-income households are becoming more financially strained while higher-income households are mostly unaffected.

Today, we see more affluent consumers continue to spend at consistent rates, while more middle- and lower-income consumers’ personal disposable income has not kept pace with rising prices and as a result, these households have become more indebted.

Even when there is a spending uptick in the lower-income sector, as seen in April 2024, what these consumers are spending on and how they are paying for it is still quite different from their higher-income counterparts. These spending patterns show that lower-earning consumers are putting more everyday bills on credit cards—and in turn, credit card delinquencies and charge-offs for these consumers are returning to their pre-pandemic levels faster than other groups.

Not surprisingly, the ripple effect of this deepening income-level divide impacts consumer sentiment along with spending. While surveys from June 2023 had shown similar levels of consumer sentiment between bottom-third earners and top-level earners, today higher-income households report a much more positive outlook compared to many lower earners who report feeling less confident in their own household finances.

And yet, 40% of consumers (across the divide) have expressed an intent to splurge over the summer months—so what different variations of delinquencies can we expect between the split of spenders? And how can businesses differentiate their approach to collections to more effectively recover debt faster?

How Does the Divide Impact Delinquencies?

Let’s start with the first question: what different types of debt are each income sector accumulating today?

Higher-income consumers: non-essentials and luxuries like travel, vacations, hotels, resorts, amusement parks
Surveys show that higher-income households are more optimistic about their ability to take trips and spend on luxuries like full-service hotels and resorts—in fact, 74% of respondents with annual household incomes of $100,000 or more plan to take a summer vacation and, across income levels, 36% anticipate taking on debt to pay for it.

We can even put a microscope to this ‘YOLO’ attitude towards spending on experiences by looking at Disney amusement parks. Surveys find:

  • 45% of parents take on debt for Disney vacations
  • $1,983 is the average amount of debt for those parents
  • 75% report that their Disney trip did or would take six months or less to pay off
  • Total respondents who went into debt during a Disney trip also increased 33% from a 2022 survey

Lower-income consumers: essentials like rent, utilities, everyday necessities
Conversely, the delinquencies for lower-income households start at home: 25% of low-income renters (defined by a Community Solutions survey as those with an annual income of less than $50,000) are 4-7 months behind on rent. And the New York Fed reported 57% of households are rent burdened in low-income areas, where they pay more than 30% of their monthly income on rent.

Even with wage gains over the last several years, 40% of consumers say they earn insufficient incomes and struggle to keep up with inflation and interest rates. And with approximately 75% of low-income households reporting living paycheck-to-paycheck, to bridge the gap there is an increasing reliance on credit cards to cover bills, so it is not surprising these consumers are falling behind on their credit card payments.

The spending divide leads to a divide on what consumers are going into delinquency for—so what’s the best way to engage and secure repayment when consumers’ financial situations and outlooks are so split?

How Can You Recover More Across Each Side of the Divide?

Regardless of where your customers fall in the divide, businesses must face facts: overall delinquent balances increased by 3.46% in June 2024 and then again in July by 0.51%. This paired with the fact that 1.11% of consumer accounts rolled into higher stages of delinquency marks an uptick in the roll rate in June compared to the improvement (decreases) seen in the past several months.

But with delinquency rates continuing to rise, it’s important to tailor your recovery approach to each consumer you seek to collect from with customized, omnichannel engagement.

A successful collections strategy goes beyond the simplified “tale of two consumers” and actually engages with individuals uniquely with the right message delivered through the right channel at the right time for them.

While getting payment reminders is beneficial for consumers across the divide, hovering between roughly 40% to 50% from the under $50,000 cohort all the way to the $100,000 and above bracket, the preference for how these reminders are sent varies across all consumers:

  • 36% prefer text
  • 32% prefer email
  • 4% prefer a paper letter mailed
  • 1% prefer receiving a phone call

But for most businesses, executing an advanced outreach strategy can be a major undertaking, especially for those used to relying on traditional call-and-collect methods. Partnering with TrueAccord can alleviate the potential strain on resources and simultaneously help you collect more faster.

TrueAccord not only engages your delinquent customers through this proven effective omnichannel approach, but also leverages our patented machine learning engine, HeartBeat, to effectively ​​reach out to every account placed with a goal of getting them to repay on their own terms when they are ready. HeartBeat dynamically optimizes the next best touchpoint for every consumer in real-time, including the content, timing, and channel for each customer.

No matter where your customers fall in the consumer spending divide, TrueAccord has the right message, right channel, and right timing to recover more across the board.

Ready to get started? Schedule a consultation today»»

Sources:

The Roller Coaster of Consumer Spending, the Whiplash of Consumer Sentiment, and How to Effectively Engage for Collections

By on June 5th, 2024 in Customer Experience, Industry Insights, User Experience

At the end of 2023, economists were hoping for a “boring” 2024—just a relatively uneventful year thanks to a soft landing with downward trends for inflation, unemployment, and interest rates.

But instead, the first half of 2024 has been an economic roller coaster for consumer spending, resulting in a whiplash for consumer sentiment. While the soft landing may still be on track, that track doesn’t appear to be as straightforward as hoped. There is an onslaught of mixed messages:

Consumers are proving to be more resilient than expected as they continue to spend, staving off what had been predicted to be an inevitable recession

versus

Consumers are actually financially stretched from depleting their pandemic-era savings and battling ongoing inflation and higher interest rates

And between these highs and lows, a serious fact remains for businesses: delinquency transition rates have increased across all debt types. But for companies looking to recover those delinquent funds, understanding how to communicate with consumers where they are in this roller coaster can mean the difference between repayment and write-off.    

Let’s look at the recent trends between consumer spending and consumer sentiment and how businesses can effectively engage with customers in the event of delinquency.

Roller Coaster of Consumer Spending

Up and down the economic roller coaster goes, but the ride may be feeling different for different subsets of consumers: Americans with higher incomes have continued to spend at healthy rates, yet lower- and middle-income consumers are starting to pull back.

This “split-spending” pattern hasn’t been the case in recent years—pandemic-era benefits, a savings surplus, and rapid wage growth resulted in consistent spending rates across all income groups. But as excess pandemic savings decline at the same time as both inflation and interest rates increase, lower-income consumers are feeling the squeeze while higher-income consumers are mostly unaffected.

And even when there is a spending uptick in the lower-income sector, like we saw in April 2024, what these consumers are spending on and how they are paying for it is still quite different from their higher-income counterparts. These spending patterns show that consumers are “trading down,” or changing the type or quantity of purchases for better pricing and value, and are starting to put more everyday bills on credit cards—and in turn, credit card delinquencies and charge-offs for low-income consumers are returning to their pre-pandemic levels faster than other groups.

Regardless of where on the financial spectrum individuals may fall, an overall slowdown is expected. According to a Fitch Ratings report, annual consumer spending growth will lower from 2.2% in 2023 to 1.9% in 2024, with much of the slowdown expected in the second half of the year as income growth decelerates, pandemic savings dissipate, and higher interest rates persist.

And the Whiplash of Consumer Sentiment

So how is this roller coaster affecting how consumers feel about the economy and their own financial outlook? Overall, consumers are reporting they plan to spend less money on discretionary items in the coming months, with approximately 40% citing affordability constraints due to “economic reasons,” but that doesn’t quite capture the true whiplash of consumer sentiment we are seeing month over month:

  • January: Consumer surveys find that 43% of respondents describe the economy as very good—but 59% are also worried about inflation.
  • February: The Consumer Sentiment Index fell in the February 2024 survey, down from the more positive outlook reported in January.
  • March: U.S. consumer sentiment rose unexpectedly in March to reach the highest it’s been in nearly three years.
  • April: Consumer confidence deteriorates and falls to its lowest level in more than a year and a half.
  • May: The Consumer Sentiment Index reports the largest decline in the index in approximately three years amid worsening concerns around inflation.

Despite these swings, recent consumer surveys have found that 22% of respondents expressed feeling less discomfort about spending a lot of money when using a credit card, and more than half reported they are more likely to make impulse purchases when using cards. Whatever the sentiment, people are feeling some confidence to continue to spend and continue to carry a debt balance, with 41% of consumers reporting a revolving month-to-month balance on their credit cards.

Looking at the dramatic spikes and dips in sentiment makes knowing how to message and engage delinquent consumers critical to eliciting commitments for repayment—especially when we already noted above that delinquencies and charge-offs are returning to pre-pandemic levels for certain income sectors.

How to Handle the Roller Coaster and Whiplash and Effectively Engage With Delinquent Consumers

So we’ve seen how although the roller coaster of spending trends may actually be split into two different tracks between income levels, consumers across the board are experiencing an almost monthly back-and-forth whiplash in their financial outlook and sentiment—how are debt collection and engagement strategies supposed to keep up when consumers are on this wild ride? In today’s world, traditional methods of outbound calling and mass blast emails are the epitome of “spray and pray” chasing the tail of the roller coaster and rarely reaching one of the consumers holding on.

To engage with today’s consumers, customization is key. Your debt recovery communications need to match where individual consumers are with the:

  • Right message – engage with empathy and options for repayment
  • Right channel – engage through their preferred method of communication
  • Right time – engage compliantly when they are ready

This means most businesses need to shift the mindset of debt resolution operations from only being focused on roll rates and placements to a more consumer-centric engagement strategy. Yet many collection agencies still practice call-and-collect (and struggle due to declining right-party-contact rates and tightening regulations), and even those using email will typically only develop basic messaging for all customer communications.

Effective debt recovery needs to take consumers’ roller coaster into account—but how?

TrueAccord’s patented machine learning engine, HeartBeat, ​​reaches out to every account placed with a goal of getting them to repay on their own terms when they are ready, versus the one-size-fits all communication that ignores trends in sentiment and spending habits.  

Powered by a combination of data-driven heuristics, the latest compliance regulations, and machine learning—continuously refined by data from our 20 million customer engagements and counting—HeartBeat dynamically optimizes the next best touchpoint for every consumer in real-time, including the content, timing, and channel for each customer. It leverages interaction signals to identify consumers at risk of breaking plans and automatically adapts to keep them successful until resolution.

The TrueAccord approach aims to engage and empower no matter where the roller coaster may be taking individual consumers. As we continue to listen, learn, and innovate, we remain committed to delivering exceptional debt collection experiences that prioritize consumer well-being paired equally with debt recovery.

What Do Consumers Have to Say About TrueAccord’s Engagement Approach?

“I really have enjoyed TrueAccord because they give you so many options that align with your finances, work schedule and once you commit to a schedule they still allow you more time to pay if something comes up. Everything is customizable to you which makes it so much easier to pay down your debts, never harder. They make it very user friendly and straightforward. I really appreciate this company and what they do for you.”

“Absolutely amazing! I really get uncomfortable admitting I need help, and calling and settling a debt. This being done by email initially made the process less stressful and myself less anxious about the whole thing. Much appreciated! Would recommend using TrueAccord to anyone that has the opportunity to settle a debt. Thank you so much.”

“I just want to commend True Accord for their professionalism as well as their empathy and outstanding customer service. NEVER have I encountered a collection company with such superb service, they did not continually harass me nor did they ever make threats in order to obtain payment, they understood my situation, and worked 110% to accommodate a payment plan specific to my financial situation.”

“I really appreciate the patience and kindness I feel I get with this company. Makes it easier to pay my bills.”

“I have dealt with enough “collectors” to be able to honestly say your company, Trueaccord, was the easiest to deal with. Allowing me to set up my own plan, not calling 15 times a day. You made this as easy as possible and without the stress! Thank you for such a stressless collection procedure.”

“I have been very backed up on getting my finances in order. I love how emails would always pop up and remind me. Finally got this one off my bucket list!”

“It was a joy working with you all, making it an easy experience. Thank you for making the ride a smooth one, slowly cleaning up our debts thanks to your company.”

Ready to get started? Schedule a consultation today»»

Sources:

Digital-First Debt Collection Delivers 35% Liquidation Increase for Leading Telecoms

By on May 1st, 2024 in Customer Experience, Data Report, Industry Insights, Product and Technology, User Experience

Telecom Industry Evolves, But Call-and-Collect Can’t Keep Up

The telecommunications industry has evolved hand-in-hand with most consumer communication preferences throughout the decades. From the last remaining landlines to mobile and internet services, it’s challenging to find a consumer that doesn’t subscribe to a Telecom service.

Yet while Telecoms enable customers to communicate and access products and services via digital channels wherever they go, the industry’s own methodology for communicating with consumers who have fallen delinquent on their bills is quite antiquated for the modern world they operate in.

Many Telecoms have traditionally used call centers for collection services to collect charged-off debt, but face mounting challenges all contributing to less revenue:

These challenges are not unique to telecoms, but considering the evolution of the industry it would only make sense that their debt collection practices would also adapt to consumer preference for digital and omnichannel communications.

Future-Facing Digital-First Solutions Deliver Real Liquidation Results

For some of the leading Telecom providers in the US, the time had come to face the declining third-party liquidation performance and reevaluate their debt recovery approach. A more future-forward, effective engagement model was being adopted throughout other industries and it was time for these Telecoms to test the waters of digital-first outreach for late stage collections…and TrueAccord was there to be their guide.

Through a champion-challenger model during the six-month pilot, TrueAccord’s digital-first, omnichannel engagement proved to be more effective at recovering from the late stage accounts. Between multiple portfolios across three Telecom providers, the results tipped the scale so moving forward all accounts would be serviced entirely through TrueAccord’s platform.

Each of the Telecom providers saw notable increases in liquidation using TrueAccord compared to their traditional call-and-collect methods:

  • First Telecom: 35% increase
  • Second Telecom: 7% increase
  • Third Telecom: 32% increase

How did TrueAccord’s digital-first approach deliver these kinds of results? Get the detailed breakdown in our in-depth Telecom case study»»

Are you ready to evaluate your legacy collections servicer against TrueAccord’s proven digital-first, omnichannel approach? Schedule a consultation today!

How Consumer Credit Trends Impact Debt Collection in 2024

By on March 5th, 2024 in Customer Experience, Industry Insights, Industry Interviews, User Experience

Today’s current economic climate is already influencing consumer spending and credit in 2024, and is becoming a hot topic for businesses seeking to engage past-due customers.

Economic Growth in 2023, But Slowdown Expected in 2024

Last year proved that the US consumer has been very resilient to the rumblings of a potential recession and continued to spend with surprising growth all the way through the end of 2023.
Despite inflation and high interest rates, consumers helped the economy end the year in a far better position than most predicted.

And consumers reported an uptick in optimism about the financial state, according to Deloitte’s ConsumerSignals financial well-being index, which captures changes in how consumers are feeling about their present-day financial health and future financial security based on the consumer’s own financial experience. We saw an increase to 101.4 in November 2023, up from 97.6 a year ago. Additionally, WalletHub’s Economic Index, which measures consumer satisfaction, rose by about 4% between January 2023 and January 2024.

But even as economic experts adjusted their outlook towards a soft landing and consumers reported a more positive financial outlook, 2024 is still expecting a slow down in consumer spending.

“Growing debt balances, stubborn interest rates and elevated prices are still a thorn for consumers, and contribute to their overall financial stability,” explains TrueAccord CEO Mark Ravanesi in his Q4 Industry Insights: Cautious Optimism with a Side of Holiday Hangover. “For lenders, service providers and debt collectors, guaranteeing repayment will still be a challenge [in] 2024.”

As Consumer Delinquency Rises, So Does Consumer Confusion

That financial holiday hangover Ravanesi described is a harsh reality for consumers: approximately one-third of American adults go into debt to pay for holiday expenses, contributing to their overall financial stability year-round. Credit card balances hit a trillion dollars in 2023, but that unprecedented milestone proved to just be another number as credit card balances continue to grow—by the fourth quarter balances increased to $1.13 trillion and the share of those balances that were at least 90 days delinquent approached 10%, an increase of more than two percentage points in a year.

In January, overall delinquency grew with a 2.31% increase in delinquent accounts and 10.49% in delinquent balances month-over-month. Today, about 61% of American households have credit card debt and the average credit card debt balance sits at $5,875.

Bottom line: households took on more debt at the end of last year and we’re seeing loans increasingly going bad, according to data from the Federal Reserve Bank of New York, leading to a shift in consumer spending for 2024.

On top of historic credit card balances, delinquencies continue to climb across the board: automotive, mortgage, bank cards, and unsecured personal loans.

The rising popularity of the Buy Now, Pay Later (BNPL) options and their corresponding delinquencies are also a piece of the puzzle, but one that is not currently captured by the Bureau of Economics and falls into a category known as “phantom debt.”

“Today’s consumer is using more and different financial products,” shares Ravanesi. “Buy Now, Pay Later was a big driver of purchasing power [in 2023] amidst elevated interest rates. While a helpful product for consumers, BNPL can be tricky as it doesn’t show up on most credit reports and can be an invisible and unaccounted-for debt burden.”

With so many different BNPLs offered, consumers can be borrowing from a variety of different lenders all at the same time and it is becoming more difficult for them to keep track of the different payments—and easily slip into delinquency. This confusion can be especially detrimental considering consumers using BNPL as more likely to be “financially fragile,” as reported by the NY Fed, having credit scores below 620, being delinquent on a loan, or having been rejected for a credit application over the past year.

“It’s becoming more and more confusing for consumers,” TrueAccord founder Ohad Samet explained in a recent webinar. “And we’re seeing consumers often need help to organize the different debts.”

And then we add student loans back into consumers’ repayment mix…

The Impact of Resumed Student Loan Repayments

Millions of people are resuming another financial obligation every month: their student loan payments. This introduces one of the defining questions of 2024 for lenders and debt collectors:

How will student loans be prioritized among other payments and debts?

It’s a legitimate concern considering surveys found 45% of respondents used the student loan forbearance period to tackle other debts, including paying down mortgage/rent expenses (27%), credit cards (26%) and other past-due bills (24%)—and even before forbearance was lifted, 85% of borrowers already anticipated facing financial hardship due to student loan repayment, with 49% saying they’ll have a hard time paying other bills. In fact, 28% of student loan borrowers say the resumption of federal student loan payments will likely require them to take on new debt to manage their personal finances.

Only time will tell, but so far student loan repayment rates have been low amongst the 22 million Americans affected—in the first month of resumed payments, 8.8 million borrowers missed their student loan payment, equating to 40% of loan holders.

Whether they missed that first payment or not, student loan repayments resuming again are having a significant impact for those who borrowed—91% say financial stress is impacting their mental, physical wellness and student loan debt is a key driver of this financial stress.

So how can lenders and collectors effectively recover debts in 2024 given the rising delinquencies and rising financial stress for consumers?

Right Message, Right Channel, Right Time for Better Consumer Engagement and Debt Recovery

Consumers have more stress and demands on their attention than ever before so it should make clear sense that consumer experience is critical for an organization’s reputation, long-term success with customers, and how effectively you can collect even in late-stage delinquency.

Research shows that contacting first through a customer’s preferred channel can lead to a more than 10% increase in payments and that 14% of bill-payers prioritize payments to billers that offer lower-friction payment experiences. Plus, 71% of consumers expect personalized experiences, which means one-size-fits-all outreach isn’t going to cut it in collections. Your business must be able to engage with the right message, the right channel, and the right time to recover the most funds possible.

“If there’s one thing we’ve learned from our consumer interactions, including the 16.5 million we added in 2023, it’s that no two consumers are the same, and what works for one may not work for the next,” explains Ravanesi. “That’s why options are so important—in communication channel, customer support method, and perhaps most importantly, in repayment.”

Personalization of the collections experience—from channel to time of day to specific message—is critical in cutting through the noise and driving engagement and commitment, especially in today’s increasingly digital world.

“Digital is deeply, deeply ingrained in every group of the population,” Samet observes.

And consumers are engaging on more digital channels than ever before:

  • 65% of American consumers have paid a bill by mobile device in the past twelve months
  • 54% have used an online portal supplied by a biller
  • 85% of consumers are already using digital bill pay
  • 41% of consumers cite ease and convenience and 23% cite faster and instant payments as the most important reason to choose a digital channel
  • 59% of consumers stating email as their first preference for debt collection, according to a FICO survey (versus only 16% want to receive a phone call)

Research from McKinsey concludes that consumers who digitally self-serve resolve their debts at higher rates, are significantly more likely to pay in full, and report higher levels of customer satisfaction than consumers who pay via a collection call.

Providing multiple repayment options, communicating through a variety of channels, reaching out at the optimal time of day, delivering the message in a way that best resonates with the consumer—all of these factors play a role in how effective your debt recovery strategy will be.

The TrueAccord Difference

Partnering with a debt collection agency for late stage debt recovery provides a number of advantages, including improving debt recovery rates, reducing the workload for lenders, offering access to specialized resources, and providing flexibility and customization. Every business is different, just like every customer’s situation is different, but TrueAccord has proven for over a decade that our digital-first, omnichannel approach drives improvements in liquidation rates by engaging consumers with the right message, through the right channel, at the right time.

At TrueAccord, our mission to help organizations recover more (from happier consumers) is comprehensive and tailored to each business’s specific goals and individual customer expectations. Since 2013, we have provided win-win solutions between businesses and consumers in debt. By using our patented machine learning engine, HeartBeat, we create a personalized journey for each consumer and keep optimizing for the ideal message, outreach time, and communication cadence to elevate performance.

Ready to get started? Schedule a consultation today»»