As the U.S. continues to see consumer balance sheets deteriorate due to inflation and real wages decreasing, financial institutions must step up their collections efforts to stay on top of delinquencies in 2023.
If your financial institution outsources collections to a third party, know how important it is to ensure your partners perform optimally.
The vetting and onboarding process alone can take months, so the "set it and forget it" mentality could be detrimental to the overall performance of your collections operation. To ensure your outsourced partner performs at a high level, it's wise to understand their company procedures and establish agreed-upon benchmarks to measure their performance.
Here are five steps for optimizing your collections efforts and partnerships:
1. Institute a performance card
In order to set proper expectations and set all vested parties up for success, it's crucial to establish a measurement tool. A performance card creates a foundation for your financial institution and vendor to understand how the collections program is measured fully.
Maybe you measure the program's success on the number of monthly calls made by the collections team. Or perhaps your idea of a successful program is the number of early or mid-stage payments collected. Whatever the metric, it should be clearly stated (in writing), so there's little room for miscommunication regarding your collections strategy, goals, and overall program performance.
The best place to start is by talking with your vendor's primary contact. This is typically an account manager or business development officer. You will work closely with your rep to outline the performance card.
If you already have an outsourced collection provider executing services on your behalf, it's not too late to establish a performance card. This organization is contacting your borrowers on your behalf, so it's important to ensure they meet the performance metrics that support your goals and expectations.
2. Evaluate your collection vendor's quality assurance process
Every organization worth looking at should have established quality assurance processes. Because their reputation depends on their performance, they will invest in many quality assurance workflows. To help you evaluate your partner's process, ask them these questions:
What percentage of calls are reviewed by the management team, and how often are these reviews conducted?
- Is there an established feedback process, and what does it entail?
- Is there a documentation process for collection calls?
- How and how often is borrower feedback distributed back to your institution?
The goal here is to determine if your vendor is continuously looking for ways to improve its processes in order to guarantee the best service and performance.
3. Evaluate your collection vendor's training process
A well-established training program is critical to the success and compliance of a collections operation. Since the type and frequency of training the collections staff directly impacts your borrowers, having a high-level understanding of the program is important. Three questions you can ask to help you better understand the training process include:
- How long is your training program, and how is it structured?
- How is compliance training administered?
- Do you have ongoing training for your staff?
4. Ask about ongoing program monitoring
Most financial institution executives spend a fair amount of time evaluating their partners' performance. Still, working with a collections provider that proactively monitors and reports on their program's performance is also important. Added value, such as monthly status reports, can help you identify data trends to make program tweaks and create efficiencies.
Likewise, a great partner will have tools and systems in place that allow you to self-serve, accessing highly visual, customized reports that give you the most important data to your institution.
5. Adopt a digital-first collections communication strategy
Different demographics have different preferences regarding communicating and interacting with their lenders. As technology creates more contact options between you and your account holders, keeping pace with your borrowers' preferences is important.
Phone calls, emails, and text messages are all expected options for communication. You'll want to ensure your collections partner offers multiple digital communication options to reach your borrowers on their preferred channel.
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