Customer preferences evolve. Whether due to the development of new technologies or significant events such as the COVID-19 pandemic, consumers today prefer digital experiences over traditional communication methods like phone calls and letters. This extends to the collection industry.
According to a McKinsey study on the customer experience of credit delinquency, customers prefer communicating digitally, primarily over email and then texting. However, despite this preference, many businesses and collection agencies haven’t adopted a digital-first approach—potentially impacting their collection rates and customer sentiment.
Analyzing the current landscape of collections
Many collection agencies see the usage of digital communications as a risk. They’re concerned about possible litigation. As such, many businesses have yet to implement them. However, through their establishment of Regulation F, the Consumer Financial Protection Bureau (CFPB) has laid out clear guidelines that help agencies to leverage digital channels (like email and text message), so long as they provide instructions to consumers on how to opt-out of future communications.
Regulation F also puts new restrictions on collection practices that used to be allowed. For example, before this regulation, a collection agency could call a debtor as many times as they wanted between 8 a.m. and 9 p.m. Now, a debt collector may call an individual seven times within seven days, but—after speaking with that person over the phone—the same debt collector isn’t allowed to call again for seven days.
This change makes it impossible for debt collectors to operate like they did in the past. It also requires them to rethink their strategies to optimize revenue recovery. However, based on customer data, this realignment could be a positive opportunity.
Evaluating consumer trends in repayment
The same McKinsey report we mentioned above demonstrates that digital channels have a substantially better success rate for collecting payments than traditional contact methods.
- 58% of customers in the study made full or partial payments after getting an email
- 77% made payments after getting a text message
- 88% made payments after getting a push notification
- 92% made payments after seeing an online pop-up
In comparison, only 48% of customers made full or partial payments after getting a phone call from a collector, and only 50% made payments after receiving a physical letter.
Customers are clearly showing their preference for online transactions, and collection agencies have the opportunity to act on this data to decrease the accounts receivable for their clients.
Choose a customer-centric partner that puts digital first
Consumer preferences are already having an impact on the accounts receivable industry. Collection partners not prioritizing customer feedback are missing a big opportunity to positively impact the bottom lines and reputations of their clients.
At CCMR3, we utilize a digital-first approach. Driven by data, we email and text our clients’ customers. CCMR3 leverages a full omni-channel communication strategy. We connect with customers based on their preferences, creating a uniquely positive experience built around empathy.
Both in relation to consumer preferences and regulatory expectations, the collections environment continues to change dramatically. Our team moves quickly to stay ahead of shifts in the landscape—and we can help your business thrive by taking advantage of new technologies today.