10 signs your bank needs debt collections software

The debt collection process involves countless data points, multiple people, and numerous channels of communication. For those reasons, it’s also fraught with friction points. Perhaps it’s the overburdened Excel spreadsheet from which you run your collections, or maybe it’s a lack of cohesive strategy holding back your NPL results.

If you ever thought to yourself, 'there must be a better way', your instinct is correct. Specialized collections software is one of the savviest investments you’ll ever make. And there are quite a few red flags that signal you’re in dire need of it.

Here are ten good indicators your bank needs to take the leap.

1. You’re running collections off a spreadsheet

Banks today use a variety of enterprise IT systems, but surrounding these systems are clusters of “shadow IT” systems, usually taking the form of end-user computing (EUC) tools, particularly Excel spreadsheets. Excel, in many financial institutions, is part of the furniture. And while it’s a metaphorically luxurious sofa for some applications, for debt collections it resembles a creaky old chair with a broken leg.

Excel is a wonderful tool, but it’s not built with the complexity of debt collections in mind. When Excel becomes overburdened, either by the number of users or complexity of the business, it becomes notoriously prone to error.

When you’re constantly flicking between 99 tabs, you lose the ability to think and act quickly. Not to mention Excel grinding to a halt as it struggles to contain your debt portfolio. For a modern collections department, dealing with a diverse debt portfolio, centralized and specialized software becomes a necessity.

Collections software makes it easy to store documents, data, and related insights in one place, making the process efficient and allowing you to identify credit risk quickly.

2. You don’t have a holistic view of your customer

Debt collections don’t start at delinquency. Instead, they are part of a broader customer lifecycle which starts with customers taking out a loan and continues throughout the relationship.

But fulfilling this ideal of customer-centric collections requires insight. And as the likes of Google, Amazon and Apple creep into the banking space, being smarter and savvier with data will become a necessity. Competing against these data-led giants will mean moving past outdated wisdom and disparate technology.

Instead of one system for mortgages, one system for personal banking, and another for credit card debt, you can consolidate a customer’s debt profile into one database. That provides you with a single view, making world-class customer service easier to provide.

3. You don’t have a collections strategy

As a collections manager, you’ll be under big pressure to squeeze more value out of debt recovery efforts. That means improved efficiency and less time heading down preventable dead ends.

You need a strategy. And while you might be able to sketch out a plan on paper, bringing the strategy to life is a whole different beast. That’s where software comes in.

Debt collections software facilitates your plans and strategies. It doesn’t create a strategy as much it makes it possible to plan, measure, and roll-out processes across your entire collections team. Which dovetails neatly into our next point…

4. You don’t know how effective your current collections strategy is.

Testing, testing, testing! The value of monitoring your strategies and customer behavior cannot be understated.

Testing doesn’t have to be costly and laborious. Great debt collections software makes a/b testing simple, allowing for constant tinkering. Do those aged over 50 respond better to phone calls or letters? Do women prefer SMS messages? The questions are endless, and the answers to these questions should inform your strategy now and in the future.

Testing, measuring and refining is a core piece of functionality for EXUS’ Financial Suite, and it’s crucial in improving your debt collections function in-house. If you don’t know what works and what doesn’t, an investment in debt software should be on your radar.

5. You can’t quickly and easily make changes to the parameters of your existing system

Perhaps you already have a CRM in place, and that’s how the bank has always managed your collections process. But there’s a catch: a CRM or a core banking module has knockout power but it’s also inflexible.

While impromptu workarounds and hacks are possible, changes in laws, regulations, and customer needs will eventually require the CRM system to be refigured or redesigned - both of which require costly third-party coding.

In EXUS Financial Suite, making alterations is simple, relying on drag-and-drop capabilities, allowing users to quickly update information, change templates or explore new strategies. So the cost of use remains low while your teams become more efficient.

6. If NPLs are steadily increasing

Across the world, from China to Turkey to sub-Saharan Africa, non-performing loans are on the up.

Even in Europe, where the EU Commission reports that NPLs declined to 3.4% in 2018 (from a startling 5.3% in 2010), it remains a substantial danger to banks on the continent. In this environment, efficiency in collections is essential given that default levels are likely to persist for years to come, and tighter post-crisis regulations like Basel III’s capital adequacy ratio requirements demand tighter debt control.

Technology is an easy way to be more efficient in your collections. Tech allows the bank to adapt its approach to individual cases, pursuing different types of actions depending on the situation. This not only means fewer NPLs but also an ability to help struggling customers get back on track.

7. You need to start thinking customer-first

Collections is a customer service challenge; at EXUS, we make this point again and again. The process should not be adversarial. It’s precisely when a customer is struggling that they need your help the most.

No one wants to be in debt. And by relying on an old-fashioned model of collections, banks often disempower consumers. Collections software flips this equation with self-service portals, transforming debt recovery into a collaborative process.

A self-service tool allows customers to take control since they can resolve obligations on their own time, in their preferred way. There’s no need to chase or press a customer, all they require is a chance to fix it themselves.

8. Digital transformation is high on your agenda

This one isn’t really a choice. The banking industry is riven with disruption. Accenture estimates that new business models could impact up to 80% of existing banking revenues by 2020.

The comfort banks have enjoyed for decades is under threat from a slew of well-funded fintech newbies. In Europe, fintech has eaten up one-third of all new banking revenues since 2005 - and the fintech wave is only growing.

To compete, banks have to transform their business from the top down. Collections, as a central pillar of modern banking, is not immune. The software makes your debt recovery easier, cheaper, and more effective while keeping customers happy and away from the amorous attentions of fintech newcomers.

9. You operate across different cultures

As we said earlier, consumers aren’t all the same. They have different debts, requirements, needs and cultures. And if your bank is operating somewhere like the Middle East, cultural attitudes to debt play a big role.

In Saudi Arabia, for instance, interest on late payments is prohibited under Sharia Law, and legal costs relating to enforcement proceedings are not always recoverable.

In territories like Saudi Arabia, an inflexible approach to debt recovery won’t work. Cultural considerations take precedence over the debts owed to you, and EXUS Financial Suite makes it easy to conform to these requirements. All without damaging your performance and efficiency.

10. You want to introduce AI into your collections

AI has already had an enormous impact in banking, with applications ranging from fraud detection to customer service chatbots like Bank of America’s Erica. Going forward, analysts expect AI to save the banking industry more than US$1 trillion by 2030.

It’s an exciting time, and for collections teams, there’s a big opportunity, too. Collections software with AI and machine learning elements can sift through mountains of data, spotting patterns and enabling smarter decisions by agents.

It’s not just about software.

Of course, the software isn’t the sole answer to efficiency. A tool like EFS Collections Software is not a magic pill. It starts with you having a clear strategy.

But collections software can help address the many issues we’ve identified in this article. With the right software and strategy operating in tandem, banks can operate more efficiently and economically with improved customer service.

For collections managers, effective software eliminates many of the frustrations inherent to the debt recovery process. No more cavernous spreadsheets or cumbersome CRMs, just peak performance for you and your collections team.

If you’d like to know more about the power of EXUS’ dedicated collections software, then get in touch today.