The future of collections: Balancing empathy & efficiency for optimal results

In a world where collection calls are dreaded, and referrals are invaluable, creating a positive repayment experience not only serves your members better but also attracts new business for your credit union.

This member-centric approach to collections builds member trust, loyalty, and retention by demonstrating your commitment to your member’s financial well-being when they need it most.

While this may seem obvious, implementing a positive collections experience is challenging due to the limited resources available to credit unions and the sensitive nature of collections interactions. However, by deploying the strategic digital innovations available today, you can support members throughout their collection or repayment experience while effectively managing delinquency.

Here are some strategies to incorporate into your collections roadmap this quarter to improve your collection processes and change the way you collect.

Change the way you collect – the 3 Cs of collections

Balancing empathy and recovery is key to driving positive collection experiences for your members and delivering effective collection outcomes for your credit union. It not only maintains positive relationships during tough times but also leads to more successful repayment outcomes.

After all, there is a human being, just like you and me, on the other end of the phone collection call.

When members fall behind on payments, your collections staff can prevent delinquency from escalating into charge-offs by adopting these simple 3 Cs: Commitment, Convenience, and Cost-effectiveness, to proactively handle delinquent accounts with empathy and understanding.

Commitment

The best offense is a good defense.

You have been committed to your members’ financial well-being for decades, and this commitment has sustained your credit union through economic turbulences, calamities, pandemics, and more.

What better time to demonstrate your commitment to them than when they need you the most?

Proactive support: Life is unpredictable. Bills pile up, and sometimes, people simply forget to pay. Save members from the embarrassment of explaining missed payments by sending timely reminders and notifications in a nonintrusive, private manner using texting. This reduces unintended and early delinquency. But it doesn’t stop there. Recognize and celebrate good financial habits too. A well-timed thank you can reinforce positive behavior and build stronger relationships.

For instance, a federal credit union recently collected an impressive $4.8 million within three months of switching to texting. Another one with several branch locations throughout central Kansas witnessed a 20% drop in delinquency in 1 month and lowered CECL. That’s the power of timely, non-intrusive reminders!

Personalized engagement: To help past-due members feel empowered, support them with consistent and personalized advice. Use AI to gain insights into their unique situations and deliver a tailored repayment experience based on their history, behavior, needs, previous interactions, and more. This increases repayment success and overall satisfaction.

Convenience

Actions speak louder than words.

Demonstrate your commitment by providing convenience when they need it the most.

Simplify the repayment experience from multiple back-and-forth calls and account logins to the one requiring a straightforward one-click resolution path.

Prompt resolution: When they decide to prioritize repayment, members might seek answers to questions such as account updates, payment deadlines, overdue fees, hardship eligibility, and more. A delay in communicating this information might inadvertently frustrate or push members into delinquency. Use AI to provide 24/7 support, minimize wait time, provide consistent and accurate answers, and resolve questions promptly—anytime, anywhere.

Self-service options: Members will be more inclined to pay on time if they can do so easily, using their preferred payment channels, and without unnecessary back-and-forth with your team. Enable the convenience of making payments anytime, anywhere through a payment link embedded in the reminder texts, eliminating the need for extra app or browser downloads. You can also use the same channel to share statements, flexible payment options, settlement agreements, legal notices, and other sensitive information in a secure & private manner.

Cost effectiveness

Play the long game.

Implementing these strategies might sound expensive and require effort to select the right technology partner(s). Still, you can easily offset additional costs by leveraging the same technology to optimize collection costs.

Optimize human cost: Human resources are the most valuable but the costliest resource in any organization. Better utilize your collection staff’s time by automating routine tasks such as creating interaction summary notes, providing pre-configured templates to complete work such as payment reminders, and more. This frees your staff to spend more time on accounts needing immediate or hands-on attention. Take, for example, a financial institution in Florida who saw a productivity boost equivalent to 31 full-time employees (FTEs) by integrating texting into their collection strategy. Imagine what your team could achieve with similar efficiencies.

Optimize operational cost: Increase contact rates while spending fewer resources by introducing texting as a communication channel to deliver a member-centric collections experience. Texting creates a sense of urgency, has higher engagement rates, is cheaper than collection calls, and doesn’t hog a collection officer’s time. You can also set up a frequent outreach cadence with automated texts for different delinquency buckets, lists, or select groups of overdue/ delinquent accounts.

Start early, start now

Additionally, you can also invest in educating members on crucial financial topics such as savings, investing, debt management, and more to help them make informed financial decisions. This builds your credibility as a trusted advisor and promotes your member’s economic resilience, reducing the chances of members falling behind on payments and building healthy financial habits. You can easily create and distribute such materials with text campaigns, where two-way texting can be introduced to provide immediate and personalized feedback.

You have spent decades earning the trust of your members and forming real connections in the community. In the face of increased competition in the banking industry, returning to the roots and ensuring the best collection experience can not only recover outstanding payments but also strengthen your relationship with your members and improve loyalty and retention.

With delinquency rates climbing, members may soon find repaying more challenging.

Visit our CSS website to learn how Eltropy is helping 600+ credit unions and community banks manage their collections with its unified conversation platform, now powered by AI.