Let’s face it: third-party debt collection agencies often sit on high-volume portfolios of accounts, as they lack the capabilities and resources to contact all debtors. Ultimately, some agencies give up on reaching all those accounts, focusing solely on the larger ones.
ARM companies usually acquire thousands of new accounts each month, but many of those accounts might be left untouched due to the lack of bandwidth. For each account, collectors need to establish right-party contact (RPC), remind the customer of their outstanding balance, and offer ways to help them pay off their debt. More often than not, customers are not available right away, and the collector has to call them back at a different time. It’s not an easy job!
What if I told you that you could automate this entire process?
Yes, you heard that right. A conversational Voice AI solution can handle your collection calls on your behalf. Think Siri or Alexa, but for collections.
What Is Call Automation?
Contact centers in all industries — from banking to e-commerce and, of course, the ARM (Accounts Receivable Management) industry — are turning to automation as a strategy to overcome the challenges of managing both inbound and outbound calls with customers. While there are a variety of software applications out there, conversational AI technologies are booming right now. These tools are capable of handling conversations with customers without the need for any human intervention.
Gartner predicts that conversational artificial intelligence will reduce agent labor costs in contact centers by $80 billion within the next four years.
Voice AI technologies may sound “new” to you today, but they are set to become the industry standard in the collections and payments space within a few years. Early adopters will likely reap the benefits as they’ll be ahead of the learning curve.
When they hear “call automation,” many people tend to think about IVR (interactive voice response) technology. Think, “To make a payment, press 1…” In recent years, voice automation has significantly evolved with the emergence of conversational Voice AI, which is a more sophisticated technology than IVR.
A Digital Voice Agent (read: voicebot) can handle a human-feeling and effective two-way conversation with a customer, answering questions and providing context-specific information.
When integrated with your collection management software, the Digital Voice Agent can reach your customers, remind them of their outstanding balances, and offer them ways to pay via select payment gateways.
Are you curious to hear what an automated outbound collection sounds like? Here’s a demo of Skit.ai’s Digital Voice Agent calling a debtor to remind them of their due balance and collect the payment:
The Voice AI platform follows these steps:
Triggers the outbound call based on pre-determined criteria
Establishes contact with the customer (RPC) and reminds them about the payment
Collects propensity data and reasons for potential non-payment
If the customer is interested in making the payment right away, the Digital Voice Agent guides them through the process via a payment gateway
Persuades the customer to pay at the earliest, or offers alternate payment plans
Feeds data to the CMS (collection management software) and provides analytics for further action
Performs auto-callback on request, auto-retries, hot transfer to agent
Is an AI-Powered Collector Compliant?
Compliance is one of the most common pain points for those who manage debt collections. There are so many regulations at both federal and state levels, and it’s common for consumers to file lawsuits against ARM companies, which can amount to major expenses on the agency’s part. Additionally, regulations often change, and collectors sometimes struggle to keep up with the new changes.
It’s actually easier to ensure that an AI-powered collector is fully compliant with local laws and regulations related to collections and phone calls. This is because a Digital Voice Agent:
The need for digital transformation (DX) can hardly be overemphasized. The need for DX and automation is becoming more conspicuous in the debt collection space. Globally, companies are expected to spend a whopping $1.8 trillion on DX technologies, and what’s more incredible is that DX spending will sustain the momentum and grow at a whooping CAGR of 16.6% between 2021-2025 (IDC DX spending guide).
While the investment and gung ho surrounding DX are real, typically, companies find it hard to succeed at DX, and further challenging is to sustain that success. Only ⅓ of companies succeed at DX, and a much smaller fraction has been able to sustain that success. This blog focuses on one technology that has proven to have a high business impact, and success rates, while being easy and quick to deploy, i.e., Voice AI.
Debt collection space has not remained insulated from the recent tumultuous years. The industry is amidst epochal changes as challenges mount in 2022. The overall grim economic forecast, inflation, and frequent regulatory changes make it imperative for debt collection companies to transform. In 2010, U.S. businesses placed $150 billion in debt with collection agencies, who could collect just $40 billion of that total. On delinquent debt, the industry averages a 20% collection rate, a decrease from 30% a few decades ago.
Technology is the only potent tool capable of overcoming core challenges and transforming debt collection companies.
Ironically, 7 in 10 U.S. small businesses put off technology decisions and are invested deeply in day-to-day tasks, according to a 2021 study from Xero, a global small business platform. The implications of this are clear–companies will not be able to incorporate technology that is vital to their long-term survival. No wonder the majority of DX efforts result in digital grief. Hence the discussion on a technology that brings about quick and easy transformation is vital. But first, let’s deep-dive into the challenges that are crippling collection agencies.
As CXOs look forward to improving the performance of debt collection agencies, here are the core problems they are trying to solve:
Efforts have been made to solve these problems, emanating out of 8 core challenges:
What Digital Transformation (DX) or Being Digital-first will do?
DX is essential if a company wants to thrive in the long run. But it is a precarious journey, and only when prudent technology incorporation is done, it brings about positive outcomes.
For the same purpose, we delve into the nuances of technology that a debt collections agency can incorporate. Post transformation, debt collection agencies can leverage technology to be more agile, more efficient, and automate most of their processes.
Technologies Enabling Debt Collection Companies
We have classified the technology into two parts – Those that help in communication and customer support. and those that support the business function.
A. Customer Support Technologies
i. Voice-Based Conversation Technologies
We can look at voice-based technologies from a standpoint of their newness. This is important because most debt collection companies have to decide what to upgrade, integrate and replace.
Dialers and Telephony
Voice AI or Voicebots
The larger discussion here would be about legacy systems. Dialer and telephone are very important and can be of great value if they are on the cloud. IVRs are still useful, but are equally frustrating, so a decision to either replace them or upgrade them is a big one. Voice analytics is a new and emerging tech, and debt collections companies will benefit if they leverage it. We will discuss Voice AI in detail, as the potential for value creation is incredible.
ii. Text-Based Conversation Technologies
They have been the oldest ones and have also been a part of legal mandates. These technologies are a significant part of interactions with customers, notifying them at the right time.
Chatbots and Text Messages
Using Email in Debt Collection
Text messages have been a vital part of debt collection as they are mandated by regulations. Chatbots are new and are improving rapidly, but since debt issues are complicated, it is not the favored go-to modality for problem resolution.
B. Technologies Supporting Business Function
These technologies power the business function of debt collection agencies and help them operate at better operational efficiency and agility.
Collections CRM for Debt Recovery
Debt Collection Compliance Software
They are very essential and can help debt collection agencies perform operationally better.
Analysis of Cost Structure
To assess the impact of technology, it will be necessary to analyze its impact on cost and revenue. Typically the cost structure of a debt collections agency is like this:
Even a cursory look at the graph makes it abundantly clear that wages are the most significant element of the cost structure, ranging near 42%. Hence a technology that helps debt collection agencies minimize this cost via automation will have a significant impact on the structure of collections agencies.
Call Automation via Voice AI
Voice AI is the most disruptive technology of our times since it automates the most expensive part of contact center operations – calls and conversations.
It is one-of-its-kind technology that can enable debt collection companies to make complete calls without requiring a human agent. Lately the Voice AI technology-based SaaS platforms have become quite affordable and quick to deploy. Hence are creating large competitive advantages for early adopters.
AI-enabled Voice Agents have been optimized to understand spoken language and strike intelligent conversations. The voice engine picks up not only what the customer is saying but also the semantics of the conversation.
Perhaps it is the most disruptive of all the present technologies as it is empowered to answer customer calls, and can reach them out independent of human agents. They are also excellent at updating customers and adhering to compliance requirements. They are proven to cut costs and improve agent productivity and collections rate.
Solving the Biggest Challenge – Automating Voice Conversations
A major chunk of the cost of a debt collection agency involves human agents’ salaries and similar expenses towards that end. Today, for the first time, companies have the technology to automate voice conversation and make calls possible without the need for human agents for as much as 70% of call volume.
We are in this section to delve deep into this new era of technology that will help companies transform truly.
The rapid rise in call volumes, defaults, demand for remote resolution of disputes, and diminishing CX have resulted in collection agencies scrambling to catch up.
The need for better outbound collections efforts—along with managing increasing volumes of inbound inquiries from customers—is putting pressure to scale contact center teams, an undesirable and herculean task.
Call center turnover (30 – 45%) has always been a challenge and has generally been twice as high as the industry average (13.5 – 18.5%), while collection agencies perform worse, with some reporting as high as 100% employee turnover. The concatenation of these factors—higher call volumes, regulations, and agent turnover—has made companies lookout for technology solutions such as Voice AI-enabled contact center automation.
Let’s compare the challenges collections agencies are facing to how a conversational AI-enabled Intelligent Voice Agent meets every challenge.
Beginning the DX Journey With Voice AI
Of all the technologies, the deepest impact has been seen with the deployment of Voice AI. This is because a major part of what a debt collections company does is conversations and automating them is going to create an unprecedented amount of value.
Once a voicebot or Voice AI agent is deployed, here is what that happens:
Automated campaigns with clear data documentation
Clear capture and documentation of the disposition/intent
No breach of compliance as the virtual agent stays true to script
Handing the same volume of calls with a much smaller human agent team
Improve compliance adherence by Voice AI strict adherence to scripts, timings, and regulatory changes
Immediate cost savings and revenue expansion
7 Reasons to Adopt Voice AI For Debt Collection
Augmented Voice Intelligence or AVI is the blend of Conversational AI and human intelligence. It creates meaningful conversations with customers to support them throughout their entire collection journey while adhering to compliance and regulations. Let’s delve deeper into the 7 core reasons:
Read in detail about these reasons in this Article
Here are a few outcomes contact centers have been able to achieve and are equally applicable to debt collection agencies:
Near 50% reduction in contact center operational cost:
Debt collection companies can work with a small team of human agents and handle the same amount of accounts. This is due to the automation as a majority of calls by Voice AI Agents.
The debt collection companies save on the hassle of recruitment and large wages.
The voicebot would also help companies cut down on agent commissions that typically range between 20-25% of the agent’s fixed compensation and is paid over and above the fixed component. This happens because the voicebot can enable payments without the need for human agents or does end-to-end automation. The higher the proportion of the payments the voicebot enables, the higher will be the saving on agent commissions.
Over 35% automation of customer support efforts:
For a debt collections company, the split–80% (Outbound) and 20% (Inbound) holds true. Let’s look into the proportion of call automation:
Inbound: Though it depends upon the number of uses the voicebot is trained for, at an evolved stage, it can handle as much as 70% of total inbound calls. Escalating only the complex cases to human agents. Also, even if the call is escalated, the voicebot will capture the intent and establish the right party contact before transferring the call to a human agent. This adds value and saves agent time, and this reduces the cost.
Outbound: Typically a voicebot will make multiple rounds of calls for the entire database before it can capture the soft PTP (propensity to pay). Only on the select accounts, the human agent will make the call. In many instances the voicebot does the job, in the same manner, a human agent would and thus creates value by replacing his effort. For instance, it can successfully establish:
Wrong party contact
Capturing disposition to pay
About 40% reduction in Average Handling Time
Overall companies across industries have observed a drop in average handling times. This is because even in most simplistic use cases the voicebot will verify the consumer, identify his/her intent, and summarize the interaction. This helps the human agent close the query faster.
Smoother Recovery with Better CX
Making the right call, to the right person at the right time makes a world of difference in collections space. Voicebot with its meticulous follow-ups, with the right message, can help customers make payments more conveniently. Hence companies see better recovery with better CX.
When going for DX, a piecemeal approach is the best. It is most prudent to start with technology with the biggest impact on the performance of the company and has the highest ROIs. But concurrently it must be easily accommodated into the current process with slight modifications. Voice AI possesses all the qualities, making it an ideal point to begin the DX journey.
AI-enabled Voicebots such as Skit.ai’s Digital Voice Agent thus has helped companies transform their contact centers with positive business outcomes.
For any questions on selecting the right Voice AI vendor and the technology, please schedule a meeting on www.skit.ai
You’ve been exploring Voice AI as a possible solution to automate your debt collection agency’s operations; you’re considering adopting an Augmented Voice Intelligence solution to scale outbound and inbound calls for collections. Congratulations—you’re in the right place.
A Voice AI solution can significantly reduce your collection costs and improve the success rate and duration of your collection campaigns. However, not all Voice AI vendors are the same. How do you choose the right vendor for your agency?
Given our extensive experience with the collections space and our tech expertise, we’ve put together a list of topics to consider when meeting with providers and choosing the best one to move forward with, from the understanding of business operations to technical capabilities.
If you can’t count on your Voice AI vendor to fully understand the collections space, you will end up being significantly more involved with every step of the process, which will ultimately take longer, cost you more money, and lead to a disappointing return on investment.
Compliance with Debt Collection Regulations
The very first thing to look for in a Voice AI solution that handles outbound collection calls is the company’s level of understanding of the existing laws and regulations related to collections in the U.S.
A well-trained Digital Voice Agent can comply with the regulations with a consistency and precision that can be hardly achieved by human agents. However, it’s crucial to check whether the provider is up to date with the current laws.
The main collections-related regulations in place in the United States are:
Fair Debt Collection Practices Act and Reg F: The FDCPA, most recently updated with Regulation F in 2021, is the most comprehensive U.S. law that restricts, for example, call frequency and calling hours, and mandates the reading of the “Mini-Miranda.”
Telephone Consumer Protection Act: The TCPA ensures that numbers in the Do Not Call registry are never contacted; this can be easily achieved with Voice AI.
Federal Fair Credit Reporting Act: The FCRA protects information collected by consumer reporting agencies.
Payment Card Industry Compliance: PCI regulations ensure that the Voice AI provider takes the appropriate measures to protect stored cardholder data and encrypt the transmission of the data.
Health Insurance Portability and Accountability Act: HIPAA is one of the most well-known privacy laws in the United States.
Read more about meeting debt collection compliance with Voice AI in our blog post.
Provider’s Understanding of the Collections Space
This point goes beyond regulations: How well does the Voice AI provider know and understand the collections space as a whole? Their understanding of the structure and overall operations of a collection agency is likely going to be a helpful factor in the collaboration between the agency and the provider.
The provider should be able to understand the agency’s structure, the challenges related to employee retention and call scalability, as well as best practices for outbound collection calls. This way, you can trust that they will design an optimal conversation flow to facilitate your collection efforts.
Different factors will affect the conversation design. For example:
Nature of debt: There are different types of debt, including credit card, healthcare, student, etc.
Age of debt: A 30-day past due debt is very different from a 180-day past due debt.
Ability to Handle End-to-End Conversations
A Digital Voice Agent needs to be able to handle outbound collection calls from start to finish, without any human intervention—from verifying the user’s identity to completing the transaction.
The Digital Voice Agent will therefore initiate the call, remind the user of the due payment, register the reason of delay, persuade the user to pay right away, collect the payment or offer alternative payment plans, and ultimately feed the data it has gathered during the call to the CRM tool.
One important question to ask providers is: What kind of access will the collections agency have over the Voice AI?
The ideal provider will offer access to a dedicated and user-friendly platform, from which the agency will be able to view and tweak conversation flows.
Additionally, having a good platform will also help with the integration of third-party applications, such as payment gateways, CRM, and other business applications.
Want to learn more about how the technology behind a Digital Voice Agent works? Check out our dedicated blog post.
Once the Voice AI solution goes live, will you be able to easily visualize and analyze its performance and results?
As more and more users speak with the Digital Voice Agent, you gather precious data that you don’t want to waste. Your Voice AI vendor should give you access to a dashboard to monitor the effectiveness and quality of the conversations.
MLOps (Machine Learning Operations)
At the very core of Voice AI lies the capability of the algorithms to continuously learn and improve as more conversations take place.
MLOps stands for Machine Learning Operations and it’s somewhat similar to DevOps. It’s an organizational model and culture designed to help the involved teams manage the operational processes behind machine learning.
AI companies that have a good MLOps system in place are likely to develop a better technology set to improve with time.
After Go-Live: Continued Voice AI Training
Your Digital Voice Agents are ready to go live and start calling your customers to remind them of their due payments. What now?
After the Voice AI platform goes live, the work is far from finished. The Digital Agents must be maintained for further optimization of the technology and the conversational experience, also to ensure they understand out-of-scope intents. The solution must also be monitored, especially at the beginning, for quality assurance purposes.
According to a recent Gartner report, failing to monitor automation tools in post-production is one of the most common mistakes companies make when implementing automation.
Additionally, it’s important to note that Voice AI solutions are typically rolled out in multiple phases: with time, additional capabilities and use cases may be added.
Therefore, your agency will want to work with a Voice AI provider with a clear plan for post go-live training and handling.
In conclusion, watch out for these key questions to ask your Voice AI vendor.
For more information and a free demo, you can schedule a call with one of our collections experts. We’ll be happy to help!