AI Debt Collection: Changing the World of Credit and Collections
WHAT'S HOT / 09 Aug 2023
Talking about debt collection is not anyone’s favourite topic. The reality is, most of us will actively avoid it. These conversations are hard for the customer service agent, and they are hard for the customer, especially if they are in a financially fragile state. Besides, nowadays people tend to avoid talking on the phone, and if they need to contact a company, they often prefer messaging channels like webchat and WhatsApp.
The quandry facing debt collection companies is how to empathetically engage with their customers, but also focus on the job at hand, which is to manage and recover debt.
The answer is not more contact centre agents
Agents on the phone are an expensive resource, and due to the stressful nature of the job, there is a high agent turnover rate in this industry.
What contact centres need are well-trained agents, that are available 24/7, have access to data and can answer those common and straightforward questions that customers ask every day. And all this without adding a huge resource overhead.
How can this be achieved?
Well, conversational AI chatbots that are trained for customer service in credit and collections ticks these boxes.
Their training not only includes accurate data, but they are also taught how to answer with understanding and act as guides rather than policemen. However, contact centres still ask themselves, “Can AI handle this as well as an agent?”
To answer this valid question, let’s look at some stats from Webio clients.
Engagement rates with AI chatbots: 70%
Percentage of automation with AI chatbots: 75%
Agent productivity up by 42%
What do we mean by AI debt collection?
Essentially, AI chatbots are used to interact with customers across multiple digital messaging channels. They work using Natural Language Processing (NLP) to understand what a person is saying or wants to do (intent), and then they respond appropriately to solve a customer’s query.
AI can also be used for predictive analytics, hyper-personalisation and as a digital assistant (or copilot) for customer service agents.
Traditional methods of customer engagement for debt collection focused heavily on the phone and diallers. As anyone who has ever tried to get hold of an agent in a contact centre will tell you, the phone is not an ideal channel! Customers are left frustrated with the long waiting times, and businesses struggle to get hold of people. Finding a convenient time to connect is also a problem, as is the high cost of human agents.
Using conversational AI for customer engagement solves these problems and brings so much more to the table. Read on to find out how.
AI debt collection software that uses Custom Language Models
Conversational AI chatbots for collections are trained on the specific data needed for debt collection conversations, and they are continuously growing using Machine Learning technology. Unlike a broad-based chatbot like ChatGPT that uses general Large Language Models, industry-specific AI chatbots use refined Custom Language Models that are narrowly focused on the language for a particular industry, such as credit and collections. For example, ChatGPT would not know how to conduct a customer query conversation around account information.
Besides, LLMs like the one behind ChatGPT are not reliably accurate and hallucinate too often to be trusted with customer conversations (about 20% of the time).
The essence of a successful AI chatbot is in the conversation design. Your customers need to feel heard and understood, and as a business, you need to respond to them quickly and in the correct way.
Examples of how AI technology is used in debt collection
Use AI to predict and identify which accounts are most likely to be collected or to default
AI can analyse data and historical customer behaviour to identify patterns and predict future behaviour. It can then help businesses to prioritise high-risk accounts.
Use AI to personalise communication with customers
AI can personalise communication with customers based on their individual circumstances that are drawn from customer data. In credit and collections, maintaining positive customer relationships is important and AI-powered customer engagement tools, like conversational AI messaging, enable creditors to engage in a more natural and relational way. This not only increases the chances of successful engagement but also contributes to a better customer experience.
Use AI to automate debt collection tasks
Many customer queries are simple and agents can find themselves answering the same questions every day for multiple different customers. AI chatbots can easily handle these and customers don’t have to wait for an agent to be available to get answers.
Use AI in self-service portals
AI can be used as a digital assistant in a portal to guide customers and answer any queries they may have.
Use AI for analytics and reporting
AI can help collections teams track the progress of debt collection cases and identify areas where they need to improve. It also helps businesses understand their customers better, their willingness to pay and how to put the best strategies in place for different customers.
Looking after vulnerable customers with Conversational AI
Conversational AI software for collections has brought a human touch to debt collection interactions. Older versions of chatbots often involved rigid, scripted conversations that could come across as impersonal. However, conversational AI has transformed the game by enabling natural and personalised interactions.
What’s more, the AI has been trained to recognise signs of customer vulnerability. For example, a customer might say that they can’t pay because they have been in hospital, or that they have lost their job. The AI will flag that and highlight it to an agent, or automation will send the customer down the best path to help them.
Regulations around how businesses treat customers are getting stricter, such as the Consumer Duty in the UK. Using AI as part of your debt collection toolkit helps keep you on the right side of these industry rules while also helping your customers.
AI Detecting Vulnerability
AI technology for debt collection brings multiple rewards
AI and automation make things happen faster, which means agent efficiency increases and agents can handle more conversations per day. Using text messaging also means the conversations are asynchronous so agents can handle multiple conversations simultaneously.
Other benefits include:
Immediate access for customers
Outbound messaging at scale
Higher agent retention
AI-powered debt collection challenges
As we have seen, AI helps collection teams solve many issues, but there are some points to note:
As technology continues to evolve, the future of debt collection lies in the hands of AI. From AI-driven software to conversational AI and predictive analytics, these innovations are transforming debt collection from a labour-intensive process to being a strategic part of the business. The marriage of AI and debt collection is not just about recovery rates—it's about building stronger creditor-debtor relationships and enhancing the financial ecosystem.
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