Did you know that the debt collection industry in the US is valued at $20.3 billion (as of 2022)? And yet, this is among the financial services sectors that are not as digitized as others. With a growth rate of 4.4%, finding a solution to expedite the debt collection process is crucial. Individuals and businesses involved in debt collection must overcome numerous hurdles, including the legal consequences and technological hurdles.
Discover how technology impacts the debt collection practices for firms in New York and how attorneys can assist them.
Common Challenges in Debt Collection
Businesses and firms that have to collect debt from individuals face various challenges during debt collection. Here are some challenges:
- Rising debt delinquencies.
- Inadequate focus on debt collection.
- Increased regulations that limit debt collection activity.
- Outdated collection strategies.
- Inability to customize the approach on first time vs. chronic delinquencies.
Technologies Transforming Debt Collection
Debt collection is a highly debated topic in the financial sector. Collecting debts is crucial because it ensures steady cash flow for the businesses involved. However, it’s also crucial to collect debts without facing a lawsuit. It’s a balancing act, especially with many regulations and laws protecting consumers from debt collectors and agencies.
Since establishing the Consumer Financial Protection Bureau, they have received many reports regarding unethical debt collection practices. Common complaints regarding debt collection involve debt not being owed, debt being paid, or unverified debt amounts. These issues could be easily overcome with a seamless debt collection strategy and the use of technologies. A technology-driven debt collection approach is powerful and can be coordinated with the expertise of New York attorneys.
Here are the technological tools available for debt collection:
Big Data Analytics – Information is crucial during the debt collection process. With so much information to collect, it can be difficult for debt collectors and businesses to consolidate it. Pertinent information, such as demographic or behavioral, can impact the debt collection method. Big data analytics make segregating data seamless and developing a potent strategy to treat each debtor ethically.
Automation – Automating the debt collection process replaces the manual tasks performed by employees during debt collection. It includes processes like making follow-ups on debt payments, skip tracing, etc. Using data analytics organizes the data while automation takes care of the rest.
Mobile Technology – The prevalence of smartphones and other mobile gadgets necessitates using mobile technology in debt collection. It makes it easier for debt collectors and businesses working with New York attorneys to communicate with debtors. You won’t be flagged for communicating through mobile devices with debtors as long as you follow ethical communication practices. Maintaining trust and credibility remains the top priority in debt collection practices.
Improving Debt Collection with Technology
Here are the ways you can use technology to improve the debt collection process in New York:
- Make it easier for debtors to pay by providing them with digital channel payment options. Banks and other financial service providers use digital channels to make payments accessible and easy for their customers. You can provide this option to debtors to make it easier for them to avoid delinquencies.
- Personalize your debt collection approach. Every debt collection situation and the circumstances surrounding them are unique. Use a customized approach to aggregate the demographic, behavioral, and other transactional factors.
- Using analytics and AI-guided debt collection strategies makes it easier to predict payment probability, set reminders for debt collection, and automate other processes involved during debt collection.
- Customer and debtor segmentation helps to distinguish the first-time and chronic delinquent accounts. It helps you formulate appropriate communication practices that increase engagement with debtors during any phase of the debt collection process.
- Monitor compliance and ensure continued compliance with the changing laws and regulations using technology. It will help your business avoid hefty penalties, even when hiring experienced attorneys in New York.
- Integrating debt collection processes with existing data is essential. Using technology can ensure you don’t call debtors who’ve already paid or ask them to pay an amount that is more than what they owe.
Leveraging technology can help create a seamless debt collection process. It does not work in silos, either. Feel free to use a combination of technologies to optimize your use of technology. However, the secret formula is to rely on the expertise of New York attorneys with experience in actual debt collection.
Technology is merely a tool; expert attorneys can utilize that tool to navigate this complex situation, especially as many variables could be involved. They can use the information in a given situation to employ the best strategy to generate positive results for all parties involved.
