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How to improve collections with legacy debt collection and recoveries systems
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- Thought leadership
Predicting the future is tricky; you’re never quite certain what is around the corner. However, immediate past and present events do give an indication of the likely trajectory. The tumultuous events of 2016 coupled with the events of 2017, in which we saw inflation rise, the continuation of long-term stagnant earnings for many, the interest rate rise for the first time in 10 years and increasing worries about the rising levels of UK household debt, are all shaping the current collections and recoveries landscape. From an economic perspective, the expectations are that collections and recoveries volumes will increase, against a backdrop of both constrained operational expenditure and continuing high regulatory, compliance and customer expectations.
This context can be specially challenging for organisations with legacy collections and recovery systems still in situ, no plans on the horizon to upgrade or move systems and/or application resource levels geared around the BAU level.
However, not all is necessarily lost, there may still be opportunities to utilise the functionality of existing systems to rise to the challenges coming down the track. What follows are some examples that are geared around the legacy (FICO) Debt Manager collections and recoveries system, but the underpinning principles are equally valid for (Experian’s) Tallyman, (CGI’s) CACS or any other mature collections and recoveries system implementations. There are many potential options, here we summarise a few we have successfully completed.
Reduce Off System Processes
As the introduction suggests this article is all about maximising the tools you currently have at your disposal rather than spending large sums of your budget on a new system. As part of this, it’s worth reviewing what can be garnered from smarter use of your current Collections System.
Are there back office processes that are being currently fulfilled by End User Computing or Desktop solutions – spreadsheets, macros, and workarounds? Whilst the inception of some of these might have been due to lack of functionality within the collections system, is that the case in all instances? Or perhaps they were quick low cost solutions that met an urgent need, but the time has come to better formalise or alternate them. This could improve productivity and bring costs savings into play by removing manual orientated processes or improving system dynamics, which ultimately will allow your colleagues to concentrate on tasks that add real value. By maximising good use of your existing collections system you can ensure that users are more productive and are only dealing with customers that need specific attention.
Utilise Existing Functionality
Multi Router Cases (MRCs)
One of the challenges with early versions of FICO’s Debt Manager was that the Router concept meant that the debt entity (Router account) could really only undertake one activity flow. This was addressed with the introduction of MRCs which provided the ability for a debt entity (Router account) to have parallel activity flows.
There are several potential uses for this functionality which can introduce greater efficiency, flexibility and robustness into collection and recovery processes that could be further explored to help accounts flow more easily, automatically and productively.
Work Queue diagnostics
In our experience, Work Queues can become over complex and over segmented and this is true of all collections systems. When was the last time your organisation had a root and branch review of your current Work Queue set up? Are you using Work Queue sorting to its full potential and therefore getting the most important accounts worked first? This could also cover a review of your users to ensure that the correct permissions are in use so that “cherry picking” is not an option unless authorised to do so.
A simple and small project to completely analyse and review the current Work Queue configuration of your legacy system might bring to light some accounts that haven’t been worked within your SLA timeframes or clean-up of redundant Work Queues that is long overdue. Perhaps your Work Queues could be enhanced by utilising better segmentation and sorting, such as introducing sorting on Extra Details that you have created? In our experience improving Work Queues can have a disproportionately high benefit over the work needed to do so.
Now is a good time to look at reviewing your collections and recoveries strategies to enable your organisation to be ahead of the curve when it comes to the potential economic uncertainty of 2018. Are you over reliant on dialling the customer? An effective alternative could be to look at a new SMS (or alternative such as auto-voice or email) strategy that might allow you to cope with higher volumes whilst contacting customers and enabling them to self-serve. The majority of customers own a mobile phone so it’s a good alternative to ‘spinning the dialler’ for the right segments of customers. Whilst full integration is clearly preferable, in the absence of immediately available IT resource to do this, it can be done with a simple trigger from your collections system to download a file that can be sent to a mobile service provider. This new strategy, if implemented effectively, can complement your existing letters and dialling strategies and can even be a challenger strategy (as explained further below) enabling higher volumes to be dealt with by limited resources whilst also contacting customers and help them early, potentially before their situation worsens.
Utilise Existing Toolkit
In our experience this concept is often talked about but often not implemented well. The concept is that you should constantly challenge your existing ‘champion’ strategies by testing an alternative ‘challenger’ strategy. An example of this in terms of legacy Debt Manager would be a selection of accounts based upon the Router account check digit, using Query Conditions. If you wrote a Query Condition that selected all Router accounts ending with a 0 this would select around 10% of your population. This enables an approximate number of accounts to be randomly selected and directed down a challenger strategy.
The simplest example of a challenger strategy might be to amend dial times and letter sequences to see which strategy gives you better results – always ensuring good MI is in place to enable you to tell! The timeframe of the test is also a factor to consider and of course the challenger strategy may not necessarily better the champion – which is just as good a result as finding a new champion in many ways.
This is a great example of being able to get maximum use out of your legacy system with minimum spend. Champion/Challenger is good practice that we advocate in any high performing collections and recoveries function but is particularly important to do it well when circumstances are challenging and changing fast as will be the case in 2018.
Activity Based Costing (ABC)
The functionality provided by the Router feature within legacy Debt Manager can be utilised to record and track the cost of collections and recoveries activities (though some thought would need to be given to those which take place off system). This information can be gathered as both a collection of individual costs and a running total. Gathering this information could then inform the Credit Risk/Strategy departments in terms of the segmentation and strategies to be deployed and Operational departments with regards the most effective treatments and training. Going one step further, this could be incorporated more dynamically within the Routers so that different paths could be taken depending on how much has been spent already in looking to recover the debt.
Our experience is that this is an aspect that has not been utilised very often, or not thoroughly enough. Understanding the financial numbers assists with making better decisions which means better outcomes.
In summary we would say that even with legacy collections and recoveries systems there are lots of things that can be done to help customers and simultaneously cope with financial pressures and volumes. Energy, creativity, knowledge and experience can go a long way.
If you have been reading this and are embarking upon similar plans already then great!
If you are reading it unsure how to start or whether you have the rights skills and experience, then please feel free to contact us for a chat. Our expert team has lots of experience as well as system knowledge which can assist to:
- Accelerate change
- Enhance existing strategies and processes
- Increase productivity .
Best of luck either way!
Michael Haskell and Stuart King, Lead Consultants
Michael is a highly-experienced systems analyst. His extensive experience includes account portfolio migrations, new implementations, support and enhancement for current systems, major conversion exercises from legacy systems, data interrogation tools and relational data models, writing technical specifications, and development life cycle methodology.
Stuart is a highly-experienced practitioner in the collections and recoveries industry, with over 20 years’ experience spanning banking and utilities. He has worked on a variety of projects throughout Europe involving Debt Segmentation, Dialler Integration, and Systems Selection.