Artificial intelligence in debt collection: 5 approaches to apply it

In this article you will find:

Artificial Intelligence (AI), a powerful tool that has transformed all facets of business life, and debt collection is no exception.. 

Artificial Intelligence (AI) is the ability of machines to learn from data and perform tasks by mimicking human reasoning autonomously. 

The COVID-19 pandemic had a profound impact on the global economy, challenging companies to rethink their debt collection strategies. It was in this context that AI emerged as a lifesaver, offering innovative solutions to tackle these challenges. 

Thanks to AI, your company can:

  • Segment and better understand its delinquent customers, identifying behavioral patterns and anticipating the individual needs of each debtor. This is called predictive capability.
  • Automate routine tasks in the debt collection process, freeing up human resources to focus on more complex cases and relationship building. This improves both customer and employee experience.
  • And on top of all this, you can offer them the convenience of using WhatsApp as the channel through which they can manage their debt repayment journey.

That's what I'll talk about today: how companies that adopt these emerging technologies will be better positioned to face future challenges and stand out in an increasingly competitive market.

En este post verás:

  1. Personalizing the debtor experience
  2. Predictive capability
  3. How AI facilitates omnichannel communication
  4. Improving the Debtor Experience
  5. Optimizing Call Center Work with AI

1 - Personalizing the Debtor Experience

The application of Artificial Intelligence (AI) in debt collection redefines the debtor experience, becoming an ally in efficiently recovering debts without creating friction in the customer experience.

Is it possible for something as unpleasant as debt collection to be good for the customer experience? Yes, it is possible!

AI allows your company to analyze vast amounts of data related to delinquent customers, identifying behavioral patterns and individual preferences. 

This means your company can tailor its debt collection strategy precisely and personally, creating a friendly and less intrusive interaction: 

  • Instead of demanding payment, offer specific solutions tailored to each client's financial situation and needs.

By feeling understood and attended to individually, debtors are more likely to cooperate and commit to a payment plan, reducing the risk of prolonged delinquency.

2 - Predictive Capability

Machine learning algorithms represent a revolution in debt collection management by allowing precise segmentation and effective prediction of payment behaviors. 

By analyzing large sets of historical and real-time data, they provide a deeper understanding of the financial situation of delinquent customers and perceive subtle signals indicating the likelihood of payment at any given time.

For example:

  • Customers with a high probability of payment may receive refinancing offers or flexible payment plans; 
  • Those with a low probability may require a more proactive and persuasive approach.

By leveraging these advanced analytical tools, your company can significantly improve its ability to recover debts and maintain a strong financial position

3 - How AI Facilitates Omnichannel Communication

Effective communication is essential in the debt collection process, and Artificial Intelligence (AI) has revolutionized this aspect by allowing smoother, personalized, and omnichannel interaction.

Analysis of preferences and behaviors

AI can identify the communication channels preferred by each customer and determine which methods are most effective for reaching each individual. 

This is achieved through the analysis of behavioral patterns and historical communication preferences.

Personalization of messages and offers

Once the preferred channels are identified — where WhatsApp leads as the best of all — it allows messages and offers to be personalized y las ofertas for each client.

By using machine learning algorithms, your company can adapt the tone, content, and frequency of communications according to individual preferences. 

For example:

  • A customer who prefers brief and direct communication may receive concise text messages.
  • Another who prefers a more detailed approach may receive more comprehensive emails.

Automation of interactions

AI-driven chatbots can interact in real-time, answer common questions, and provide relevant information about their accounts. 

This streamlines the communication process and frees up human resources to focus on more complex cases and relationship-building.

Improving response rates and engagement

Customers are more likely to interact and respond to messages delivered through their preferred channels, increasing the effectiveness of debt collection strategies. 

Additionally, the customization of messages and offers increases relevance and perceived value, which also contributes to higher engagement.

4 - Improving the Debtor Experience

Artificial Intelligence (AI) plays a crucial role in an individual-focused debt management process and is essential for creating a positive experience for both the debtor and the company. 

Deep understanding of the customer

By analyzing demographic data, purchasing behaviors, and other variables, your company can better segment and understand its customers' needs, preferences, and financial situations. 

This, in turn, provides a more comprehensive understanding of your customers and more precise and empathetic debt management.

Sensitive and personalized communication

Instead of using a generic and invasive approach, your company can adapt its debt collection messages and actions to fit individual circumstances. 

For example:

  • Instead of sending automated payment reminders, your company can directly discuss customized payment options that suit their financial situation.

Tailored offers and solutions

By analyzing financial and behavioral data, AI can identify the best refinancing options, flexible payment plans, or other solutions to effectively and sustainably resolve delinquency. 

Reducing the sense of intrusion

An individual-focused management approach also helps reduce the feeling of intrusion often experienced by delinquent customers. 

Instead of feeling harassed or pressured by the company's debt collection actions, they perceive that the company is genuinely interested in helping them resolve their financial situation in a friendly and collaborative manner. 

This improves the perception of the company and increases the willingness to cooperate and commit to a payment plan.

Building a relationship of trust

By demonstrating empathy, understanding, and willingness to adapt to the customer's needs, the company builds a solid and lasting relationship that goes beyond the financial transaction, benefiting in terms of debt recovery.

5 - Optimizing Call Center Work with AI

The implementation of Artificial Intelligence (AI) in the debt collection process not only improves operational efficiency but also allows call center advisors to focus on more complex cases, while routine tasks are effectively automated.

Automation of routine tasks

Activities such as sending payment reminders, checking outstanding balances, or updating customer information can be performed automatically by intelligent systems, reducing the administrative workload on human staff.

Focus on complex cases

With routine tasks handled by automated systems, call center advisors can dedicate more time and attention to situations requiring special negotiations, handling objections, or providing individualized financial advice. 

By allowing advisors to focus on complex cases, AI improves the quality of customer service and increases debt recovery chances.

Analysis of payment behavior

AI also plays a crucial role in analyzing the payment behavior of delinquent customers. 

Using machine learning algorithms, AI can examine historical payment patterns, spending trends, and other relevant variables to predict the customer's future behavior. 

This predictive capability allows your company to anticipate customer needs and preferences, offering customized payment options or refinancing solutions tailored to their specific financial situation.

Personalized payment offers

Based on payment behavior analysis, AI can recommend personalized payment or refinancing options for each delinquent customer.

For example:

  • A customer who has consistently shown late payment tendencies may receive a debt consolidation offer with lower monthly payments.
  • One facing temporary financial difficulties may benefit from a flexible payment plan tailored to their current payment capacity.

Improving the debtor experience

Instead of feeling overwhelmed by generic payment demands, delinquent customers perceive that the company is willing to collaborate and find solutions tailored to their unique financial situation. This improves the customer's willingness to cooperate and resolve their debt.

As you can see, Artificial Intelligence has come to help us turn uncomfortable moments into opportunities. 

And if we add WhatsApp and Truora to that, we get the recipe for success.

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