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Voice AI: The Magic Pill for All Major Debt Collection Challenges

Harshad Bajpai

August 2, 2022

Let’s begin by addressing the elephant in the room—the collection rates have dramatically fallen in the last decade. The State of Debt Collection 2020 Report reveals that in 2010, U.S. businesses placed $150 billion in debt with collection agencies, of which they could collect just USD 40 billion. On delinquent debt, the collection rates have declined to 20% (industry average), a decrease from 30% as recorded a few decades ago. 

Anyone from the debt collection space would be cognizant that the industry has been under pressure from all fronts—inflationary pressures, agent attrition further fuelled by the great resignation and increasingly stringent regulations after Reg. F, and economic downturn.

Never before was the need for automation direr than it is in 2022!

What is Voice Automation for Debt Collection Companies?  

Before we go into the transformative role Voice AI can play in the debt collection industry, let’s understand voice automation. 

Voice Automation Refers to the automation of voice calls, decoupled from the assistance of a human agent. This means the capability to answer customer queries with the machine, striking intelligent, multi-turn conversations. 

Consider this scenario where an AI-enabled Digital Voice Agent interacts with a customer and facilitates an on-call payment. 

The demo is a perfect example of how an intelligent Voice Agent can help consumers willing to pay and facilitate a quick payment with remarkable ease.

  • Outbound Call Automation: A Digital Voice Agent can call consumers and establish the right party contact, remind them about the due date, capture their dispositions, raise dispute requests, accept and schedule a payment on call, or help them negotiate, and arrange a payment plan for a better recovery.
  • Automating Tier-1 Inbound Consumer Queries: The Voice AI agent can answer tier-1 calls, which are as much as 70% of total inbound calls, without the need for a human agent. Also, even when a Voice AI agent calls customers, it can answer all basic questions and handle tier-1 queries discussed in the outbound section above.

Hitherto, only IVRs have played a limited role in increasing the containment rate with the self-service option. IVR’s effectiveness can be debated, especially when reports have revealed that it plays a role in decreasing customer experience. The problem with IVR technology is that they have reached the culmination of what it can do for debt collection agencies. It is time to move beyond IVRs, especially when tech advancements have brought us to the sweet spot of cost-effective incorporation of AI-enabled solutions such as Voice AI.

Want more clarity; read this interesting piece – Voice AI Vs Robocallers 

Addressing the Elephant in the Room: Core Debt Collection Challenges

Debt collection companies face these core problems:

  • Dormant Files: Every debt collection agency sits on a pile of inactive accounts, as high as two-thirds of their portfolio, that they can not process because of its economic infeasibility. This is a sour point, and they are looking for tech solutions that can help them address this pain point. 
  • Non-Revenue Generating Calls:
    • Wrong Party: Proportions of wrong party contacts vary depending upon many factors, such as the age of debt, but it can be as high as 70-80%. All the calls made by human agents that turn out to be wrong contact numbers are pure costs with no return.  
    • Dispute: The next big chunk of the volume of calls is usually when a consumer fails to recognize the debt or disagrees with the outstanding amount. The regulations require debt collectors to raise the dispute request to investigate the debt further and provide relevant information to the consumers before any collection activities. Those calls where debt is disputed by the consumer or asked for more details of the debt eventually turn out to be a pure cost activity.
    • Cease-and-Desist: Be it inbound or outbound, there is always a set of consumers who ask agencies to stop all collection communication with or without any good reason. There is no real scope of value creation by a human agent in this case as well.
    • Attorney Representation: Often, the consumers ask to contact their attorney and not to approach them directly. All agents do in this case is update the system to not reach out to these sets of consumers as required by regulations.
    • Call Back Requests: More often than not, the consumers ask the agent to call some other time, in some cases beyond the working hours of the agency.

  • Right-Party Contact (RPC) Cycle: Traditionally, a human agent will call consumers to establish if the contact number is correct. Any debt collection agency has so many files to process that they can only call a fraction of them within a time frame, and take long to cover all consumers, if at all. The shorter the cycle, the larger would be the scope to improve recovery.
  • Propensity Based File Segmentation: Ideally, a debt collection agency would like to segment their portfolio into different buckets based on the consumer propensity to pay. But sadly, with a large number of files, it is challenging to do this within a limited time frame, if at all.
  • Agent Bandwidth Optimization: Agents are the most precious organizational resource and their time/bandwidth optimization is an utmost priority for them. But in absence of RPC and disposition capture, it is near impossible to optimize their time and effort.
  • Service Level Maximization: The number of calls a debt collector addresses per agent per hour is vital for enhancing operational performance. 
  • Compliance: The regulations have become increasingly stringent; this has two implications:
    • The penalties and fines are levied at instances of breach of regulations. They are typically bearable expenses, though they affect profitability.
    • Lawsuits filed by consumers: They do real damage as they consume time as well as cost, and are typically much higher than government fines and penalties.

Read more about how Voice AI can help debt collectors augment bottom lines

Leapfrogging Value Creation with Voice AI

With the coming of Reg. F, a new conversation has begun on the compliance of new-age technologies. Being AI-enabled and capable of striking an intelligent multi-turn conversation, Voice AI finds itself better placed to meet compliance. (read more about it in this Voice AI compliance white paper by Mike Frost and Skit.ai).

Voice AI is based on AI/ML, Automatic Speech Recognition (ASR), Spoken Language Understanding (SLU), Text-to-Speech (TTS) technologies, and more. A confluence of such great technologies enables Voice AI to understand the spoken word and respond to it most intelligently. Here is the gist of how a Voice AI Agent can create value for debt collection agencies:

  • Segregating Right and Wrong Party Contacts: 

With the great capability for executing thousands of concurrent calls, Voice AI can call and establish the right or wrong parties in a matter of minutes, for a significant portion of files. No technology has been able to accomplish this except Voice AI. 

Value Creation: At a fraction of the cost, a debt collection company can identify if the contact is right or wrong without involving their human agents. Time and cost advantages can help them improve performance in a big way.

  • Enabling File Segmentation by Capturing Disposition: 

Classifying customers into 4-5 different segments solves a lot of problems for the collection agency. A Voice AI agent can call thousands of customers and, based on dispositions, can segment millions of accounts into various buckets such as consumers who disputed the debt, consumers with cease-and-desist requests, consumers with attorney representation, consumers who agreed to a payment plan, etc.

Based on this segmentation, accounts can be allocated to respective specialists and departments for further processing.

Value Creation: Only after capturing the disposition for the entire portfolio, the company will be able to draft an optimal strategy and optimize the time spent by their agents.

  • Compliance Adherence: 

Since the coming of Reg. F, the compliance has become difficult to keep and the corresponding implication of its breach is getting higher. With large portfolios, it is difficult for agents to execute their follow-ups with perfection. 

Mandatory rules such as the 7/7/7 rule, along with Mini Miranda, use of decorous language, and more, make it difficult for the human agent to always stick to the script especially when a majority of calls are repetitive and low-value. 

Value Creation: Voice AI agent, once trained for compliance will always stick to the script, and use the right language. It will also stick to the schedules of follow-ups increasing the probability of conversion as well as saving the company thousands of dollars in fines and lawsuits. This also increases the speed of the company processing its portfolios.

  • Value Out of Non-Revenue Generating Calls:

Voice AI, at a fraction of the cost – 1/6th, can process these calls (mentioned in the above section) and help human agents avoid these and focus on value-creating calls.

Voice AI: Helping Debt Companies Strategize Better

Voice AI, with its consummate coverage of debt portfolio, can help debt collection companies have a more precise understanding of their consumers and devise better strategies. Below is a graph that depicts VaR and the ideal file segmentation and corresponding strategy.

Strategizing with Voice AI

Age of Debt and Voice AI: A debt collector will typically have a mixed portfolio with debt lying in various age brackets. Typically the older the debt, the lower the probability of recovery, and hence Voice AI is more suited to engage with these accounts.

It must be noted here that the segmentation is only possible after the Voice AI Agent covers the entire portfolio to uncover consumers’ propensity to pay.

  • Capturing Propensity to Pay: Once the Voice AI Agent has captured the disposition of the consumer, a debt collector can then segment or classify it and assign it according to the disposition.
  •  Strategizing for Value at Risk: Since Voice AI costs one-sixth of a human agent, and is as effective for simpler conversations, it is ideal for Voice AI agents to address these accounts and follow up meticulously.

High Willingness to Pay (WTP) – High Value: When the willingness to pay is high, the voice AI agent can call promptly and facilitate on-call payments or remind them to pay. Debt collectors have been able to achieve a high degree of success in this category. 

High and Low Willingness to Pay (WTP) – Low Value: This segment of the portfolio is prohibitively costly for human agents to process because of its low value, making it ideal for the voice AI agent to process it and help prop up recovery rates.

Low Willingness to Pay (WTP) – High Value: High value and low willingness to pay makes this segment of consumers ideal for human expertise. Human agents can deploy their cognitive skills to convince and help them pay.

  • Optimizing Campaigns: Armed with new insights on consumer behavior, debt collectors can refine and optimize their campaign strategy. An ideal mix of Voice AI, human agents, and SMS/emails, can make a difference.

Impressive Contact Center Outcomes with Voice AI

No, the capability of Voice AI is not just based on conviction and hope, there are solid stats to second every value proposition. 

It must be noted that the higher volume that Voice AI Agent handles, the greater the scope of value creation. This is necessary if a debt collector wants to strategize based on consumer disposition. 

Here are a few outcomes that the debt collectors as well as other contact centers have achieved with Voice AI: 

  • Up to 38% improvement in service levels
  • Nearly 50% decrease in operational costs
  • Up to 70% automation of your consumer support efforts
  • Reduction of 40% in average handle time

Conclusion 

There are multiple challenges from diverse fronts plaguing the debt collection companies. They can break the status quo and make the necessary changes on many fronts such as cost, performance, recovery rates, compliance, and speed.  

Voice AI technology has been successful in value creation for debt collection companies. However, it takes an expert vendor and meticulous execution to achieve desired results.

To further understand the nuance of Voice AI and the scope of transformative value it can create for your business please – Book a Quick Appointment.


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