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.
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.
In our second installment of “Between Two FinTechs,” an interview series with leaders in financial technology, we have Hunter Walk, co-founder and partner of seed stage venture fund Homebrew. Previously at YouTube and Google, Hunter uses his startup and scaling expertise to help founders articulate their product/market fit, recruit stellar teams and build well-defined cultures. In this conversation with our CEO Ohad Samet, Hunter shares how he started his venture fund, his thoughts on major developments in fintech and his investment philosophy.
Ohad Samet: Hunter Walk is one of the early believers in our company and one of the most outspoken leaders in the venture capital community, so we’re really excited to have you, Hunter. Can you start us off by telling us about the beginnings of Homebrew?
Hunter Walk: Thanks so much for having me!
Homebrew came out of a partnership with my co-founder. Satya Patel and I had worked together at Google and always wanted to work together again. At the end of 2012, I was thinking about leaving Google after almost a decade, most recently having run the Product team at YouTube. Satya had recently left Twitter where he had been running Product, so we finally started to talk about what we wanted to do together.
“We didn’t assume we were relevant just because we’d been around the Valley for awhile and had the ability to write checks.”
We didn’t assume we were relevant just because we’d been around the Valley for awhile and had the ability to write checks. We wanted to make sure we were committing to a relatively small number of companies that we would get up every morning and put sweat and reputation behind them, not just capital. My objective is to be able to look back and think about the impact the people we backed made.
We think about who we’re going to be proud to be associated with—and TrueAccord checks off those boxes.
OS: You recently tweeted that your team is “big on banking as a service.” Can you tell us more about how you’re thinking about that sector?
HW: When we started Homebrew in 2013, we believed industries would experience innovation from how data that used to be siloed can now be pooled. Data analysis that used to be impossible or expensive had become more open and available for companies of all sizes.
Despite having no specific background in financial services, we were fascinated by the potential there as a tremendously large industry where its consumers didn’t feel empowered by them. We realized there were people taking a very low net promoter score industry to create something that was thought of more positively by its customers. We knew there would be very tough challenges. It’s hard as a startup to navigate around regulations. The incumbents have spent a ton of lobbying dollars. Old technology platforms are difficult to work with, and you essentially have to figure out how to partner with them or route around them. But the people who could do it successfully would build incredibly durable, important, and valuable businesses.
We’ve invested in and continue to invest in that sector. It’s an industry where depth of knowledge will really help you in a lot of areas. We’re always happy to bet on first time entrepreneurs, but no entrepreneur should underestimate the complexity that you encounter in this sector. That type of knowledge, mentality and accrued experience, makes a competitive moat as well.
“[Fintech] is an industry where depth of knowledge will really help you in a lot of areas. We’re always happy to bet on first time entrepreneurs, but no entrepreneur should underestimate the complexity that you encounter in this sector. That type of knowledge, mentality and accrued experience, makes a competitive moat as well.”
We also look for that little crazy gleam in the founder’s eye that says “Oh, if we can do this, then we can do that.” I call those iceberg startups. The 10% that’s above the water looks impressive, but then you realize there’s another 90% below the surface. Maybe the metaphor is that the ship is the incumbent, and the startup is the iceberg. And that’s utterly horrifying if you’re a ship. I don’t know what makes the investor. Maybe like a happy penguin on the iceberg!
OS: That’s a really interesting point. How do you feel about companies expanding into new businesses? How do you think about balancing the legacy business, expanding that, doubling down, and then working on value-added services as a way to expand the product?
HW: Sometimes people assume that as companies grow, they’re de-risking themselves. And I actually don’t think that’s true of the best startups. I think the best startups choose to re-risk their business at various milestones because they know that they have the opportunity to expand the set of services or products they offer against a consistent mission.
During my decade at Google, I saw that if you are a successful company, in the near term it is always worth putting more resources on your core business and not in new opportunities because you already know that the ROI will be positive. But the reality is that that’s actually the right time to start placing those next bets because you have the stability of something that’s working. And so you say, “Well, what does that put us in a position to do next?” Is expanding into this new service aligned with the mission? Is it consistent with the capabilities and brand of the company? And is it a big enough problem worth solving?
OS: What’s your take on “lending as a service” type companies?
HW: It’s a very interesting and obviously a tremendous area. There are definitely challenges for companies trying to break into that. I think some of those horizontal plays and those essential infrastructure plays are interesting, but you have to figure out how to run a very lean, tight ship because it’s only going to make sense if you can get to a certain scale. You need to decide what sort of risk you’re taking on, what sort of value you add, and if that value actually catalyzes the underlying business of your partners. But looking at the Affirm’s and so forth of the world, it’s clear that there are very smart people in this space who can get and preserve some margin because they’re doing something their partners probably can’t do for themselves, and increase revenue by taking on some of that processing risk. We think it’s one of those businesses where value is going to accrue to a very small number of players.
We’ve seen some other areas that we think are less competitive that are more emerging in the infrastructure space of banking, insurance pricing, and reinsurance. When it’s an area like this, I get really excited when I hear somebody with a contrarian take. If that person is right, they are going to potentially have an outsized result versus a bunch of people who are like, “Oh, I’m going to do Square credit for influencers, or I’m going to do credit for Patreon.” I don’t think those are, by themselves, interesting, discernible big businesses. They don’t have the same vision mission objective that, for example, TrueAccord does. Sometimes if you build the right platform, what other people are calling companies, you can call features and products.
“Sometimes if you build the right platform, what other people are calling companies, you can call features and products.”
OS: Can you tell us more about your investment philosophy and what’s next for Homebrew: How do you balance pattern recognition and Diversity & Inclusion when making early stage investments?
HW: We believe it really starts by being accessible—we respond to every cold email, work to meet new people and communities that weren’t just based on our own work histories, and bring a ‘pay it forward’ attitude to working with underrepresented segments in tech. That said, there’s still plenty of work to be done—while we’ve historically invested in female-founded companies at a rate 4-5x the industry average, I don’t believe our portfolio is yet representative of our ambitions when it comes to other underrepresented segments such as Black founders. Hopefully I’ll update this a year from now and we’ll have more to say there!
Perspectives from Melissa Guzy, Co-founder and Managing Partner of Arbor Ventures
At TrueAccord, we are motivated by how our work impacts consumer finance through technology. Given how broad the landscape is for fintech products and services, we’re excited to introduce a new speaker series on our blog, called “Between Two FinTechs: A Chat Series with FinTech Industry Leaders.” Hosted by our Founder Ohad Samet, these conversations will provide unique industry insights and a chance to highlight notable players in this space.
For our inaugural interview, we’re honored to have Melissa Guzy, Co-founder and Managing Partner of Arbor Ventures, discuss her perspectives as an investor focused on fintech companies.
This transcript was edited and condensed for clarity.
Ohad Samet: We’re really excited to be launching this new series of virtual fireside chats. The goal of these chats is for us to meet with folks from across the industry, learn about the issues they care about, and gain new perspectives on the fintech space. Today, we have Melissa Guzy, general partner at Arbor Ventures, and board member at TrueAccord. Welcome Melissa!
To start, can you tell us a little bit about yourself?
Melissa Guzy: Thank you very much for having me. It’s really an honor to do this and to chat with everyone on the team.
My story is not that unusual. I did a startup in my 20s and it was a very colorful ride, both up and down—at one point, we even went public. After that, I joined VantagePoint Venture Partners as a partner. I spent 12 years there and then decided I really wanted to do something entrepreneurial again. So in 2013, I decided to start Arbor Ventures. It was very much like doing a startup all over again. We only invest in financial services, which is something that I’m tremendously passionate about.
OS: Why the focus on financial services?
MG: I always think you’re a better investor when you’re truly personally passionate about something than just thinking, “Hey, what’s the latest fad?” An early experience has made me very passionate about debt collection in particular.
When I first started my company, I had to put expenses on my personal credit card. which is what you do when you’re completely and insanely committed to something. Eventually we received funding but it was quite stressful for a period of time.
When I think about what TrueAccord is doing, I’m quite passionate about giving people a chance to get back on track There are so many unexpected events that have happened to all of us in our lives—including now during COVID. But that doesn’t mean you’re a bad person or that you’re a bad risk. It just means at some point, you needed more flexibility than what the system was offering you.
“When I think about what TrueAccord is doing, I’m quite passionate about giving people a chance to get back on the rails.”
So when the opportunity came up to invest in TrueAccord, I said, “Absolutely.” I think Ohad probably remembers we made a decision in two days. We never looked back and we’ve been fortunate to continue to invest in the company.
OS: Thank you, and likewise we’re lucky to have you! What are some more qualities you look for in a startup that you would invest in?
MG: It’s about the people. I always say your relationship with a team or your investment lasts longer than the average marriage in the United States. When you think about investing in a company, you need to think, “I’m going to be working with this person through ups and downs for a long period of time. Is this someone I want to work with and spend my time with?”
“Your relationship with a team or your investment lasts longer than the average marriage in the United States. You need to think ‘I’m going to be working with this person through ups and downs for a long period of time. Is this someone I want to work with and spend my time with?’”
The second thing, of course, is the idea, but what we have found is that really good entrepreneurs can learn to pivot and change. Every company will go through ups and downs. So it starts with people and from there it’s about industry and sector—what gets us excited.
OS: Based on your experience, why do startups fail? Can you differentiate those who fail quickly versus those who fizzle out later?
MG: That’s a great question. Startups never fail because of one issue. Startups fail by consistently making bad calls and judgments. We’ve been studying this for quite some time and usually it has to do with not wanting to deal with the core problem at any given point in time.
You don’t want to deal with a problem or a challenge because you’re fundraising, or you don’t want to make a change on engineering because it’ll slow something down. What happens is people start to put bandaids on decisions, and then all of a sudden, the next decision is based upon something you’ve already put a bandaid on, and that just keeps building. And to me, that’s absolutely a point of failure.
I think later startups fizzle out because people forget that you’ve got to innovate and iterate every single day. We live in a very competitive world that changes at hyper speed. Often, companies will reach a threshold and then stop growing because they actually stopped innovating. And they stopped innovating because they stopped taking risks.
OS: Why do you think some fintech companies become successful versus others?
MG: The most successful startups in fintech have not been technologically revolutionary. They’ve just solved something incredibly messy. Take Stripe as an example—a couple lines of code to be able to accept credit card payments on a website so an e-commerce company didn’t have to hire a payments team. That was really simple. It wasn’t rocket science. It was messy. What they solved first was very sticky, and then they were able to build around it.
“The most successful startups in fintech have not been technologically revolutionary. They’ve just solved something incredibly messy.”
If fintech companies start with something weaker, they’re not going to be able to build around it. I think that’s one of the benefits, again, of TrueAccord. We started with something really hard and now we can add everything around it to serve the consumer in the right way.
What’s so interesting is that many financial services are consumer-centric until someone’s late on a payment, and then they don’t like that consumer anymore. They fail to realize that it’s always going to be consumer-centric. As long as we understand that everything we do, at the end of the day, is to help the consumer, we will definitely succeed massively.
OS: How do you think COVID-19 is going to change funding and the overall startup environment?
MG: I think Silicon Valley has had a hold on being the startup capital for a long time that’s well-deserved. During the 2000 downturn in venture capital, VCs on the East Coast pulled back and got scared. The venture capitalists in Silicon Valley never did, and I think that’s why the Valley has the reputation it has. It’s part of the fabric of the community to take risks and to back entrepreneurs.
I think that’s going to change as more startups and more people are moving out of cities, especially with COVID, and we’ll see much more diffusion of startups across the United States —and across the world, for that matter.
We will pull through, and we’ll be in a new norm, and there’ll be new opportunities. And you can be nothing but excited about the future.
New products in debt collection seek to solve decades-old problems with traditional collection strategies. Products and services seek to improve the collections process and aim to improve contact rates, liquidation rates, brand perception, and ease of access.
When you combine agile product development with its application in collections, you’ll see new solutions to old problems. I recently spoke with Parker Lyons, TrueAccord’s Product Director, about his personal product philosophy, how he and his team are approaching product development, and the challenges faced by new product offerings in the space.
Hi Parker! Thanks for joining me. I wanted to kick us off with an introduction. You’re fairly new to the collections industry. Can you walk me through what brought you to product development in debt collection?
Sure! When I finished college I started out in advertising for consumer packaged goods. I was living in Colorado at the time, so I was working on some ads for Coors Light and Polaris snowmobiles. I spent a few more years in advertising, but I ended up taking an interest in energy and renewables. I saw companies in the space with really impactful missions and the growth potential, so I went to school to get my Master’s [Degree] in Environmental Studies.
I ended up making my way out to California and started in solar. I met some people at Spruce Finance who are now working at TrueAccord, and had the chance to see the work TrueAccord is doing. I always had a very “Tony Soprano” view of debt collectors, but TrueAccord is something different. It’s a different type of mission, and we’re really helping people get back on their feet.
We’re happy to have you! How do you translate your product experience over from such a different industry?
Most recently I was with a company called BlueWave Solar that was a community solar business. Our product allowed consumers to subscribe to a percentage of a solar farm and apply the savings generated from that farm to their utility bill.
So we really were a servicing company. We had clients who were big banks and energy companies whose assets might differ from debt collectors managing portfolios, but the goal was the same: they wanted to keep accounts and cash flow moving.
And as you’ve started to consider meeting that goal for clients in debt collection, what are some things you’ve learned about the industry? Do you see consistent issues that you think need to be addressed?
Traditional debt collection platforms are using reliable systems. Call-and-collect methods have worked for a long time, but performance is waning and people aren’t picking up the phone anymore. A lot of the appeal though is that it’s a relatively simple model to get moving. You hire agents, you train them, and they start calling.
On the other side of that, we see some resistance to new technology, and I think that people are worried about it being too complex. So that falls on us. We have to meet clients where they are and focus on making integration easy. We have to maintain simplicity even though machine learning and digital tools can be very complex.
How do you go about making your product more easily digestible then? Where do you start when you’re trying to solve that problem?
It starts with knowing your user. Who are they? What’s their problem? You have to have a deep understanding of what makes them tick and their pain points because you then have to ask yourself “How do we solve that problem for them in a way that no one else can, or cheaper than someone else can?” In product management, we say that you’re responsible for creating a product that is valuable, usable, feasible, and viable. With those things in mind, you can turn your potential client’s issues into your value proposition and the capabilities of your company.
In product management, we say that you’re responsible for creating a product that is valuable, usable, feasible, and viable. With those things in mind, you can turn your potential client’s issues into your value proposition and the capabilities of your company.
As an example, we’re expanding with TrueAccord Retain, our product for first-party pre-charge-off solutions. We’ve scaled our capabilities with artificial intelligence and machine learning in late-stage collections, and early-stage is a natural extension of our growth and service value. In the age of COVID though, we’re seeing an increasing need for early-stage.
The major pain point we’ve seen is that it’s expensive to spin up and scale massive call centers quickly. We have a proven tech stack that can address the need to start quickly. Now it’s a matter of evaluating and understanding the unique challenges of collecting early-stage debts.
Are there projects outside of Retain that we’re currently working on that you’re allowed to share?
Our team is constantly asking “How do we bake all of our learnings into best practices?” One of our biggest projects right now is improving our own internal efficiencies. Everything that we’ve built so far has worked, but we need to—with higher account volume and higher growth rates—automate more of our own processes and move away from manual practices.
Another important piece of that is ensuring that processes are thoroughly documented. These growing pains are expected when an organization is growing quickly, and the more we grow, the more diverse our client base will get. We have to build on a foundation now that can accommodate that diversity consistently.
I’m also reflecting on what we know about our current users. We have to figure out the changes we hope to deliver for existing and future clients. Building a clear roadmap for that is huge which is why we’re working so closely on improving our internal organization. Improving our internal planning directly improves our product offering and client performance.
That’s really exciting to hear. I know how much the startup world prides itself on its ability to pivot quickly, but creating a more defined system makes that system scalable. We’re all incredibly excited to see what comes next!
Traditional call and collect debt collection agencies may see up to 5,000 accounts managed by each agent on their team. Increasing that number to 80,000 accounts per agent not only requires the support of powerful machine learning technology but an extensive training program. Cassie Cox, TrueAccord’s Director of Operations, discusses how her prior experience in collections and a unique training program has enabled our team to manage multiple communication channels and support a customer-focused experience.
How has your experience in debt collection shaped your approach to managing operations today?
I’ve been in collections for 25 years. I started my career on the phones as a debt collector myself, and I worked my way up to a supervisor position and eventually a department manager. I just kept going from there. I’ve had the opportunity to work across the country—North Dakota, Oregon, Virginia, and now Kansas—and in several roles where I was responsible for the agent experience.
Consumers’ expectations have changed significantly. I remember when having an IVR (interactive voice response system) manage call flows was an annoyance to people. Customer experience scores would plummet because of them. Someone would call in and want to speak with an agent, not a computer.
Today, no one wants to talk to an agent anymore. If someone has to pick up their phone, hearing an IVR is their best-case scenario. You have to meet your customers’ needs from tomorrow, today, and improving the overall customer experience with your company starts with having the right infrastructure in place. You need to ask the right questions:
How are consumers trying to engage with you?
What tools do your agents need?
How do you develop those tools?
What processes do you build?
What controls are in place to maintain consistency?
All of this helps to make sure that the customer experience comes to life in the way that you design it and doesn’t go off the rails. You can use these guidelines to train new hires and manage new process deployment in the future, and you can manage this by building a quality knowledge management system.
Speaking of processes: as I understand it, our agent training process is pretty extensive. Can you walk me through what training looks like and why that’s the case?
The key differentiator for our training process is really that our agents are working closely with TrueAccord’s technology. Agents in a traditional call center are regularly managing payments and routine account questions. When 96% of our consumers are managing their accounts through self-service, the consumers that do email or call us truly need help.
Machine learning technology drives TrueAccord’s consumer experience. If you want to learn more about the role of machine learning in debt collection, you can read more here.
This means that our call types are typically more challenging, and we need to rely on more complex problem-solving skills. So our goal with our training is to create a team of elite problem solvers.
Agents also have their own technology to learn and manage. We have our own CRM that helps automate scripts and disclosures that prompt agents so they don’t have to memorize a unique playbook for every client. If, for example, a creditor has a unique out-of-statute disclosure, that information can be built into our system, so we make sure that our team sees it when they need it.
These processes are fairly standard in the collections space, but they still require training. The biggest reason that our program is a full six weeks is that our agents are managing multi-channel communications. I’ve worked with larger companies where you have one team dedicated to email, one for inbound calls, and another for outbound calls. Our agents are managing all of our channels at once.
“I’ve worked with larger companies where you have one team dedicated to email, one for inbound calls, and another for outbound calls. Our agents are managing all of our channels at once.”
A new hiring class will spend two weeks in a classroom setting designed to teach Collections 101. This ten-day period is meant to go over subjects like the differences between first party and third party collections, defining pre-charge off versus post charge off debt, and who our clients are. Reviewing collections laws and regulations is also a foundational part of the education process, and then we finish off by walking through our communication channels and TrueAccord’s systems.
The next week, these agents begin to manage inbound email communications. Once they feel comfortable with email, we have another week of phone training before they spend the fifth week managing calls. Then, in the last week of their on-the-job training, they are working both email and phone communications.
I’ve seen other companies with training programs that last anywhere from two to four weeks, and it’s great to have people ramped up quickly, but you also have to balance that with high attrition rates and error rates.
Our training team is also incorporating a comprehensive suicide-prevention training into our agent onboarding process as well as for our current staff. A surge in unemployment and growing anxieties about financial stability and personal health due to the pandemic have contributed to an increase in consumers that are in need of more than simple financial assistance. Our agents experienced this surge first hand, and we want to equip them to successfully navigate these difficult conversations. This includes being able to deescalate potential life-threatening situations and referring to resources like the National Suicide Prevention Hotline (1-800-273-8255).
Even here at TrueAccord, the process has improved over time, and we continue to improve our training methods because we want to set people up for success.
Some improvements and changes have been expedited recently. You recently hosted a webinar with Tim Collins [TrueAccord’s Chief Compliance Officer and General Counsel] about shifting agents to a work-from-home environment that has generally gone very well. The COVID-19 pandemic has made a huge impact on work standards and practices, but are there other challenges we’re working to address at the moment?
If we’re talking about larger-scale challenges, it’s important for us to continue improving our training and helping our agents navigate conversations and negotiations with consumers, but that need has also been amplified by COVID-19. The pandemic sent the nation and the world into crisis mode, and for us, that meant that when a consumer reached out and said they had been impacted and they couldn’t pay, we would tell them “It’s okay, we understand.”
TrueAccord has also worked directly with many of our clients to implement a hardship program to offer further assistance to consumers directly impacted by COVID-19.
Unfortunately, whether they’ve been impacted or not, their debt still exists. Now we’re working on guiding them through the process and focusing on “It’s okay. We understand. Let’s work with you to get through this.” It’s easy to hear someone’s concerns and say “you don’t have to pay right now,” but we can do more than that for them by discussing their options.
Thank you Cassie for sharing some insight into our training process and for your continued dedication to creating a positive consumer experience with our team. Building a system that supports and educates consumers leads to long-term financial success, and our agents are a core part of that.
Are you looking for a new type of collections solution? Talk to our team today to see how our machine learning engine and our expert agents can improve your recovery rates.
TrueAccord is bringing together industry experts to continue the collections revolution. Today, we’re joined by Mike Walsh, TrueAccord’s Vice President of Enterprise Sales. With over twenty years of experience in the collections industry, Mike has been an active part of the evolution of collection practices and standards. His more recent work has been focused on helping drive technological and customer-focused change, and we discuss what those changes look like for collectors and consumers alike.
What can you tell us about your background in collections?
I got started in the industry in 1996, right out of college. Everyone’s dream is to go into collections and sales, right? I started in a position primarily handling client servicing. Even back then I saw that people have a negative view of the industry, but my experience has been really positive. I’ve met a lot of great people in collections and continue to build great relationships.
This really is a relationship-oriented business. The industry is based on trust, and I learned early on that your reputation is really what you’re selling. Whether you’re in client services or on the phone with consumers, you have to constantly build a reputable brand.
I’m thankful that I have been able to work on teams where I really believed in the product and the people. Your reputation and your company’s reputation are directly tied together, and it’s great to feel confident in both.
You were directly involved in the collections process for many years and more recently, you’ve turned to working with companies that aim to optimize and customize others’ collections processes. Can you talk a bit about how you feel your experience working in collections management has shaped your perspective on these newer tools and services?
More than anything else I’ve seen customers change. It’s gotten more and more difficult to reach consumers over the phone; people just aren’t answering phone calls anymore. It’s part of what I call the “Amazoning of America”—consumers don’t call in to order a product or a service, they pull it up on their phone, press a button, and they’re done.
Understanding how we as an industry help the customer in light of these changes is tough. Adjusting to these needs efficiently in an effort to provide a better user experience has always been my focus. Giving people the ability to choose is more important now than ever. You hate to tell someone “oh, we don’t do that” when they request a specific way of doing business with you.
In order to adapt to this changing customer, I always keep my eyes open for new tools with enhanced efficiencies and use that to help guide my professional pursuits. If a product or service benefits the customer, that benefit will trickle up to the client. This is how I found VoApps, and it’s part of why I joined TrueAccord. Both companies focus on how to improve the customer experience in a way that is less intrusive to the consumer.
Even social media channels can provide another way for consumers to find you. The more flexibility that your team can offer, the easier it is for the customer.
Every consumer-facing industry is looking for ways to be less intrusive, and, as a consumer myself, I totally understand. That evolution important to me. I have a special needs son, so my time is very valuable. If someone is calling me it had better be important, and if it isn’t, my first thought is “why didn’t you just text me this?”
Going off of that: it’s clear that you see the value in emerging technologies and changing behaviors in the industry. What are some patterns that you’ve seen develop in your career that have driven these changes, and why is now the time for these new approaches to collecting?
The development of customer-focused and customer supported technologies drive changes in the industry. When I was on the phones in the 1990s working as a collector we had “hot contact times” from 6 pm to 8 pm—the best time to reach people. Then the rise in cell phones made contact centers completely rethink how they were getting in touch with people. The evening “hot contact times” didn’t exist anymore when people started carrying their phones in their pockets.
Right now there is a need to provide a collections experience focused on customer service. People rate everything. Consumers are reviewing restaurants as if they’re big-screen TVs, and they want to share that information—and share it quickly. If you’re aware of this, you can harness it. You can build your company around consumer choice and those choices, in turn, will support your brand.
In debt collection, that means developing your product based on your consumer’s needs and experimenting to determine what consumers prefer and what they do not. Consider how they want to connect and when? How do they like to do business? Then build more of what they prefer.
Did that at all impact your decision to join TrueAccord?
I couldn’t fathom that a collection agency had a positive Google Review rating until I first saw TrueAccord’s 4.8 out of 5 stars. It helps illustrate the importance of building a platform based on meeting consumers’ needs and making sure that they associate your brand with a positive experience.
What do you think comes next for the collections space?
I’ve always been a big believer in the power of behavior science and machine learning. It doesn’t surprise me that its application to the collection industry, especially by a company focused firmly on a customer-focused approach, is disrupting one of the oldest industries in the world. The big reason I’m here is to help the team bring this customer-focused future to the rest of the industry.
TrueAccord is redefining the collections industry, and the fastest way to do that is by building the best teams. I sat down for a conversation with Tobias Campbell, a former operations manager at a payday and installment loan company in charge of in-house collections—and our team’s newest Account Executive—to discuss his experience in the industry, what challenges he faced in traditional collections (including falling right party contact rates and high employee turnover), and why he decided to join TrueAccord.
Welcome to the team! Before we dive in, could you tell us a little about your experience in finance and how your career led you into the collections space?
Prior to my start in collections in 2016, I worked at a large bank in the retail and private banking investment portfolio space. When I had the opportunity to transition to the consumer finance industry working in-house as an operations manager for a larger consumer lending company I wanted to take the chance despite collections’ negative reputation. I knew there had to be a better way to get in touch with consumers and change that perception.
What was your focus as an operations manager when you got started?
Initially, I spent time listening to agent calls and getting a clear sense of how they engaged with customers, and I was really determined to improve our right party contact rate. I helped transform the training process for agents to use more of a sales approach.
We still coached the team on building rapport with the consumers they were reaching, but also leveraged sales strategies in an effort to increase our overall performance. Beyond new training strategies for our agents, we started to dabble a little in sending emails, but they were basic drip campaigns consisting of a few manual emails per person.
The small changes added up, and we were able to double our right party contact rates. But ultimately those improvements were marginal. Calling to collect wasn’t sustainable and the law of diminishing returns started to kick in, especially as we ran into more call blocking apps and services.
So when training smoothed out, what were some of the other challenges you were running into?
Two of the biggest ones we were facing were agent turnover and trying to keep up with the volume of accounts we were managing. We had to bring new agents on pretty frequently because of the high turnover rates. When agents first start there’s an element of excitement because they’re ready to start their new job. They can make a difference. They’d start off strong, but then we’d see those same people burnout in three to six months.
TrueAccord was performing 7 times better than our internal team, and that’s including the service fee that we were paying
It’s a very difficult job. Anyone that’s ever worked in collections knows that even if you manage to get a consumer on the phone, especially with an account that’s been delinquent for more than six months, the likelihood of securing that payment is slim. It’s hard to keep agents motivated and excited through that. Plus, there’s the compliance piece.
Having the technology in place to ensure your agents meet all of the compliance obligations is a daily struggle. No matter the number of tools available, the amount of compliance training, or the level of oversight, there is always the chance for human error when you have live agents on the phone.
At the same time, we realized that we were just getting too big, and our internal team could not handle our volume, especially with a declining RPC rate. We had our entire collection strategy in-house for so long, so we looked at our numbers, and the further accounts went into delinquency, the harder and harder it got to reach them. There was a need for a partner that could help us in the late-stage space.
Our CEO at the time knew Ohad [Samet, the Founder of TrueAccord] and he saw what TrueAccord was doing—leveraging technology and email, which we weren’t really using—so we decided to send over any accounts that went beyond 120 days. We kept 10% of that paper ourselves so that we could compare effectiveness rates between the mostly digital and the call-to-collect strategy.
What did that comparison look like?
The change was night and day. After six months, we saw that TrueAccord was performing on par with our internal team’s historic performance on those portfolios, but [TrueAccord’s machine learning engine] Heartbeat kept going. At twelve months, TrueAccord was recovering twice as much as we were on a percentage of outstanding debt, and by the time I left in early 2020, TrueAccord was performing 7 times better than our internal team, and that’s including the service fee that we were paying TrueAccord.
We had customers that would get on the phone with an agent, and they would say “hey, can you send me to TrueAccord?” They would regularly talk about having more options, more flexibility, and the most common one was “they don’t call me 3, 4, 5 times per day!”
When you started to see the difference between TrueAccord and your internal team, was there any plan to try and update your practices to something more in line with what TrueAccord was doing?
We saw consumers gravitating toward digital communications over phone calls, so we recruited a product manager to research and build a digital strategy in house. There was some conversation around improving our email messaging by making the tone softer, since our current emails felt very businesslike and, well, boring?
There was a lot of talk around needing to make these substantial changes, but we didn’t know how. We didn’t have the infrastructure in place, we wouldn’t be able to automate content personalization the way TrueAccord does. Plus, the costs needed to develop the solution were a barrier to entry, especially when we already had a partner providing those services successfully. I decided that I wanted to join TrueAccord because I saw that unfolding, and I knew that TrueAccord had a differentiated product: a flywheel for this industry.
If you had to offer a final takeaway piece of advice to other lenders doing in-house collections, what would you tell them?
Don’t lose sight of the backend of the business from a revenue perspective. There is typically an intense focus on attracting new consumers to the product, and we start to forget about previous customers that still owe money on their account.
I would advise other managers in the collections space to think about building a digital line of defense, especially in preparation for a downturn or recession. When consumers are in a difficult situation, digital approaches can better connect with them and will lead to more dollars recovered.