The financial impact of the pandemic has been felt across various sectors of the economy. As individuals stretched their budgets, businesses have faced unique challenges to ensure the creation of a successful accounts receivable strategy.
While the pandemic created significant financial strain for many companies, the challenges faced by business leaders are not new. A report by Citi Treasury Diagnostics revealed that 93% of businesses experience late payments from their customers, and most clients still only make partial payments to settle their accounts.
These challenges are indicative of a system in drastic need of improvement. While most businesses recognize that inefficient accounts receivables are an issue, they persist with outdated methods of communication regarding their strategy. The previously mentioned report also revealed that the majority of Citi clients still receive more than a quarter of payments in check or cash. This is indicative of lenders’ reluctance to adopt new methods of communication for the modern era. Here is why the prevailing call and collect model of communication used by agents today is unsustainable in the digital age.
Why current account receivables communication strategies are unsustainable in the digital age
Achieving right party contact has become an exercise in patience
A vast majority of corporations rely heavily on letters and telephone calls to establish contact with customers who have outstanding accounts. These are highly inefficient modes of communication that require call center agents to conduct time-consuming and inefficient follow-ups. A recent report revealed that only about a tenth of call center agents manage to establish contact with the right party on the first attempt, with almost a quarter of agents reporting they need to make five to seven attempts before reaching their intended target. To improve this, businesses must reevaluate the effectiveness of current communication methods—and evolve as necessary. These attempts can also be limited by many new state regulations on call attempts by an agent.
Ineffective communication creates unnecessary tension between lenders and borrowers.
The settlement of accounts receivable, by its very nature, has the potential to be a tense exchange between stakeholders. As a result, it is in the best interest of companies to conduct effective outreach with their clients through their preferred communication channels. Relying on letters and phone calls means that collaboration between the parties cannot be accomplished efficiently. Exchanging information and documents and establishing payment plans is often a time-consuming and inefficient process due to the lack of integrated communication and payment systems. This leaves both parties frustrated and drastically harms the customer experience. A negative customer experience directly impacts the customer’s brand perception. With social media and review channels being so popular in 2021, a single poor review can quickly snowball into a brand relations nightmare. This is why it is important for businesses to consistently deliver stellar customer experiences, especially in previously ignored areas such as collection.
3 ways technology can transform your collection strategy for the modern era
Customers expect a digital-first communication approach
Customer preferences have changed significantly in the last three decades and cross-party communications have not evolved at the same pace. As more customers use mobile product in their personal lives, they expect to receive correspondence on those devices directly. In a study conducted by McKinsey & Company, customers of varying balances and risk profiles indicated that they prefer to be reached by businesses via digital channels such as email and text messaging to settle their outstanding accounts. This becomes even more important as a younger generation of digital-natives expect companies to reach them on their preferred platforms.
Omnichannel solutions enable higher levels of efficiency and effectiveness
A recent survey of North American credit card customers showed that two-thirds of issuer-initiated contact in late delinquencies were made using traditional communications channels. Even though digital channels are less commonly used, email and text messages were found to be vastly superior in terms of efficiency, with almost three-quarters of these delinquents taking action right after being contacted. In addition to increasing engagement, AI-based omnichannel solutions allow customers to make payments and communicate important information through self-serve portals without needing to speak with an agent. If lenders wish to successfully maintain engagement with their clients, they must communicate with their customers at the right time and on the right platform. With the use of AI, businesses can balance their need for consistent customer engagement with their customers’ need for personalized digital-first communication.
Behavioral analytics can power personalized customer experiences
A digital-first approach is even more necessary when considering the changing preferences of the modern customer. With technology making service delivery and customer engagement easier, customers expect personalized experiences and communication from businesses they interact with. This is no different for credit-based enterprises. Under traditional collection models, a standardized template is used to contact customers with outstanding balances, which leads to low engagement rates. With behavioral analytics, companies can reach customers on their preferred platform as well as communicate with them in their preferred language, at their preferred time, and preemptively address potential customer concerns.
Ultimately, delinquency has been and will always be a challenge for businesses. Fortunately, with software-based analytics, effective communication, and personalized service, businesses can engage their customers in ways that encourage repayment and simultaneously reduce the administrative load on customer service representatives.
Remitter
For more information on how you can future-proof your collections strategy , contact Remitter or schedule a demo today.