“I think no matter what direction you look at it from, debt collection in the United States is just broken. Because it takes consumers who want to pay, who could pay and turns them into customers that can’t,” noted TrueAccord CEO and Co-Founder Ohad Samet.
TrueAccord beats the competition on many levels, and does that through rigorous testing and improvement. Hear a talk from our CTO Paul Lucas and Director of Product Roger Lai on our approach to experimentation.
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We just posted our 2018 Customer Survey and the results are incredibly interesting.
Consumers in debt are definitely feeling more like TrueAccord customers, giving us a Net Promoter Score of 40, a new record for us and for the industry. We have also uncovered several interesting trends in customer preferences – not new, but definitely eye opening.
Click here to download the infographic summarizing our findings.
Call centers are risky: expensive to operate, experience high turnover, training and retraining are increasing overhead, and controlling calls is close to impossible because humans are fallible. In this episode, Tim Collins and Ohad Samet compare and contrast a call center based collection operation with TrueAccord’s compliance management and scale: pre-written content, compliance firewall, and other solutions.
Data from the Federal Reserve Bank shows consumer debt has been increasing and hit its peak in 2017 totalling $12.73 trillion, exceeding the previous peak in 2008, with roughly $1.3 trillion in student loans. The expected decrease in regulatory and tax burdens on U.S businesses suggests that the US economy will grow even faster than expected, giving consumers more confidence to spend. This growth in debt volume is accompanied by a change in the profile of consumers that owe it. Millennials are a new type of consumer, and therefore also a new type of debtor. This shift has left the debt collection industry struggling to deliver the type of user experiences consumers demand today. Companies wanting to stay successful, recover debt and retain their positive brand perception must adapt.
Millennials are the new consumers
Millennials have surpassed Baby Boomers as the nation’s largest living generation, according to population estimates released by the U.S. Census Bureau. Millennials are defined as ages 18-34 and in 2015 they numbered 75.4 million, surpassing Baby Boomers at 74.9 million. They are young, highly educated, driven, technology savvy and in significant debt. In 2016 the average student loan debt was close to $40,000 for the millennial generation. Student loans is now the second highest consumer debt category, trailing only mortgages.
Income and debt introduce uncertainty
In a recent survey 68% of millennials have said that debt negatively impacts their life, causing personal and professional stress, and 19% have received collections calls. On average a millennial carries around $5500 high interest credit card debt, to which many add auto loans. According to the Bureau of Labor Statistics an average millennial salary is $35,592, which leaves many dreaming of being debt free but finding that goal impossible to reach. Faced with mounting debt and economic uncertainty, millennials not only communicate and think differently, but are also faced with a substantially different economic reality. When they fall off the debt repayment wagon, they require much more support to get back on it.
A shift in demographics and values
Beyond the economic uncertainty, millennials’ money management habits also differ from those of baby boomers. Millennials place a high value on ephemeral consumption – experiences such as travel rather than goods and investments – leaving them with less long term financial security. Coupled with lower salaries, they are facing a constant struggle between paying off their debt, building financial security, and living in the moment. Helping millennials pay down debt also requires an element of flexibility and financial education to help them start and stay on track with a debt repayment plan that works for their life.
Technology is key
Millennials’ love affair with technology has changed the way companies interact with them and created an opportunity for innovation that spans across all markets from healthcare to fintech and an on-demand economy for pretty much any service imaginable. With 98% of millennials owning a smartphone and using it for more than 2 hours per day, phones are their main source of communication and interaction with the world at large. Organizations need to invest and improve their technology to meet the millennial consumers’ ever changing and evolving preferences.
Personalization is not a good-to-have
This generation puts a lot of emphasis on personal expression and personalization. Individuals express themselves not only by increasingly specific value sets and identities, but also by adopting brands and consumption patterns. Accordingly, millennials expect a higher degree of personalization when they engage with products and services including financial services. Millennials engage with products and services that understand them and connect to their experience, whether it’s expressing oneself through brands or the emotional experience of being in debt. The more variance companies can offer, the more they can respond to consumers’ individual circumstances and get better results.
Looking ahead
To successfully engage with millennials we have to continue to focus on more sophisticated ways to learn from consumer behavior and preferences to offer real-time, meaningful, personal interactions. Millennials are not only the biggest demographic, but they are a maturing one, and are seeking ways to gain better control of their finances and build a more secure future. Properly servicing them and their mounting debt, personalizing and providing customized solutions, is crucial for the future of our growing economy. Issuers and collectors must adapt to this new world or see their charge offs rise rapidly.
Today, consumers engage with service providers and businesses through multiple digital devices and platforms. They expect to be able to research car loan interest rates on their iPad, then see an ad in their Facebook news feed on their desktop, and finally apply for the car loan application on the bank app using their mobile phone. According to a ComScore study, 50% of consumers rely solely on their mobile devices for all of their banking needs. These numbers reveal just how comfortable consumers are with digital communications and banking.
An omnichannel approach creates a consumer experience that is consistent, complementary and seamless as they move across channels. This is now an expected way for consumers to interact with businesses, and that expectation continues into the debt collection process. Surprisingly, many debt collectors are still using phone calls and letters to get the attention of the consumer, but because their methods are so out of date, many customers will ignore or miss their communications all together, leaving a tremendous amount of debt unpaid.
What is an Omnichannel Debt Collection Strategy?
An omnichannel debt collection strategy is a consumer-centric approach to communicating with consumers. It’s a personalized and intelligent strategy of marketing that provides a seamless experience, regardless of channel or device.Consumers can now engage with a company in a physical store, on an online website or mobile app, or through social media. They can access products and services by calling a company on the phone, by using an app on their mobile smartphone, or with a tablet, a laptop, or a desktop computer.
When utilizing an omnichannel debt collection strategy it’s important to note that you’re not just making your website mobile friendly or sending an email reminder once a month. It’s not using multiple channels in order to stay ‘top of mind’ to the consumer. According to TeleTech Consulting, “To succeed with emerging channels, you can’t leapfrog over the basics. Instead, you must build a solid customer experience foundation from which to incorporate all interaction channels. This means setting up people, processes, and technology to identify, differentiate, customize, and interact with customers to meet their needs and resolve their issues.” An effective and precise omnichannel debt collection strategy will use the consumer’s behavior to personalize every interaction and communication in order to nurture the customer through the collections process until their debt is fully paid.
Consider the Customer Journey
Most businesses are aware of their customer’s journey. Consumers take this same journey when paying off their debts, but traditional debt collection agencies or agents are not nurturing their consumer through the process, which leads to ignored calls, irritated consumers, and unrecovered debt.
TrueAccord understands that in order to appropriately nurture the consumer through the process you must use the technology and platforms they are most comfortable with. We reach our consumers through text messaging, email, and push notifications on their devices. The average American spends 4.6 hours a day on their cell phone, but most of that time is spent on apps, searching the web, and texting. A recent study by Informate, found that globally people are not spending time on speaking on their phones. Further, the FCC has warned the American people not to answer any unknown phone calls in order to remain safe and avoid scams. An omnichannel debt collections strategy is the only effective way to meet consumers needs, which is why 95% of TrueAccord’s customers resolve their debt through self-service, online, without a single phone call.
Customer Journey in the Omnichannel Debt Recovery Strategy
From the consumer’s viewpoint, paying off a debt and making a purchase for a product or a service are very much the same, so it is no surprise that they need the same amount of nurturing and follow a very similar customer journey. TrueAccord uses behavior analytics and machine learning to create a personalized omnichannel debt collections strategy that is seamless and effortless for the consumer.
Every step in the debt recovery process is determined by the consumer’s behavior and needs. TrueAccord consumers will experience an individualized consumer journey unique to them. Personalization coupled with flexibility enables TrueAccord to collect more debt from more consumers. TrueAccord’s customers are able to utilize payment plans to pay off debts because they are easy to set up, offer many choices and nurture and motivate consumers to stay committed with positive messages.
The following chart is an example of one consumer’s personalized journey from debt collections to debt recovered. As the consumer moves through the different stages, the decision engine decides on what channel to use, what content and how often based on the consumer’s interaction with the platform.
Click here to download a larger version of this diagram
Precision in an Omnichannel Debt Collection Strategy
A personalized omnichannel debt collection strategy is a very precise method of interacting with consumers. This is not a throw-it-all-at-them-everywhere approach to consumer communications. TrueAccord’s intelligent omnichannel debt collection strategy will actually communicate less frequently than a call center would, 3 times a week on average. There is no need to call the consumer 10x a day for weeks on end, or to send expensive direct mail letters in various color paper just to be ignored. The omnichannel approach communicates less frequently but much more effectively, reducing call volume by more than 95% and attempting to contact consumers about three times per week. Because the communication responds to each individual consumer’s behavior it has maximum impact resulting in 50-500% more funds collected than traditional agencies.
An intelligent omnichannel debt collections strategy is a relief to today’s consumer. They are looking for a way to take control of their debt and manage it on their terms. TeleTech’s study found that, “simple tools that give customers more say in their interactions can also improve the experience in the long run.” TrueAccord is the tool consumers with debt are looking for. We believe debt collection does not have to be a stressful never-ending process. When consumers are met on terms that make them most comfortable, and given options that suit their needs, they are happy to pay off their outstanding debts.
Today, 64% of consumers approach businesses with the expectation of personalization and streamlined digital access, an omnichannel intelligent approach to debt collections is a necessity for the success of debt recovery. TrueAccord is the only collections platform powered by machine learning, which allows us to meet consumers exactly where they are and guide and nurture them efficiently through their personalized debt collection process until the debt is fully recovered. We view the process through the eyes of the consumer and work to deliver an integrated experience that enables a seamless transfer between channels.
To get a larger version of our customer journey diagram, click here
I’m very honored to have been appointed to the CFPB’s Consumer Advisory Board. With this appointment, the CFPB is sending a strong message about how it views technology’s role in shaping the future of consumer finance in general, and debt collection in particular. I’m proud to be able to represent the industry’s point of view while making sure we usher in a new era of great user experience and technology innovation. Even with Director Cordray’s planned departure, the CFPB remains a strong and active regulator. While some of the weight is likely to move to State level examinations, keeping in touch with Federal regulators remains a top priority as a way to contribute to consumer protection broadly, and to support TrueAccord’s long-term mission.
Anyone can apply to be a CAB member through the CFPB’s site. I applied and was appointed earlier this year. I did so because at TrueAccord we believe in the Bureau’s mission – protecting consumers – and also that engaging with your regulator is the smart thing to do. I was humbled and excited to be sworn in, because there is still so much in financial services in the US that can be improved, and innovation to be encouraged. I truly believe in the role of the CAB in informing the CFPB on important trends and how to support consumer protection and choice. I am lucky to be serving alongside academics such as Prof. Lisa Servon, consumer advocates such as Chi Chi Wu from the NCLC, and industry leaders such as Max Levchin. It’s a broad set of experiences and opinions that foster great discussions and set us up for the challenges in front of us.
The CAB looks at financial services in general, but my I cannot disregard my own backyard. In tricky, regulated markets like debt collection, with its active rulemaking process, it is even more important to take part in crafting fair and forward-looking rules that protect consumers. Any work I can do to ensure innovation can finally reach the debt collection market is a net positive for consumers and the industry.
The meeting span three full days in Tampa, Florida, and culminated in a public session with comments about the new PayDay rule. Bureau staff kept a tight schedule presenting latest developments in regulation, consumer education initiatives, and for first time members – an intro to the Bureau and its divisions. During the third day, I was also asked to give a 45-minute presentation on trends in the debt collection market. I used it to discuss the transformative role technology has in making the debt collection process customer-centric and digital first, creating better experiences with less friction and stress for consumers.
All in all, my first meeting was an incredibly positive experience. Staff turned out to be a diverse group of intelligent and thoughtful people, and the (now ex-)director a highly engaged and knowledgeable person. CAB members bring impressive backgrounds and facilitate an effective discussion, especially when they disagree. I am already looking forward to our next meeting, and reviewing developments we’ll see until then. I personally expect the debt collection rule to be one of them, though Bureau staff gave no formal guidance on this matter.
I’m honored and excited to have been appointed to the CFPB’s Consumer Advisory Board. With this appointment, the CFPB is sending a strong message about how it views technology’s role in shaping the future of consumer finance in general, and debt collection in particular. I’m proud to be able to represent the industry’s point of view while making sure we usher in a new era of great user experience and technology innovation.
When we founded TrueAccord in 2013, we set set a goal for ourselves – to go to Washington and influence policy making in the debt collection space. Ever since then, we engaged with the CFPB in various ways: quarterly meetings through Project Catalyst, participating in the SBREFA panel for the proposed debt collection rule, and even potential data exchange. We view policy making that enables better debt collections as our mission, and this appointment is just another step in the process.
This appointment isn’t about me, when I attend these meetings I will represent the industry, TrueAccord, its team and our consumers. I will take as very seriously, like we all take our mission. This could not have happened without the TrueAccord team’s hard work and laser focus on making a difference.
The US economy has taken a turn for the better in the past year. Unemployment has plummeted, the Federal Reserve is raising rates, and the stock market is soaring. However, for the past two quarters, several issuers reported an increase in charge off rates. While banks may be changing their underwriting standards to encourage growth, there is another contributing factor: a fundamental shift in the way consumers live and work, one that the credit card industry has failed to adjust to.
2008-2009 was a turning point for the US economy. Millions of jobs were lost across all industries, without much hope of recovery. College grads joined a crippled job market, and felt like they needed to “hustle” and find alternative means to sustain themselves. Uber, founded in 2009, created an opportunity as standard-bearer of the gig economy and many others have followed suit. At the same time, social media became prevalent as Facebook went international in 2007. These processes created new consumers – the millennial cohort. Millennials are on the move, working several unsteady jobs, managing their own time and relying heavily on social media and digital communications. They use traditional financial solutions like credit cards, but the dominance of mobile and digital in their life is driving their preferences for communications and interactions with people and businesses. However, if they default, they are effectively sent back to the stone age, where in time to a world that knows nothing about them, and does little to service them effectively. When a system that “always worked” faces a new type of consumer behavior, it breaks – and leads to increased defaults and losses.
Consumers expect a better user experience – even in collections
As digital, always connected users, millennials expect their bank – or the bank’s collection vendor – to fit their lifestyle and preferences. Unfortunately, the debt collection and recovery industry hasn’t changed in decades. There has been little investment in moving away from phone calls and letters to a more digital and technology driven process, that can deliver a better user experience for those in debt.
Contact through digital channels is table stakes for the digital consumer. Many have never visited a bank branch and most will not answer a call from an unidentified number, or respond to a letter. According to Accenture’s “Banking Customer 2020”, 58% of consumers use their mobile device when seeking support from their bank, 53% report going to their online banking center at least once per year to sort an issue; 78% report doing so to make a payment. More than half of the population has adopted digital channels to manage their lives, and will not respond to cold calls and letters in nondescript white envelopes. Call center-based collection approaches fail to get these consumers on the phone, and debts make their way to charge off without any meaningful engagement from the consumer.
Once contacted, millennials expect clear communications. The common disclosures used in debt collection, for example, feel onerous and obscure – causing them to disengage (the CFPB recognized that and is planning a survey regarding disclosures). The dispute process, asking for more information about their debt, is onerous and slow. Consumers need, and deserve, communication that drives them to action rather than intimidates and coerces them. Collectors are pressured to cold call and create instant rapport with unwilling debtors – and they are failing this task in growing numbers.
Finally, consumers need flexible payment options that fit their work schedules. As Robert Reich notes, while 1099 workers may make slightly higher hourly salary when working, their hours are irregular and difficult to schedule. This means irregular paychecks that can vary in size and resulting disposable income. A consumer might be able to pay $100 this pay period, $150 next time and only $50 the following one. Traditional approaches fail to adjust to these realities, focusing on steady payment plans that these consumers cannot always keep up with.
This article, written by our In House Counsel Adam Gottlieb, first appeared in the RMA Insights Magazine
The word “startup” conjures images of stereotypical open offices, complete with ping pong tables, standing desks, and people in hoodies feverishly hammering at keyboards. Startups are often associated with high risk, scrappiness, and the ability to break things and move fast–all a stark contrast to the bureaucratic and highly-regulated environment that most debt buyers and collectors operate in. Yet, as startups begin venturing into the area of financial technology, they have had to adjust to new operating principles and new stakeholders, with the government chief among them.
TrueAccord is a machine-learning and Al-driven 3rd-party debt collection company that is reinventing debt collection. We make debt collection empathetic and customer-focused and deliver a great user experience.
Our digital-first approach to debt collection creates a cycle of collections growth:
1. Improve the perception of the industry
2. Provide a personalized experience
3. Build brand equity and collect
