In a recent blog post, we shed light on an often overlooked component of the collections lifecycle: inventory segmentation. This process of identifying high-risk consumers for specialized workflows is a mission-critical operation that ensures collectors remain profitable — while reducing threats from the legal and compliance sector.
In the old days, segmenting inventory was done manually. And as collectors juggled datasets from various sources, the result was a myriad of audits, analyses, phone calls and costs. In other words, a big headache.
Today, segmenting inventory is a much more intelligent and efficient process. Using a single input file, information solutions providers have eliminated the need for manual searches by identifying the most sensitive pieces of your debt portfolio so you can manage them properly. This batch file transfer is seamless and in most cases, insights are available in just a few hours.* It’s a momentous upgrade that most collectors have adopted, but it’s only half the battle.
What is portfolio monitoring?
If today’s financial economy has taught us anything, it’s the consumer is dynamic. Things can change — fast. Healthy bottom lines depend on knowing when a consumer’s ability to pay changes, enabling you to adjust your strategy accordingly.
Today’s cutting-edge segmentation solutions include the capability to monitor your debt portfolio for changes to a custom set of data points crucial to your business. Daily inquiries keep your files fresh — with new activity flagged and sent directly to your team. Through this functionality, you can proactively address changes in your book of business and restructure your collections priorities.
Why and who should monitor?
Say the gas gauge in your car was broken. It would be impossible to track the ongoing consumption, and you wouldn’t receive an alert telling you it’s time to refuel. Portfolio monitoring is the gauge for your segmentation engine. Without real-time visibility and alerts into your debt portfolio, you run the risk of stalling out. Simply put, all collectors that utilize batch processing should optimize their segmentation process by monitoring accounts for fundamental changes that affect recovery decisions.
As the old saying goes, Knowledge is Power. Conversely, the unknown can be unnerving. By elevating your segmentation strategy with portfolio monitoring, you can achieve a higher level of control over inventory and benefit from various advantages that permeate multiple levels of your organization:
- Avoid compliance risk. Every debt portfolio contains inventory protected by state and federal laws. Moreover, the inception of the Consumer Financial Protection Bureau (CFPB) aims to ensure consumers are treated ethically. A robust segmentation strategy that includes monitoring serves as a safeguard against litigious individuals and those protected by law.
- Foster healthy margins. The business climate for third-party collectors has seen profit margins drop to all-time lows. To gain an advantage, it’s critical to maximize your current resources and boost recoveries. When used in concert with batch segmentation solutions, portfolio monitoring can remove hours of manual work and keep your team focused on collecting only from those accounts with a high probability to pay. Moreover, having up-to-date consumer information also aids your business in its effort to sidestep lawsuits, fines and disputes. Mitigating these operating expenses can have a profound effect on your bottom line.
- Foster more recoveries. In an industry where profits are shrinking, bolstering staff efficiency leads to healthier margins. That said, performing for your clients is also paramount to your business’ success. The good news is the former accelerates the latter. By removing tedious manual tasks, admin time and uncertainty, you create a work environment where collectors can be laser-focused and ultimately more effective at achieving the ultimate goal—recovery.
Myth: Many collectors believe monitoring is an expensive luxury only large firms can afford. As well, many in the industry believe incessant updates pushed to data files will drive technology expenses through the roof.
Myth Busted: Monitoring is typically a very small percentage of your information solutions costs, as very few consumer files have frequent status changes. Although irregular, being aware of changes gives your recovery strategy invaluable insight. For example: Being alerted of a recent military deployment can help you avoid an unnecessary dispute. Knowledge of an adjudicated bankruptcy filing may present an opportunity to recover.
You can’t afford NOT to monitor
Effective inventory segmentation plays a key role in a profitable recovery operation. When combined with a customized batch processing initiative, portfolio monitoring allows collectors to harness technology to stay apprised of ongoing changes to their debt portfolio — so they never miss an opportunity to collect.
Complete the form below to schedule a complimentary analysis and let TransUnion help you determine if portfolio monitoring can maximize your recovery efforts.
*The TLOxp product is provided “as-is”, with no warranties of any kind, including without limitation, those as to quality, non-infringement, accuracy, completeness, timeliness, or currentness, and those warranties that might be implied from a course of performance or dealing or trade usage and warranties of merchantability and fitness for a particular purpose. The TLOxp solution is not provided by a consumer reporting agency and does not constitute a consumer report as these terms are defined by the Fair Credit Reporting Act. 15 U.S.C Section 1651 et seq ("FCRA"). The TLOxp solution may not be used in whole or in part as a factor in establishing an individual's credit worthiness or eligibility for credit or insurance or employment not for any other purpose under the FCRA.