ATLANTA — Today, LexisNexis® Risk Solutions released its inaugural 2019 First Party Debt Collections Report, which shares a long-term vision of the debt collections market and insights into how collectors can optimize the customer experience, during both stable and turbulent economic times. The findings stem from 20 in-depth interviews of first party debt collection industry participants.
According to a recent survey 1 from the National Association for Business Economics, 72% of economists predict that a recession will impact the U.S. economy by the end of 2021. Even in a relatively stable economy over the last two years, LexisNexis Risk Solutions noted an 18% increase in total collections transactions. Couple that with the fact that more than 8% of all credit users now have a debt in collections, an efficient collections department remains a major need for financial institutions in the US.
“If collection inquiries are rising in what currently seems like a steady economy, how will the industry fare if a recession hits?” said Sean Britt, senior director, collections and investigations, LexisNexis Risk Solutions. “With both the broader US economy and the collections industry in a state of flux, it’s never been more important for collectors to prioritize the customer experience, which means ensuring that collectors have the proper technologies and methodologies in place to adequately reach those customers. Through our discussions with bank and credit union executives who are charged with leading the collections portfolio, our report provides a holistic picture of the challenges first party collectors face, how they overcome them and where they think the industry is headed."
Debt Collections Workflow Processes & Pain Points
Survey respondents shared that their departments tend to think about the collections process from a functional and emotional standpoint, first thinking about the process and different steps and then diving into pain points related to each. Respondents expressed that every step in the debt collections workflow has associated problem areas, with data hygiene and contact and locate being the most challenging and interrelated, negatively impacting the debt collections process and overall customer experience. Data quality issues and management are among the top pain points experienced with both data hygiene and contact and locate.
Communications Methods & Strategies
First-party collections agencies utilize a combination of different communications methods to collect on debts, though the frequency of each method varies. Phone calls using auto or manual dialing are most frequently used and are considered the most effective method. Comparatively, mailed letters tend to be the least effective and most frustrating communications method for agencies. Notably, email use is on the rise, though some are hesitant to adopt it because of regulations and privacy. Those who have adopted it have seen success, particularly among younger consumers.
Generational Differences & Trends
Most agencies take generational differences into account and attribute importance when creating and implementing new debt collection strategies. Common stereotypes apply to generational communication preferences. Millennial and Gen Z consumers are extremely unlikely to answer phone calls and prefer to be contacted digitally, whereas Gen X and Baby Boomers prefer phone calls over digital communications. This divide has led some collections agencies to consider adopting technology that would include the preferences of younger generations. That said, widespread adoption has been delayed due to perceived negative impacts from regulations and cost concerns.
Register here for our webinar on November 11, 2019 with Chris Reimann, vice president and principal at KS&R, and Sean Britt, who will review the findings of the report.
About LexisNexis Risk Solutions
LexisNexis Risk Solutions harnesses the power of data and advanced analytics to provide insights that help businesses and governmental entities reduce risk and improve decisions to benefit people around the globe. We provide data and technology solutions for a wide range of industries including insurance, financial services, healthcare and government. Headquartered in metro Atlanta, Georgia, we have offices throughout the world and are part of RELX (LSE: REL/NYSE: RELX), a global provider of information and analytics for professional and business customers across industries. For more information, please visit www.risk.lexisnexis.com and www.relx.com.