Klarna, the highest-valued private fintech in Europe, is on a mission to make shopping simple, safe and smooth, for both consumers and retailers, through its suite of payment products and services. From its inception in 2005, Klarna has not compromised on providing a seamless consumer experience — even when it comes to consumers in collection.
With a high standard for customer experience and in an effort to integrate collections seamlessly with their product, Klarna initially opted to keep collections in-house. For five years the company had great results with in-house collections, but as Klarna expanded to new markets and added new products, scaling in-house collections while maintaining a best-in-class customer experience strained the company’s resources and became less feasible.
This led Klarna to begin considering a third-party collection partner. By this time, the collections industry had evolved. New players like TrueAccord were building digital-first collection solutions that vastly improved the customer experience via personalized outreach, flexible payment plans, and a self-optimizing, machine learning-driven performance engine.
It’s easy to underestimate the expertise involved in building an effective, compliant digital debt collection engine, and partnering with the right collection solutions provider would free up valuable internal resources. Klarna’s priority was to focus on their core business and engage an expert partner who would be able to build a world-class collection operation for them — one that would only enhance their consumer experience while not sacrificing brand image.
“We look at collections partners the same way we look at hiring team members: we only want to work with the absolute best. We wanted to partner with a company that truly takes care of consumers,” said Jan Hansson, VP Debt Collection, Klarna.
Other key considerations to moving away from in-house collection included, data science expertise, engineering talent, compliance resourcing and industry knowledge. After doing their due diligence, Klarna decided to partner with TrueAccord as a collection solution provider. TrueAccord stood out from competitors in two important ways: customer centricity and digital and multichannel capabilities.
By partnering with TrueAccord, Klarna was able to increase liquidation rates and achieve better holistic results, with retention rate a key indicator. Moving to a partnership with TrueAccord from in-house collection also allowed Klarna to free up valuable internal resources and refocus on their key business functions. Klarna is now expanding their engagement with TrueAccord to include more accounts and looks forward to growing the partnership even more in the future.
“We are so proud to work with TrueAccord,” said Sebastian Siemiatkowski, co-founder and CEO, Klarna. “Putting technology to use for the people instead of against the people is the next generation of tech.
Debt collection is a highly regulated industry and as such, is notoriously slow to change. While there are a number of reasons for this, the end result is a growing gap between consumer’s expectations and the services creditors offer.
TrueAccord’s recent report, Consumer Debt in the Age of COVID-19, found that during times of economic uncertainty, this gap can grow even wider. Repayments may be irregular for the foreseeable future, so when consumers do choose to pay, it’s up to collectors to make the process as simple as possible. Now more than ever, it’s clear that the collections industry needs to catch up with other financial services and provide modern solutions for the consumers it services.
Debt collectors can pave the way for an improved consumer experience with context-aware messaging, flexibility, and opportunities for consumers to engage on their own terms.
Use Context-Aware Messaging
A consumer’s relationship with a debt collector begins well before any payment activities. While this relationship has traditionally been built on a series of letters and phone calls, today, it’s crucial to leverage digital channels and a context-aware approach.
Consumers expect a personalized experience from their financial services, and debt collection should be no different. Customizing communications based on context improves engagement and enhances the customer experience. To succeed, digital debt collectors must leverage their messages from robust content libraries, selecting the right communication at the right time.
A key part of finding the “right” message is striking the right tone. Financial hardships are challenging to navigate and as a debt collector, being patient and offering solutions can make a world of difference.
At TrueAccord, our machine learning engine, Heartbeat, chooses the “right” message to send from thousands of legally approved communications based on the millions of people TrueAccord has worked with in the past. We’ve found that the right content in an email can increase click-through rates by 20%.
To be sure, optimizing content is about tone and timing — not increased frequency of communications. In fact, there are many safeguards in place to protect consumers from email overload. Not only will email service providers identify those who over-email as spam, but consumers can also independently unsubscribe or flag messages as spam if they feel harassed.
Provide Flexible Options
Offering consumers flexible payment options is not only better for customer experience, but it can have a dramatic impact on payment plan retention as well. Our research shows that consumers are 50% less likely to drop off of a flexible payment arrangement.
While flexibility has always been a differentiator for debt collectors, it is especially important during times of economic hardship and uncertainty. Consumers are more likely to begin a payment plan if they are confident that they can adjust their payments to accommodate uneven or unpredictable cash flow. We’ve found that consumers are more inclined to pay off debts that they feel are manageable and are owed to a company they trust.
Introduce Self-Service Options
Today, consumers take care of most of their financial needs without ever talking to a human, and paying a debt shouldn’t be any different. Online self-service tools have become the norm across financial institutions and debt collectors need to follow suit to best serve consumers.
All debt collectors should set up a payment portal so that consumers can seamlessly make payments online. This type of self-service tool reduces friction for the consumer by removing the need to speak to an agent and allowing them to pay at any time, not just during business hours. Our data shows that 17% of consumers access our website before 8:00 a.m. or after 9:00 p.m — times when they could never talk to an agent.
To truly match the convenience of online banking, digital tools must also allow consumers to take a variety of actions including (but not limited to):
Adjusting the length and installment amount on their payment plan
Deferring a payment
Disputing all or a portion of their debt
Entering bankruptcy information
Applying for a hardship pause on their debt.
Implement Smarter Staffing
In times of national economic uncertainty, payments are likely to be inconsistent. For example, during the coronavirus crisis, we may see spikes in payment activity as individuals receive governmental aid or businesses are able to hire back their workers. Unfortunately, staffing becomes very complicated when there is uncertain demand. On top of that, operating a call center is currently harder than ever, with most states still requiring staff to work from home—a challenge for compliance, IT, and HR.
One step companies can take is to prepare for spikes in payments based on leading indicators of future demand. These can include factors such as economic indicators (like unemployment rate), governmental aid programs (like the CARES Act), and consumer digital engagement trends (like click-through rates on emails). While these indicators won’t provide enough time to train a whole new team of agents, they may signal a good time to bring in your seasonal staff.
But in order to succeed in the long-term, debt collection agencies must introduce a digital-first model. Once someone decides to pay a debt, having digital payment options alleviates pressure on the call center. At TrueAccord, 95% of consumers resolve their debts without ever speaking with an agent.
Needless to say, humans are still crucial. While machines are great at handling routine requests, there is no replacement for a well-trained agent to help customers with more complex situations. However, with the help of digital tools, each agent is more efficient. At TrueAccord, each agent is able to service more than 80,000 accounts (and counting) vs. a traditional agency’s 1,000-2,500. This type of hybrid model provides the best possible customer experience, even during busy times.
During times of economic uncertainty, debt collectors must adapt to an operating model that empowers consumers to manage their debts in the way that makes most sense for them. Based on historical trends, as well as the consumer behaviors we’ve seen in the first few months of the coronavirus pandemic, we recommend that all companies collecting debt should use context-aware messaging, provide flexible options, introduce self-service options, and implement smarter staffing.
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.
Mike Walsh, TrueAccord’s Vice President of Enterprise Sales
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.
Social media in the business world is typically used in a few select ways: individuals that use platforms like LinkedIn to connect with one another, businesses that engage with directly with consumers on platforms’ brand pages, and businesses that place advertisements to reach specific audiences of prospective customers.
In the debt collection industry, the use of social media is regulated by the Consumer Financial Protection Bureau when used as a channel by which traditional call-to-collect debt collection agencies attempt to reach consumers that they couldn’t reach by phone must comply with the Federal Debt Communication Practices Act (FDCPA) and other state and city consumer protection laws.
The CFPB’s new debt collection rule addresses appropriate ways to use social media (among many other things), but the rule doesn’t explore the use of social media as a tool beyond private messaging. Social media platforms are very useful tools for digital debt collection agencies and creditors to communicate with consumers but not in the way you might think.
Two things you should not do with social media
Friend request
Sending friend requests to join a consumers’ social network without making it clear that the purpose of your friend request is to collect a debt is a deceptive practice. Businesses attempting to reach a consumer should never attempt to have an agent attempt to secretly infiltrate a personal network in this way.
Instead, if you are going to send a friend request to a consumer, your message should be similar to the Zortman message and make your intent behind the request clear. Beyond that, and must be a private request (see below on third party disclosure concerns).
Post on feeds
Posting a debt collection communication on a public-facing account that allows others to see the content of the message on their feed, is an explicit violation of the FDCPA’s prohibition on third-party disclosure. This would publicly expose the existence of that consumer’s debt to anyone who can view the page and is akin to the old (now prohibited) practice of public debtor boards that the FDCPA sought to end.
This doesn’t mean that social media platforms are entirely unusable in the collections space. They can actually prove to be great places to share resources and provide easy access to your team so that consumers can reach you at their discretion.
How social media can help digital debt collection
Directing to support teams
The easiest way to make effective use of social media platforms for your business is to clearly present your company’s website, phone number(s), email address(es), and mailing address(es) online. Increasing visibility and keeping your lines of communication open can lead to greater engagement.
This is especially important for digital debt collection agencies that make use of payment portals and other online tools as you can guide consumers directly to the answers they’re looking for.
With a public-facing social media account, you will find that consumers will reach out to you with questions—even questions related to their specific accounts. You want to make sure that you are prepared to answer these questions in a discreet but helpful manner so that the consumers get the information they need without any extra disclosures about their debt.
Consumers expect this ease of access from any business, and it can make an enormous difference in the collections industry that remains largely call-based. Here’s an example of a consumer reaching directly out to our team on Twitter!
The identity of this consumer has been anonymized here, but this is a public-facing post directly on our feed.
Brand Awareness
Social media platforms offer businesses the opportunity to advertise directly to specific customers based on their online activity. Collections agencies can use social media advertisements to build on brand awareness and help gain customer trust. Providing a hyperlinked statement about your company such as your mission, motto, or BBB rating that will appear in the personal advertising feed is not a collection communication – as long as it does not explicitly address that the consumer is in collections and cannot be shared to their social networks.
It allows the consumer, if they choose, an easy way to investigate a company’s website, identify your business as legitimate, and gain trust in your brand.
The role of social media in debt collection continues to evolve as legislative bodies more clearly identify how it is currently being used and how those uses overlap with existing legislation. Social media platforms are an omnipresent part of consumers’ lives, and it may seem like an easy way to reach them, but the most important thing to consider is the compliance and security of their information on evolving channels.
Mastering digital communications is easier when you choose a team at the forefront of the industry. Interested in learning more about digital debt collection? Check-in with our team.
Consumer debt in the United States continues to climb into the tens of trillions of dollars, and as unemployment numbers continue to rise consumers are expected to continue to pay for essential services such as rent and utilities, companies are likely to see an exponential rise in delinquencies. All of these things together can cause financial spirals, especially for those already struggling to pay their bills.
In the midst of troubling economic downturn, it is the debt collection industry’s responsibility to remain a financial service and not create more damaging burdens. Here are four things you and your company can do to continue collecting and maintain customer relationships and loyalty even through challenging economic hardships.
Acknowledge the challenge
Communication is key. Your consumers have to know that they are seen and heard. Your mission has to help consumers navigate the challenges they’re facing.
Visitors to TrueAccord’s consumer website immediately see a banner drawing direct attention to the economic crisis. The banner links to a page with resources for those impacted (and available to those who are not impacted by COVID19) helping to answer the most frequently asked questions related to those with upcoming payments and in settlement plans.
Provide non-collection related communications
Send communications that do not imply the existence of a debt. Do not mention any account, the balance due, or a demand for payment. Instead, provide other resources that can help anyone during this pandemic, like work from home opportunities, childcare assistance programs, and local resources for those in financial distress, including area food pantries and safe shelters. By providing tools that can aid consumers in need of help, you can be a guiding force for overcoming their financial burdens.
Individuals in debt often need these resources year-round, not just in the middle of a crisis. These can include tools such as budgeting resources, debt payment calendars, or links to job boards for companies still hiring.
You may also consider sharing less direct financial resources such as educational tools that may be especially helpful to individuals seeking to improve their situation and parents hoping to address their family’s needs.
Extend payment plan lengths
One step that creditors can take that is simple but impactful and can help to alleviate financial concerns is to extend the length of consumers’ payment plans. Agreeing to longer payment plans gives consumers more time to pay, creating lower monthly payment rates, and leaving more dollars they can allocate to more immediate needs.
Machine-learning and artificial intelligence can help to guide meaningful payment plan offerings. Read more about how new technologies are shaping digital debt collection.
Another step allows consumers to defer a payment. For many consumers in settlement arrangements, deferral may provide the assistance they need while not resulting in the loss of the settlement offer. In fact, North Carolina recognized this and passed this emergency law to make sure all consumers in the state have this option for the next 30 days.
Give consumers the power to manage their debts themselves
Implementing digital collections tools into your business can empower and educate consumers. Online portals and payment systems offer thousands of consumers the ease of access that they require of other financial institutions.
Ideally, digital tools should extend beyond just payment options and should include opportunities for consumers to:
Make adjustments to the length and amount of their payment plans
Skip or defer a payment without losing a settlement
Dispute all or a portion of their debt
Apply for hardship pauses
Enter bankruptcy information
All without needing to speak to an agent.
The best debt collection practices should prioritize consumers’ needs and enable them to control their finances. It’s critically important to provide consumers with flexibility and the ability to customize when and how they pay.
Many in debt have tight budgets, live paycheck to paycheck, and sometimes are forced to choose between basic needs and paying bills. Leading the collections industry with compassion and empathy for those in need can make a lasting impact on consumers and creditors alike.
Want to learn more about what we’re doing at TrueAccord and how we can help your consumers? Get in touch with us!
The collections industry continues to expand its digital footprint as growing consumer preference for digital channels combines with stricter regulations on call volume and call rates. Digital communications are standard today, but a key law passed in 2014 by the New York State Department of Financial Services of New York limits third-party collectors’ abilities to connect with consumers via email.
We’ve seen the impact that digital communications can have on people’s lives, and you can help your fellow New Yorkers by sending the governor and your local official an email using the template at the end of this article!
The law (23 NYCRR 1)
Many existing collections laws are rooted in the Fair Debt Collection Practices Act (FDCPA) from 1977, long before emailing, text messaging, and direct voicemail technologies existed. In an age of growing prefernece for digital communication, New York’s 2015 law—§ 1.6 of 23 NYCRR 1—states that collectors may only contact consumers via email if they have:
Voluntarily provided an electronic mail account to the debt collector which the consumer has affirmed is not an electronic mail account furnished or owned by the consumer’s employer; and
Consented in writing to receive electronic mail correspondence from the debt collector in reference to a specific debt. A consumer’s electronic signature constitutes written consent under this section.
Shortly after the law took effect the New York Department of Financial Services compiled a list of answers to frequently asked questions. You can review them here.
These laws were put in place to protect consumers from collectors excessively emailing them, but consumers are not required to opt-in for debt collectors trying to call them on the phone. In the State of Collections 2019 report published by TransUnion and Aite Group, one collections industry leader said that “right-party contact has fallen off a cliff,” and for many debt collectors, this means that their existing call-based strategy is suddenly becoming unviable.
On the other hand, we’ve found that consumers provide their email address opting into electronic communications with their creditors. In fact, 95% of accounts placed with TrueAccord come with an email address provided with the placement file. Of those we reach with our digital-first strategy, 65% of them open at least one email, and 35% click at least one link to begin the process of repayment.
When debts go unpaid, some creditors and collectors turn to legal action, and New York is suffering a resurgence of lawsuits since the passage of the 2015 debt collection law. In fact, 2017 saw a 61% increase in debt collection suits according to the New York State Unified Court System. In other states across the country, TrueAccord has seen dramatic growth in consumer debt repayment using email and other digital channels as the primary mode of communication.
At TrueAccord up to 96% of accounts are resolved without speaking to an agent and nearly one-third of users prefer to manage their accounts outside of the “presumptively convenient” hours (8 am to 9 pm) legally outlined by the Fair Debt Collection Practices Act.
Consumers understand the ease of this digital management system and regularly share their positive experiences with a digital-oriented collection strategy. Here are a few:
I liked that the email system was used rather than phone calls. I found it easy to use, and it helped me to gather information, figure out a plan, and get the bill paid. It was a small balance, but during this time, it seemed bigger to me. Thank you for your service.
This was the best way for me to take care of my outstanding debts since I’m always on the road. Thank you for taking your time with me and not blowing up my phone!
TrueAccord has been friendly and helpful, and your systems are always up and running for me to use. You should be proud!
The power of digital communication
Digital channels give people the power to access and manage their debts on their own time without having to work directly with call-center agents. Moreover, it provides greater consumer protection by providing a paper trail of debt communications, unlike aggressive phone calls that consumers most likely wouldn’t be able to record. The more hassle-free options that folks have to pay, the more likely they are to get out of debt and avoid aggressive call-and-collect agencies.
We want to encourage New Yorkers to make their preferences for easily accessible digital channels to be heard. Pay off your debts on your time, not on an emotionally charged phone call or in a courtroom.
Reach out to Governor Cuomo by clicking here with the template below and make your voice heard. Once you’ve sent your email, share this information using #CollectWithoutCalls and let the governor’s office know that digital is easier for everyone!
Email template
The following text may be used as a template for reaching Governor Cuomo or other elected officials in your state. Please replace any content in the parentheses with your own information.
Subject: RE: 23 NYCRR 1
Dear Governor Cuomo,
My name is (your first and last name) and I am a (family member/service provider/advocate/community member) who resides in your district.
I feel that 23 NYCRR 1 concerning debt collection by third-party debt collectors and debt buyers places an undue burden on consumers in debt. It limits the ease and efficacy of digital communications and gives priority to intrusive and aggressive call-and-collect agencies. I prefer to use email and the internet to manage my own finances, and permitting 3rd-party collectors to email me directly (if / when) I am in debt gives me the ability to manage my accounts on my own time rather than at the collector’s discretion.
Please read here for more information about consumer preferences and see the movement on social media. #CollectWithoutCalls
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
