Why AI-driven digital transformation is the future of the collections industry?

With the ability to integrate different systems and automate daily workflows, it’s no wonder AI has become part of many organizations’ business objectives

Why AI-driven digital transformation is the future of the collections industry? - CIO&Leader

In today’s fast-paced and consumer-oriented environment, digital transformation is one of the most critical initiatives for firms to continue growing and delivering value to their customers. With a 30% increase in digital transformation deals since the outbreak of COVID-19, the importance of fostering a digitally enabled business model can’t be understated. However, the credit and collections industry lags behind digital first-movers, despite their long-standing business models. Even though 73% of customers took action when contacted through digital channels compared to traditional ways, as reported by McKinsey, many collection firms are still working on paper-based systems, even Excel trackers, to communicate with consumers and collections partners.

Digital transformation and AI

Considered the 4th Industrial Revolution, digital transformation has helped collections and call centers reimagine their business models, discover new ways to engage with customers, and meet fast-changing regulatory compliance standards while leveraging technology. And Artificial Intelligence (AI) has been recognized as one of the central enablers of digital transformation in several industries, particularly in the collection industry. With the ability to integrate different systems and automate daily workflows, it’s no wonder AI has become part of many organizations’ business objectives.

For instance, a large collections firm that has grown throughout the past ten years through acquisition is more likely to have dozens of systems that operate independently of one another. These systems could include legal back office and call center management to scoring systems like propensity to pay. To streamline productivity and profit, firms need to unify all this data into a single location on a digital platform with the help of technologies like AI and Machine Learning (ML). The increasing use of AI and ML in lending is ushering in a new era in debt collection, including early delinquency warnings, enhanced techniques of categorizing borrowers, and optimal customer interaction efforts to reduce defaults.

Three ways AI can automate and aid digital transformation

  1. Customer data collection and consolidation: These tools can analyze massive amounts of data from various sources, exposing new information regarding delinquency risk and how to handle at-risk accounts. The call center sector is moving towards automation technology to improve and raise their client experience by examining, preserving an enormous volume of data, and giving customer-centric solutions. Gartner predicts that by 2020, customers will manage 85% of their relationship with the enterprise without interacting with a human.
  1. Tracking/confirmation that regulatory best practices are followed for compliance guarantee: Failing to comply with rules and regulations may lead to the businesses being subject to financial penalization, disrepute, and in extreme cases, criminal litigation and imprisonment. As firms deal with growing amounts of data and reporting, AI-based tools can significantly help monitor risks, identify conflicts of interest, and fulfill obligations, making the company compliant, processes more effective, benefiting the entire organization.
  1. It opens the door for ML / intelligent recommendations to engage with consumers to increase the propensity to pay: AI and ML have the potential to transform how lenders view their borrowers. it helps them:

    • To determine which medium is most effective for each consumer segment
    • Send customized communication to various consumer segments at the appropriate moment
    • Provide additional personal information about clients to help guide conversations

AI may work miracles when combined with a comprehensive transformation strategy. Both lenders and debtors can profit from AI and machine intelligence as debt collection becomes modernized. By leveraging AI to understand the customer better through predictive analytics and insights, it has already become a strategic factor to generate sustained growth and provide a competitive advantage to organizations. Lenders must improve their collection capabilities ahead of time to address and avoid delinquencies, and intelligent use of AI will substantially increase their collection efficiency today and in the future.

The author is Senior Vice President & Chief Technology Officer at Provana

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