Collections is often misunderstood in the credit union industry. An afterthought when considering the role this department plays in the overall success of a financial institution. The impact a collections department has on the financials is critical. Managing risk, the effects on the allowance account, monthly charge-offs, and of course the reportable delinquencies all play integral roles in the financial wellness of the credit union.
How can your organization improve the effectiveness and efficiency of your collection efforts without significant increase in cost? One simple answer – Technology.
Many organizations use antiquated, outdated, and inefficient collection systems. Some are nothing more than a notation system offering zero automation of tasks, letters, emails, and texts. These systems have no next contact dates, an inability to input/track promise-to-pays, and many cannot take payments remotely. We must maximize every opportunity to contact the right members, at the right time, and make it easy to do business with our credit unions.
A robust collection software system allows a team to work smarter and vary the dates/times/channels used to make contact. Identifying how and when contact was made previously increases the likelihood of contacting that member on the next attempt. Tracking the number of right-party contacts, the # of promises made and more importantly, the # of promises kept is crucial. The “old school” mentality of tracking the number of calls a collector makes isn’t helpful if your team isn’t calling the right numbers to the right people at the right time.
Business intelligence is important technology for collections. Identifying members who may have started a new job and/or have accounts funded at the credit union is significant. Analyzing data related to collections, such as success rates, customer behavior, and financial forecasting is a game changer. You need accurate and timely reporting to understand delinquency trends. Sit down with your IT Department and find out how they can help you with technology.
Communicating with delinquent members is critical. A competent telephone system is a must. Telephone systems with built-in AI provide instant feedback on recorded calls and can generate AI scorecards to assist with coaching opportunities. Some systems allow for mass text campaigns, or the ability to set up text templates to increase efficiency with electronic communication. This saves time and reduces the possibility of errors.
Focus on KPI’s that make a difference in collections. Know your audience. Know how they prefer to communicate and when they’re available. Utilize technology and don’t be afraid to email and text your membership base!
A comprehensive collection software system, Business Intelligence, and a robust phone system can help you accomplish your goal – reducing your delinquency. In turn, you increase your team’s efficiency and effectiveness. Your organization is also able to help more members, decrease your delinquency, charge-offs, and your allowance account, which puts more money back into the bottom line.
Predictions for delinquency in 2024 and 2025 seem to show a rise. It’s important to be prepared. Take the time now to research and implement change.
*Originally published in CU Today publication.