The role of technology in streamlining debt collection processes

Managing debt is a vital aspect of financial management, irrespective of a business’s size or sector. Debt collection has consistently been a significant concern for many businesses due to its direct influence on a company’s fiscal health. Yet, as the years have progressed, technology has increasingly played an essential role in this process.

Pre-digital era debt collection practices

Failing to settle the payments can be a result of general human nature since factors such as forgetfulness, lack of financial education, unexpected events, unwillingness, and many more can highly impact the ability to pay on time. According to a study conducted by Lexop, 72% of late payments in 2022 occurred due to non-financial factors.  Moreover, nurturing debts has been an everyday activity since way before the surfacing of advanced technology, meaning that dramatically different methods were employed in the past. 

“According to a study conducted by Lexop, 72% of late payments in 2022 occurred due to non-financial factors”

In the past, the entire process of ensuring receiving payment was done between humans. Ever since immemorial times, the creditor, or a business would simply approach the debtor and try its luck convincing the late payer to finally settle the payment. Before any communication tools were invented, the dunning process would be done by having physical contact, however, eventually, phones were invented in 1876.

With the invention of the phone, the entire process has gradually become way more efficient and advanced, as the need for physical interactions has been eliminated. However, if considered, it is easy to notice that the way some companies collect their debts has not changed ever since the phone has been invented. Certain enterprises are still favouring call centres, employing tens of workers to interact with the debtors, even though technology has come a far way since 1876.

How did payment reminder innovation progress over the years?

Phones were considered a phenomenal and irreplaceable invention, at least until the internet was invented and became accessible to most people. At the time, most people were sceptical about the internet and only a few saw the potential and opportunities, however, eventually, it has become a part of each person’s life. By accepting the internet as an idea, humanity has opened up many possibilities and areas of innovation, one of which was the payment reminder sector.

Shortly into the development of different communication and technological tools, emails, online banking, pay links, QR codes, videos, and many more have become available for most companies and consumers. Some businesses decided to streamline their payment recovery processes with the latest and most efficient technology solutions, whereas others chose to stick with traditional methods, for example, a call centre.

Moreover, as a result of quick adoption and fascinating applications, artificial intelligence has been rising in popularity lately. In fact, a recent Deloitte research suggests that over 50% of organizations are planning to incorporate AI and automation technologies in 2023. Unsurprisingly, AI has also been applied for nurturing late payments, which in fact, turned out to be an efficient and effective choice, as AI can aid in constructing more convincing messages, personalize the customer experience through behavioural science, and generally utilize data to increase success rates. Overall, it is clear that with such a rapid development of technology, debt collection processes can be handled in more diverse and efficient ways than before.

“A recent Deloitte research suggests that over 50% of organizations are planning to incorporate AI and automation technologies in 2023.”

The role of technology today

First and foremost, society is developing and adapting to ever-growing technology, therefore, its preferences are shifting highly, which can mean that old methods of collecting payments, such as call centre calls, or physical letters might not be accepted positively by recipients. In order to satisfy society’s needs, enterprises also need to adopt the most preferred and latest technological tools, especially when it concerns a delicate subject such as debts.

Moreover, developing technologies directly impact the extent of efficiency that an enterprise can reach during the debt collection processes. For example, employing a team of people, who would manually call the debtors, puts a heavy financial burden and is not as efficient. As most methods are now automated and usually do not require any human input while communicating with the debtors, a company can save a ton of money and reach significantly higher efficiency, resulting in overall increased performance and productivity.

Furthermore, the overall effectiveness of the efforts to retrieve the unsettled debt matters the most, otherwise, why would you even try and waste your capital, right? As covered earlier, a large part of society is used to the latest technology and would expect to receive reminders in that particular form, which would undoubtedly increase the chances of finally paying the outstanding amount. For example, imagine a person from Generation Z receiving a call from a utility provider and in comparison an SMS reminder including a payment link. It is rather safe to say that such a person would prefer and be more convinced by an SMS message. Therefore, the overall effectiveness of the efforts to collect debts rises exponentially

What benefits can businesses reap from the use of the latest technology?

Say a business finally chooses to switch from the old school methods and employ the latest technological solutions, what benefits would they manage to reap as a result? As discussed earlier, such businesses would achieve significantly higher efficiency and effectiveness, yet many more additional benefits can be reaped.

Higher customer satisfaction

Businesses would undoubtedly reach higher customer satisfaction, as the new methods would not be so disturbing and would generally be more acceptable to most of the population. Additionally, the latest technological advancements let companies remind customers about outstanding debts in more subtle ways. As a result, reminders do not raise negative emotions and further improve customer satisfaction. In general, higher customer satisfaction can mean that more people will be willing to pay and less will be motivated to cut ties with the company.

Easier process monitoring and analysis

Moreover, by using recent technological solutions, businesses would be able to monitor and analyse the debt collection processes, therefore, improve them. The reason why this would be available is that the latest solutions provide businesses with elaborate, in-depth reports and data about each dunning effort. Such reports can include different ratios on each effort’s results, as well as more focused data, such as the payment methods, that the customer used to settle the debt. Overall, continuous analysis and improvement of one’s dunning processes would certainly increase the quality over time.

Competitive advantages

Additionally, businesses would generally gain competitive advantages as they would be employing the latest systems and increasing the value of their company. Innovative and advanced businesses often form better public images and receive more attention. Although some solutions might appear pricy, the results highly outweigh the costs, especially when the success rate of collecting debts increases exponentially.

Collectmaxx

Thinking about improving your debt collection processes with modern technology? At Alphacomm, we’re ready to lend our expertise. Our in-depth industry knowledge can guide you towards a suitable and affordable solution. Take, for instance, our innovative solution Collectmaxx. It’s a proven system for managing late payments. We invite you to reach out and discuss how Collectmaxx can help streamline your operations