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| Risk Management |
| Credit
Services |
| Data-driven
Marketing |
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| Debt Management – How effective are you? |
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| Both unsecured and secured debt as a percentage of disposable income are at record highs in many countries around the world. Creditors are reaching out to riskier segments and running sophisticated cross-selling campaigns to gain or retain their market share. Credit is more available to those, who were previously unable to qualify. Growth in consumer debt poses a risk to households and can lead to higher delinquency and, eventually, write-offs.
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One of the key principles in
the consumer credit cycle is the
fact that acquisition of a new
customer is significantly more
expensive than to cross-sell to
or retain an existing one. Therefore,
the primary objective of collections
is to work with customers so they
can bring their accounts current
and generate revenues for the
organisation. |
For those customers
who are unable or unwilling
to bring their accounts up-to-date,
the objective of collections
is to minimise the write-offs
by working accounts that fall
past due.
Given the objectives of the
collections function and the
realities of the marketplace
today, there are numerous questions
currently being asked related
to debt management. Some of
them are: |
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How cost-effective are
we? Reduction in labour costs,
increased retention to protect future
revenue and the creation new revenue
can be achieved with an automated
workflow system. This allows effective
use of available customer contact
channels and improved customer knowledge
derived from the customer’s overall
relationship with the creditor and
external performance.
How are we going to thrive
in a ‘bloated’ market? Consumer
debt is at a record high, which has
produced very large amounts of delinquent
debt and record numbers of insolvencies.
To deal with this, strategies must
be embedded that are based on scoring
models and segmentation. Strategies
for phones calls, letters, e-mails,
SMS’, visits and settlement offers
must be executed effectively at appropriate
times.
Customer or account-level
debt management? Most multi-product
creditors have embraced the concept
of customer level management – an
approach that brings potential challenges
in terms of customer level scoring
/ prioritisation. The solution here
is to aggregate all available account
and performance information by using
data across multiple products and
ensuring that contacts are done at
a customer level.
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| "The primary objective of collections is to work with customers so they can bring their accounts current and generate revenues for the organisation..." |
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Are we managing our DMAs
correctly? Creditors are
outsourcing services to Debt Management
at all stages of delinquencies, but
how effective are they performing?
And when and for how long should their
services be used? Come to think of
it, how does one value distressed
portfolios for sale or purchase? The
requirement for this is to have a
module to allocate accounts to DMAs,
with a strong MI to control the outcome
and quality of strategies.
Receivables growth is a priority
this year. How about its non-performing
loan consequences in the following
years? Increased market and
competitive pressures are exposing
firms to higher risk, including sub-prime
markets, and this requires a real-time
system, a sophisticated segmentation
and strategy, and strong MI to monitor
performance of debt management strategies.
I cannot possibly be perusing
through 100 pages of reports every
week. What is going on with the portfolio?
Are problems and opportunities identified
in a timely manner ensuring rapid
response to such business issues,
and does the report evaluate the effectiveness
of strategies? Operational and strategic
reports are key requirements, as is
an interactive workspace with up-to-the-minute
KPIs. Skilled analytical resources
are employed in interpreting information
and developing responses to identified
problems rather than in the production
of data.
How will I make the best use
of the credit bureau information?
Credit bureau information now available
in many countries assists creditors
in making informed decisions and,
therefore, provides opportunities
for creditors to become more profitable.
But how does a creditor ensure that
it is getting the desired benefits
out of it? It must aggregate all available
account information and performance
at customer level, blending delinquent
customers’ internal and external performance
and exposure data with a real-time
functionality.
The solution
The Tallyman Debt Management solution
from Experian enables organisations
to address these challenges, increasing
the recovery of cash collected, ensuring
earlier recovery of debt through improved
automation of decisions and the use
of best practice collections techniques
inorder to maximise profit, improving
cash flowand reducing costs. Additional
benefits are represented by debtor
rehabilitation, achieved through its
profiling and the use of the most
appropriate collection technique,
and a rapid ROI experienced by utilising
an agile deployment and optimised
ability to further enhance the solution.
Burak Kilicoglu
Business Consultant
Decision Analytics
Experian
* Source Experian
Decision Analytics eNewsletter
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