The world and Indian economic growth find themselves precariously placed in 2022, with bleak economic data raising concerns. People are reeling under the increasing cost of living, and rising defaults on loans are beginning to be a worrying trend. The rise in default rates was seen in every segment, without exception, with Loan Against Property (LAP) having the highest default rate at 4.14% in November 2021; loans due past 90 days in the two-wheeler segment are also high at 3.64%, up 140 basis points, while consumer durable loan delinquencies are the third highest. Delinquencies in the credit card segment have eased sharply by 77 basis points to 2.22% (data from credit monitoring agency Transunion Cibil). Also, the spike in fund disbursement will increase the asset size of NBFCs, while the GNPA rate will also increase significantly to 6-8%.
On account of inflationary pressures, and a slowdown in the growth of fresh credit, the situation is becoming challenging for companies in the debt collection space. To maintain profitability, NBFCs are faced with the dual challenge of improving their performance, while improving cost-efficiency at the same time. This calls for a different approach, leveraging technology such as Voice AI to automate a significant portion of their outbound customer reach outs.
In this blog, we shall explore the role of Voice AI as the ‘agent of change’ in the growing debt collection space, and why the shift to Voice AI is one of the most profitable moves NBFCs and debt collection agencies can make in 2022.
Voice AI Is Redefining the Future of Debt Collection
Customer experiences are critical to the brand and business performance agree 73 percent of the business leaders, suggests a study by the Harvard Business Review. The global proliferation of voice-led technologies and voice-assisted interfaces built on AI-based NLP across industries have set massive expectations in the way customers prefer digital interactions and engagements. IVRs have proven to decrease CX, and bulk robocalls have proved ineffective. This is of significance in debt recovery, because as companies lose time, the probability of recovery dwindles.
On the other hand, AI-enabled voice agents are capable of engaging in meaningful conversation that runs beyond generic reminders by gathering insights and feedback that may facilitate on-call payment, rescheduling, and dispute resolution.
Money talks are uncomfortable, Voice AI exactly helps debt collection agencies achieve that, allowing human/machine partnership, the future of intelligent work.
Human-Machine Partnership: Voice AI platform built specifically for the debt collections industry also helps automate voice conversations while enabling context transfer capabilities from across modalities (text, chat, email, and speech), empowering the agents to operate without burnouts whenever call volumes peak. Automation of cognitively routine work also allows more time for contact center agents to prioritize their bandwidth and use it for solving complex challenges without the need to upscale the team.
Learn more: Explore 7 Reasons Why NBFCs Must Not Miss Out on Voice AI
All in all, integrating Voice AI can help create three ideal scenarios—NBFCs can improve their Collection Efficiency Ratio while reducing the cost and even improving customer experience!
Skit.ai’s Augmented Voice Intelligence in Action
Challenges Facing Indian Debt Collections Companies (NBFCs)
These are challenging times for NBFCs trying to improve their recovery rate. As CXOs look forward to improving the performance of the debt collection agencies here are the core problems they are trying to solve:
- Intensifying competition is putting pressure on profitability
- Low Collection Efficiency Ratio
- High Cost of Collections
- Slower campaigns and limited customer coverage
Before we deep dive into how Voice AI can solve all the major challenges, let’s first look at the definition of Collection Efficiency Ratio.
Understanding the Performance of a Debt Collection Agency or an NBFC
The entire performance of a collection agency can be expressed to a large extent by these metrics:
- Collection Efficiency Ratio
The collection efficiency ratio is a measure of how well the collection department collects debt. It’s essentially a way to determine the effectiveness of the collections team.
The collection efficiency ratio is calculated as a percentage that depicts the proportion of debt collection achieved out of the total portfolio. The higher the percentage, the better the debt collection performance of the company.
How to Calculate the Collection Efficiency Ratio
The total collectible amount for month X – This includes the overdue at the start of the month as well as all the due dates throughout the remainder of the month.
Remaining recovery amount for month X – This is the amount remaining on a specific day that the team failed to collect.
Formula: (Total Collectible Amount – Remaining Recovery Amount) / Total Collectible Amount
A higher percentage depicts greater success in the collection of debt, ie., better debt recovery.
How Important is Collections Efficiency Ratio for NBFCs?
The collection efficiency ratio gives an overall monetary recovery status. Irrespective of the number of accounts recovered, at the end of the day, the Rupee value counts.
It is also a good measure because it gives a clear picture of value at risk (VaR) which is the most important thing to monitor for a debt collection agency.
- Age at List (AAL)
Time is important when it comes to debt collection. If your account is 7 months old, its recovery rate drops to 50%. After 12 months, it drops to only 25%.
Therefore, Age-at-List is one of the most important KPIs in the collection. This is the average number of days your account has been in expired status. AAL provides a general overview of the collection cycle. This is an excellent comparison indicator between collection agencies and the industry.
Successful agencies are aiming for a low AAL. A high AAL indicates that the agency needs to be more effective in debt collection. However, AAL tends to fluctuate. Therefore, you need to review the data for about a year to gain valuable insights.
The Digital Voice Agent can be trained to pursue B0 and B1 buckets and will be very effective with its precise regime to convert the default accounts. This will lower the age of debt and improve the performance of the company.
- RPC rate (Right Party Contacts)
The RPC rate is the first of the more specific metrics in this list.
This KPI measures the ratio of all outgoing calls to a valid phone number for the person (or “right person”) for whom the collection was requested. For collectors, the higher the score, the better the success rate of finding the debtor.
Of course, the first step in collecting claims is to find and contact the right person. If your company has a lower RPC rate than its competitors in other industries, you need to think carefully about what’s wrong and how to improve them.
- Percentage of Outbound Calls Resulting in Promise to Pay (PTP)
The PTP rate is just as important as the RPC rate when measuring efficiency and is the next logical step to a successful collection. It measures the percentage of all calls that end with the debtor’s promise of payment. That is if the RPC rate measures the success rate of dialing the appropriate person, this metric measures the success rate of those RPC calls. This is another percentage that you want to get as close to 100 as possible.
Voice AI agents can help companies with lower PTP figures buy prompt calls for which the best agents can train the voicebot whose perfect timing and schedules will help improve the PTP stats.
- Profit per Account (PPA)
Finally, PPA measures how much profit each account in your collection makes on average. In short, this KPI measures the impact each account has on revenue.
This metric is calculated by dividing the company’s gross profit (calculated by subtracting total operating expenses from total revenue) for a particular period by the total number of overdue accounts managed for that period.
A Voice AI Agent can help reduce the operational cost to the tune of 50%, along with a faster sales cycle, improving this performance metric.
Improving these numbers is a big challenge and we will now go into detail about how Voice AI can help debt collection agencies and NBFCs transform their performance.
Transform Your Collections Efficiency Ratio with Conversational Voice AI
The effort of a collection agency is to collect as much as possible and as fast as possible from every account, i.e. a higher recovery amount with a shorter collection cycle will improve the majority of performance indicators mentioned above.
Voice AI Core Benefits for Debt Collection Agencies and NBFCs:
- Voice Automation: Voice AI will help your company by automating 70% of the calls, primarily tier-I calls, and by automating payment reminders and collection calls at B0 & B1 buckets. This would cut down the time & effort of human agents and they can focus on RTP cases. This would reduce the burden on human agents and improve the use of their time on meaningful and complex problems.
- Augmenting Agent Productivity: Since the human agents focus just on RTP cases that require more empathy and intelligence, their efficiency and productivity take a big leap. This has an impact on CX as well as recovery rates as agents are not wasting their time on trivial tasks.
- Cost-Efficiency: Be it collection calls or running outbound campaigns for reminders or notifications, etc., the Voice AI Agent can do everything at a fraction of the cost. This has long-term and big benefits for the company.
Quality and Compliance: The Voice AI Agent never fails to follow proper protocols and thus, avoids any potential legal challenges. Also, its delivery is always the same and hence its service quality does not deviate with mood, as with human agents.
9 reasons why NBFCs and Debt Collections Agencies Should Not Miss Out on Voice AI
- Allowing human agents to focus on RTP (Refuse to pay) accounts. Thus increasing the profitability by converting high-risk accounts.
- Automate simpler calls like reminders & FAQ – Proactively reminding debtors at the right time and helping them with FAQ related to their loan/upcoming payment. plays a far bigger role in collections and Voice AI does it perfectly.
- Improve contact-ability & customer coverage – Voice AI is capable of contacting millions of customers in a matter of weeks. Thus the company can reach out to every customer for payment reminders, follow-up on DPD cases, and assist with queries related to the loan.
- Shorten collection cycle – Faster reach outs and quicker conversion with Voice AI Agent helps shorten the collection process.
- Persistency in follow-ups and call-back requests – Human agent may err in follow-ups but the Voice AI agent follows up as well as calls back at the requested time without fail. This is a big help and improves collections.
- Capability to handle spikes in volume – Traditionally the call center teams are unscalable over short periods, but with Voice AI, this is not the case as it can handle any spike in call volumes.
Here are some other unique capabilities of conversation Voice AI for debt recovery:
- Feeds data to the CRM tool and provides analytics for further action
- Persuades customers to pay at the earliest, offering payment plans and options
- Helps agent plan post-call follow-up campaigns with Voice AI Agent
These unique capabilities prove indispensable and give the debt collection agency or the NBFCs a big edge over their competitors.
How a Digital Voice Agent Adds Value to Collections Efforts
The Digital voice agents are highly effective at B0 & B1 collection buckets with no human assistance. The later bucket requires a bit more contextual conversation and dunning from the collection agent.
The digital voice agent gets a custom design flow to interact with customers at Bucket Zero and Bucket 1 for debt collection. At bucket Zero, the Voice AI gives out a “The last day of payment” reminder, requesting the debtor to maintain the payment amount balance in their account for auto-debit. The Voice AI also assists in converting manual payment to auto-debit.
At bucket one (1-30 days), the debtors are expected to pay off the due within the grace period so that their CIBIL is not impacted and does not affect their eligibility for future loans. The Voice AI communicates the same to the customer and assists them with on-call payment. The Voice AI can make calls, follow-ups, and take call-back requests concurrently at any time during the week and to which the human agent has limited capacity.
For situations when the customer is refusing to pay or is unable to maintain sufficient balance, the digital voice agent dispositions them accurately and notifies them of a call back from the human agent.
Voice AI Outcomes
It will be interesting to note that the Voice AI agent helps in improving every performance metric.
- Collection Efficiency Ratio – Higher, overall collections help improve the collection efficiency
- Age at List (AAL) – faster collections help in keeping the debt age towards the lower side
- RPC rate (Right Party Contacts) – Voice AI calls and identifies the Right Party Contact so that human agents do not have to waste time. This is a radical improvement, without spending much money and time
- Percentage of Outbound Calls Resulting in Promise to Pay (PTP) – Voice AI agent calls at the right time and to the right person when they prefer to interact, thus increasing the probability of recovery
- Profit per account (PPA) – since with Voice AI agent, the costs as much lower, it has a direct impact on this metric
Here is what a debt collection agency or an NBFC can expect from Voice AI agents such as Skit’s Digital Voice Agent.
- 49% of the total collection value recovery per campaign
- Debt recovery from 78% of delinquent accounts without any human assistance
- Lower the cost of collection by 40% by addressing the collection challenges like unreachability, unresponsiveness, callback request, and collection after business hours
- Achieve 90% of collections in the first 3 days
- Increase customer coverage by 30%
- Speed up the collection campaign TAT by 70%
- 80% contact-ability rate
- 84% engagement rate with customers
- 68% disposition capture rate on CRM allowing your agents to focus on accounts in the B2 bucket onwards for personalized interaction for recovery
The data mentioned above has been taken from project implementations, and will certainly vary for each company. Thus, it is indicative at best, of the results that can be achieved and the potential of the Voice AI agent.
For any questions on the application, operations, outcomes, and pricing of a voice AI agent in the debt collection space, feel free to contact us – Book A Demo.
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