Consumer adoption of Buy Now, Pay Later (BNPL) products skyrocketed in the past year, fueled in part by an increase in online shopping due to Covid-19. There are many payment and credit options available, but it really comes down to consumer preference and consumers are choosing to use BNPL. But why are consumers into BNPL and what happens when BNPL installment loans go unpaid?
The outlook for BNPL customers that default on payments and go to collection is different than for those who default on credit card debt. TrueAccord is a digital debt collection platform that works with the leading BNPL providers and compiled data on debt trends, repayment performance, and consumer preferences from millions of customer accounts to report on the BNPL phenomenon. The report explores the trends and why BNPL continues to be a preferred payment option with consumers, even after going to collection.
Key findings include:
Since the onset of the pandemic, younger consumers (18-34) are going into collection for lower amounts due to an uptick in BNPL usage
BNPL debts see higher and faster repayment rates than similar-sized credit card debts— BNPL repayment is 2x+ higher than credit card repayment at both 30 and 90 days.
Consumers like installment payment plans, whether at the time of purchase (by using a BNPL product) or after default (by setting up a repayment plan over a period of time)
TrueAccord’s Chief Growth Officer, Sheila Monroe, was recently featured in the New Standard in Debt Collection panel as part of the Beyond Digital: The Next Era in Collections summit. Having held numerous executive-level positions at TrueAccord on top of a multi-decade career in collections, Monroe is uniquely qualified to recount the historical practices of the collections industry from her point of view. In this blog post, Sheila shares her perspective on where the collections industry is heading in 2021 and beyond.
Much has changed since I started in the collections industry in 1986 and not just in the types of communication channels used, but also in the collection strategies employed. For example, the first real meaningful change was a move from a one size fits all strategy to a much more sophisticated segmentation of consumers.
That means “customer A” gets a very different experience than “customer B” based on their individual repayment behaviors while in collections. This type of segmentation helped companies decide calling intensity and their letter strategy: Is it a reminder letter? How frequently do we call? When do we call?
Once organizations mastered segmentation, operational efficiency (deploying and optimizing tools aimed at reducing the amount of calling) helped the industry start down a path of reduced staffing requirements and operational effort. Collection dialers have been around for years but with the new effort towards efficiency, agencies realized that customers were willing to make commitments and payments in the interactive voice response (IVR) system. Agencies started using interactive voice messaging (IVM) to automate outbound calling journeys as much as possible. Sophisticated skiptrace waterfalls became automated as companies got smarter about data management to increase contact rates.
The industry is still largely phone based but most collection businesses are now starting to adopt digital channels, like email and SMS. Though digital channels still only make up a small percentage of total outbound activity across the industry, we’ve seen regulators respond to these modern communication platforms with the introduction of Regulation F. As a company that is leaps and bounds ahead of the industry average when it comes to digital communications, we’re excited at TrueAccord about the new legislation. What Reg F says is, “all that disruptive phone calling that is happening, it’s not what consumers want. It’s not a great experience for consumers.” It’s clarified and given a strong nod toward using digital channels. When I think about that shift toward digital, a lot of players in the industry are just doing it for efficiency and some, frankly, out of survival because of Reg F.
The CFPB is doing a good job recognizing that consumers want a change, so they are forcing collection companies to innovate or get out. They understand that consumers want to communicate in more convenient, less disruptive channels and they want to feel safe communicating on their terms. The reality is that most consumers want to pay their debts. If there is respectful personalized communication and a simple way to sign up for a repayment plan, they likely will.
That brings me to where we are today and this continuing shift of behavior. When it comes to innovation and segmentation, changes have been about making things more streamlined for contact centers. All of that innovation has been focused inward to figure out how the company can optimize to get more for less. There’s been little attention paid to the consumer and their preferences. How can engagement with a consumer about a really sensitive topic be done in a way that meets their needs? How can we simplify the process for the consumer? How can we start to remove that stigma from the conversation? In most industries, you design with the consumer in mind and the money will follow.
Now, we’re in the age of the consumer. Today’s consumers crave simplicity, convenience and personalization. We live in a world in which we can listen to whatever music we want to hear, stream the content we want to see, connect with friends from around the world, get a ride, and have food delivered to our doorstep all with a couple of clicks. All those apps which we know and love, pay attention to our preferences to make it even easier the next time we open them to stream or watch or buy.
Effort is a thing of the past. Effort is reserved for things we want to do now: play a sport, take a hike, or go to our kid’s recital. So now, financial services, and yes, the collection process, which touches millions of consumers each year, needs to become simple, convenient, intuitive, personalized and ultimately, low effort.
This content originally appeared as part of the Beyond Digital: The Next Era in Collections summit. Watch the entire summit here.
In 2013, TrueAccord was founded with the hypothesis that AI driven digital collection was the way to transform the industry. Eight years later, we are still confident in the transformational nature of our hypothesis but are still surprised how few other companies in our industry have fully embraced digital-first debt collection.
The digital revolution has been ongoing for some time now. The word “digital” itself has evolved from a high-tech term that few understood to one that is now regularly accepted as part of our everyday lives – both personally and professionally. As the digital world continues to accelerate the way in which we do everything – from paying for things to driving cars to debt collection – it’s not enough anymore to just invest in digital. Focused strategies and understandings of more complex technologies are mandatory to getting the most out of what the digital economy has to offer.
At TrueAccord, to create powerful moments that actually help consumers, not only pay off debt, but become more financially stable and confident, we need to think bigger by putting them first. In honor of the launch of our newest product, Retain, TrueAccord hosted the Beyond Digital: The Next Era in Collections summit, which is now available in its entirety on-demand. Stay tuned for more on each of the individual sessions.
Here’s the lineup from the Beyond Digital summit:
Welcome Keynote
Ohad Samet, Co-founder & CEO, One True Holding Company
Understanding Consumers in Debt in 2021 (and Beyond)
Mark Ravanesi, CEO, TrueAccord
Jacob Kong, Chief Product Officer, Experian
Jan Hansson, VP, Debt Collection, Klarna
What Debt Collection Leaders Can learn From the Masters of E-Commerce
Naama Bloom, CMO, TrueAccord
Sunil Kaki, EVP, Beachbody & OpenFit
The New Standard of Excellence in Debt Collection: Creating World-Class Consumer Experiences Via Machine Learning
Ensuring regulatory compliance in debt collection is a high stakes and increasingly complex process. As we know, the industry is constantly evolving and collections strategies must adapt.
At the end of July, the Consumer Financial Protection Bureau (CFPB) announced that the final rules issued under the Fair Debt Collection Practices Act (FDCPA) will take effect as planned on November 30. The new rules focus on the time, place, and manner of debt collection communications, the expansion of those communications through digital means, and enhanced disclosures that collectors must provide consumers with at the beginning of collection communications.
To help explain and analyze the new rules, TrueAccord recently hosted a webinar featuring two members of our in-house legal team: VP Legal & Compliance, Kelly Knepper-Stephens and Associate General Counsel, Katie Neill.
Regulation F outlines the first-ever guidance for digital communication efforts in collections – effectively giving the green light to make alternative collection efforts more mainstream. The rule explicitly outlines email and SMS communication but also includes language for digital outlets that might not be in use for collections today or even in existence yet – a nod to social media and consumers willingness to be contacted privately on those platforms.
Furthermore, the rule does not change the federal law as it relates to consent to email. No consent is required to send debt collection emails, just like no consent is required to make calls or send letters.
“The devil is in the details for Regulation F;” the implementation of each new provision turns on the Bureau’s explanation in the preamble and examples in the comments. Legal and compliance teams should be the engine that makes sure the organization is in compliance with this guidance when the rule takes effect later this year.
Unlike regulations in regards to phone-based collections, there is no cap on outreach frequency in digital communications like email. This is because consumers and email providers self-regulate the communications frequency – collectors must design deliverability carefully to be successful, and if collectors email without a self-imposed cap their communications will be marked as spam or not delivered.
As a digital-first collections agency, TrueAccord is ahead of and prepared for the guidance that will be put in place at the end of November. As a leader in this style of collections, TrueAccord leveraged a lot of data and consumer preference insights to help inform these new rules. The issuance of Regulation F is a significant validation by the top financial services regulator of TrueAccord’s business model.
On July 28, the debt collection advisory committee of the California Department of Financial Protection and Innovation (DFPI), whose mission is to better protect California consumers, promote responsible innovation, reduce regulatory uncertainty for emerging financial products and increase education and outreach to vulnerable groups, held its inaugural meeting. TrueAccord cofounder, Ohad Samet, who is one of seven founding committee members, joined to set priorities and kick off the committee’s activities.
Samet’s voice on the committee, which is made up of a cross-section of industry experts from lawyers to academics to executives, brings his nearly two decades of experience in implementing technological and machine learning practices in fintech and debt collections, as well as the consumer preferences and trends uncovered through TrueAccord’s data-focused and more consumer-friendly approach to collections.
“We’ve been able to find a way, as part of the Consumer Advisory Board of the CFPB (Consumer Financial Protection Bureau), to meet with consumer advocates and more traditional industry players to find that space where, if we serve consumers effectively using tech and we find alignment, everyone wins,” said Samet in his opening remarks of the meeting. “It allows consumers to be served well and industry players to be able to operate in a way that is actually cost-effective and appreciated by everyone involved. I hope to bring that type of forward- and consumer-focused thinking in the collections space to the DFPI. Through use of tech, consumer research, listening to what consumers want and aligning with them at scale, we can make the world a better place. I really think this can be the result of our work here.”
Some common themes of the committee’s inaugural discussion were documenting the life cycle of consumer debt, technological solutions and making sure the DFPI understands those processes, according to California DFPI Senior Deputy Commissioner and the debt collections advisory committee program lead, Suzanne Martindale. Discussion also prioritized consumer communication best practices, licensing requirements, and how research can help support the DFPI’s mission
“Introducing tech and consumer focus into the debt collection process is a lot more than sending an email and hoping for the best. It’s bringing in the best practices from e-commerce combined with consumer research,” Samet remarked. “Consumers want to pay their debt when they’re able to do so and when it’s done in a way that’s convenient for them. We’ve seen a spike in online activity from consumers actively looking for ways to negotiate or learn more about their debt – which on one hand is encouraging and on the other hand is critical to understanding how we offer a path for these consumers to engage in a way that they feel is good for them.”
Though the goal of this first meeting was to develop next steps and action items for future sessions, members agreed that DFPI research on consumer communications and preferences would be helpful to shape how the consumer advocates and debt collectors can work together. On this front, Samet will contribute insights garnered throughTrueAccord’s current business practices and core values.
“Consumers feel at a disadvantage on the phone because they are not as equipped with negotiation skills or knowledge of the law as the collector on the other side. They want to default to digital, asynchronous communications so they can think between the beats of back and forth,” said Samet. “All of TrueAccord’s activity has been heavily slanted towards allowing consumers to engage on their own terms as much as possible. When you bring e-commerce and tech practices to debt collections, it leads to more productive conversations, more proactive communications, more expectation for choice in mode of interaction and more requests for customization.”
The formation of the debt collection advisory committee was announced in April in order to provide critical feedback to the DFPI as it stands up its debt collection licensing program at the beginning of 2022.
To watch the entire first meeting of the debt collection advisory committee of the California DFPI, click here.
In 2019, Todd Johnsen, Snap Finance’s Senior Manager of Collections Vendors, was charged with doing something that had never been done at Snap before: developing a third-party collections program. According to Johnsen, “At that time, the only recovery program for charge-off accounts was a call-and-collect settlement at tax season. I knew we could do better, but we’d have to start from scratch.” Johnsen also found a large amount of backlog accounts that had never been worked by a collections agency, as well as the need for a forward flow third-party recovery program.
Johnsen and team surveyed their options: they looked at both traditional agencies (predominantly making outbound calls) and digital-first collections solution providers, like TrueAccord. Johnsen was particularly interested in how digital-first providers like TrueAccord used machine learning to optimize their relationships with consumers via digital channels like email, SMS, and push notifications.
“My thought process was — we work with subprime consumers who may have bad associations with debt collection,” said Johnsen. “This audience may have already had experiences with incessant collection phone calls, and they are used to avoiding them. I wanted to find an agency that was doing things differently. I knew that TrueAccord was using technology and digital channels in a way that other providers weren’t.”
While Johnsen was curious about working with a digital-first agency like TrueAccord, he wasn’t ready to go all-in immediately. The Snap Finance team decided to engage both a traditional agency and TrueAccord and compare the results. In evaluating the competing partners, key considerations included liquidation rate performance, security and compliance, and optimization efficiency. The result? TrueAccord delivered better results across all measured parameters.
“The reality of the results really knocked me out,” said Johnsen. “What we saw was almost 25-35% better performance on the accounts that we placed with TrueAccord, compared to the accounts we placed with traditional agencies. It was a real eye-opener. In fact, TrueAccord is number one in every tier I have them in. We’ve seen nothing but huge benefits as a result of that individual, digital-first interaction that TrueAccord tailors to each consumer.”
To learn more about TrueAccord’s work with Snap Finance, read the full case study.
As hospitals face growing and aging accounts receivable systems, and with limited data and visibility into their organizations’ financial health, the most common revenue challenges in today’s healthcare landscape all relate to not getting paid on time, every time. With patient financial responsibility increasing since the enactment of the Affordable Care Act, the challenge for hospitals and healthcare providers to collect payments consistently will become even more difficult to manage as more of the financial burden falls on patients.
To quantify this increase in patient financial responsibility, TransUnion Healthcare’s 2019 study found a 12 percent increase in out-of-pocket costs for inpatient, outpatient, and emergency department care from 2017-2018. At the same time, Instamed reports that 78% of healthcare providers cannot collect on a bill of over $1000 in 30 days.
The issue of patient financial responsibility is complex, but one aspect is the patient financial experience. Patients who have a better experience are more likely to pay, but healthcare organizations are lagging far behind the financial experience that patients want. Patients often grapple with sticker shock due to the costs of healthcare confusing medical bills from their healthcare providers in addition to insurance coverage notices and challenges. Many healthcare consumers are frustrated with their provider’s billing and collections process especially those that are not yet digital. Patients could benefit from better clarity and communications from their healthcare providers as well as easier and faster payments.
Patients who have a good financial experience with a healthcare organization are more likely to remain customers, which leads to future revenue. 41 percent of patients would consider switching to a new healthcare provider that offered a better digital billing and collections experience. In an increasingly transparent marketplace where there are many options for healthcare, ensuring that patients have a good clinical and financial experience is integral to retaining them.
TrueAccord helps health care providers alleviate these payment issues. By delivering clear communication about amounts owed, an empathetic approach, and digital self-service, TrueAccord can offer a better financial experience for patients. Powered by AI, our system reaches out to the consumer with the right information at the right time so that they are empowered to take the steps necessary to fulfill their patient financial responsibility. We seek to understand the patient and meet him or her where they are with empathetic communications that take into consideration both the message and how and when it’s delivered. Rather than fostering frustration about their financial responsibilities, TrueAccord eases patients into the process. We also provide a self-service portal where patients can customize their payment plans and find other options for easily settling their bill.
Since we were founded in 2013, TrueAccord has worked with more than 13 million consumers. Hundreds of thousands have resolved their debts with convenient payment plans, customized billing schedules, and easy documentation. Learn more about how TrueAccord can help your healthcare organization today.
Halfway through 2021, e-commerce and consumer spending continue to see the impact of government stimulus payments while consumers look for new ways to invest and leverage their money. Simultaneously, all sectors of fintech grew during the pandemic, and this growth has not shown signs of stopping. Investment and lending platforms have grown in users by the highest percentage during the pandemic — with increases of 23 and 25 percent, respectively (McKinsey).
With the digitization of banking and financial services now firmly part of our new normal, is “disruption” still possible in fintech in 2021? TrueAccord co-founder and CEO, Ohad Samet, recently sat down with Julie VerHage-Greenberg of Fintech Today to discuss what the next horizon of fintech disruption will look like — and how financial institutions of all types can stay ahead of the curve and create groundbreaking solutions this year.
Watch the full “TrueAccord Talks” episode for more insights, but key trends to watch in fintech disruption in 2021 include:
Solving “structural problems”: Fintechs, unlike many traditional financial services companies, are not just putting old products online and calling them digital, but rethinking the approach to existing problems and building new, better solutions.
Digitization for customer experience: While many companies have focused on digitizing the customer experience, those that haven’t may begin to feel the pressure to adapt. With digitization increasingly being driven by consumer demand and expectation, financial service providers that don’t integrate the consumer experience into their offerings will lose out to those that do.
Affordable financial services: With so many new fintech players in the industry, competition and innovation continue to spur more efficient and affordable services for consumers. Old products will be replaced with new banks, payment options and wage access, and more will focus on credit care and access to cater to consumers.
Generally, when talking about artificial intelligence (AI) in regards to medical collections, we hear about how it has automated the once-painstaking process of medical coding for billing. But why stop there? With all of its capabilities, AI has much more impressive and patient-facing applications when used to improve customer experience, especially in the healthcare industry which is increasingly digital-first and self-serve. In this post, we’ll explore how AI and machine learning can supercharge the healthcare revenue cycle by catering to consumer preferences, turning billing and collections into a seamless, efficient experience for both patients and providers.
But first: why is it necessary—and even urgent—to improve healthcare revenue management? The answer is patient expectations. Patients now expect the same type of personalized, easy-to-use experience they’ve grown accustomed to receiving from other industries, including banking, airline and retail industries. Patients are now “digital-first” and look for an end-to-end experience that allows them to handle medical-related issues on their own, often from their mobile devices. Patients can already schedule appointments, request prescription refills, receive test results, and even contact their healthcare provider directly through digital platforms. The application of digitization through AI and machine learning to other touchpoints in the patient journey, all the way through billing and collections, can improve customer experience and thereby their overall interactions and relationships with their healthcare providers.
First, digitization powered by AI and machine learning can replace manual and paper processes to speed up the recovery timeline. A 2020 report by InstaMed, a J.P. Morgan company, found that patient collections take more than a month for 63% of healthcare providers. This figure isn’t surprising when 81% of providers still leverage paper and manual processes for collections, while 75% of consumers want to receive eStatements for medical bills. The traditional method of collections does not align with consumer preferences, with more than half (54%) of consumers surveyed saying they prefer electronic communications (emails, text messages, in-app messages and live chats) for medical bills. And a majority of consumers (65%) preferred paying those medical bills digitally as well – whether online through their doctor’s or health plan’s website, their bank’s bill-pay portal or mobile apps – instead of manually. Using AI and machine learning to match the consumer’s communication and payment preferences can drastically improve the time needed to engage and collect from patients.
Second, AI-powered systems can personalize the billing and collections process and offer intuitive payment solutions for patients to achieve the best possible recovery rates. According to the InstaMed report, collecting patient financial responsibility in a timely manner was especially challenging for large patient balances, with 49% of surveyed providers reporting that they cannot collect bills of more than $400 in 30 days. Especially with multiple billers on different payment cycles, it can be difficult for a patient to set up a payment plan with terms they can successfully meet. AI can improve this experience by identifying the most efficient time, place and manner to communicate with a patient about their financial responsibility and go a step further in presenting personalized, affordable payment options.
Third, AI can be used to interface directly with clients where they are and minimize the need for waiting on hold for the next available representative, creating a more seamless, humane process and a better customer experience. AI-enabled chatbots can answer basic questions, while automation can help provide information on why claims were denied and other status updates. Empathetic customer service is important in the healthcare industry and customized customer self-service can reduce frustration for the patient and the number of service agents needed for the provider.
At TrueAccord, we use AI and machine learning to build digital debt collection solutions for billers that put customers first. By implementing behavioral analytics to predict consumer communication preferences and machine learning to create smart, intuitive processes that increase likelihood of patient repayment, TrueAccord products stay a step ahead to ensure a successful revenue cycle where both patients and providers win. To safeguard personal patient information, TrueAccord’s policies and procedures are designed to comply with all HIPAA-related requirements (Health Insurance Portability and Accountability Act), including documenting the use of protected health information (PHI) and the physical, technical, and administrative safeguards implemented to protect PHI. Learn more about how we use AI and machine learning to provide a personalized collections experience at scale here.
If you aren’t familiar with Buy Now, Pay Later (BNPL) yet, it’s a safe bet that you will be soon. The service, which allows consumers to split a purchase into several payments over a set period of time, has been popular in other countries and has been gaining traction in the U.S.
To quantify the growth in BNPL use, a February 2021 survey conducted by The Strawhecker Group (TSG) of more than 1,500 U.S. consumers found that nearly two in five (39%) had used a BNPL service and predicted that BNPL volume will double by 2025. A separate March 2021 survey by The Ascent found that 56% of U.S. consumers have used a BNPL service, a nearly 50% increase from July 2020.
This type of payment plan, offered by BNPL companies, has clearly caught on with consumers, leading to rapid growth (in some cases 200% or more year-over-year in 2020) for the main players.
So why do consumers love this offering? The question should be, why wouldn’t they?
The service performs like a short-term credit card, with generally no interest or fees due, unless the consumer misses or is late on a payment.
It’s simple and convenient to use when shopping online, with payment offers prominently displayed at checkout.
It’s easy to see why consumers would opt for a more flexible, pay-over-time purchase option. After trying BNPL, users tend to like it and become repeat customers – TSG’s research found that nine out of ten people who have used BNPL found it reliable and that 85% of consumers plan to continue using it. TSG’s research also confirmed that the option to buy now and pay later tends to make people spend more than they would otherwise, potentially outside of their budget. BNPL will continue to be an attractive payment option for consumers, especially if it’s eventually integrated into in-person retail transactions, and the need for consumer education will grow.
As a digital debt collection company, TrueAccord helps clients collect on unpaid debts, but is equally committed to helping consumers achieve long-term financial fitness and stability. TrueAccord works with many BNPL customers who for one reason or another did not meet the terms of the payment plan and ended up in collections by helping them understand their debt, offering flexible repayment options and educating on smart borrowing and spending. TrueAccord aims to usher BNPL consumers through and out of debt while delivering the best possible experience, and it’s that collaboration that will lead to better business for BNPL providers and better financial outcomes for consumers.
If you’re interested in learning about BNPL service providers and our work, check out our recent webinars co-hosted with Klarna and Affirm.
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
