With the number of accounts increasing, it's crucial to scrub your data and predict who will pay.
Editor’s note: This is part two in a three-part series on the state of collections. Part one is available here.
Reaching out to consumers is one of the most resource-intensive tasks third-party collections agencies perform, and it’s one that isn’t always efficient. Some consumers, for example, should not be contacted at all — those in bankruptcy proceedings for example. Other consumers may be more able and willing to pay down debt — and therefore should be contacted first.
And segmentation and prioritization will payoff even more in the year ahead. That’s because roughly 70% of collections professionals believe there will be more accounts flowing into their companies in 2021, as shown in Figure 1 from the report, The State of Third-Party Collections 2020: A Year of Pivots, Challenges and Opportunities.
Figure 1. Potential future changes due to the COVID-19 pandemic
More accounts mean more resources are put into making contact with consumers, which can strain existing employees’ time management and require increased staffing costs.
Take the guesswork out of which accounts to contact first
How can you improve efficiency and focus on the most productive accounts? As mentioned earlier, the answer is twofold: segmentation and prioritization. These activities can help you determine where to focus your efforts — on accounts most likely to pay while conserving agency resources and reducing risk.
Segmentation analyzes consumer data from a variety of sources to determine which accounts represent specialized inventory that should be handled with care. There are a variety of categories of consumers who may be legally shielded from the collections process, such as those in bankruptcy or those actively serving in the military. Others, such as those with a history of litigiousness, may warrant a decision to remove from the contact list.
Risk mitigation and profitability depend on effectively determining which accounts to avoid and which are considered uncollectable. Avoiding protected consumers doesn't just save you time. Collections practices that fail to comply with relevant laws can result in fines, prompt consumer backlashes and fracture trust between lenders and consumers.
Once you've used segmentation to scrub your inventory, prioritization will help you decide which accounts should be the focus of your efforts. Prioritization techniques analyze trended credit data to better pinpoint those with a higher likelihood to pay, which can help streamline operations and increase profitability.
Prioritization tools, for example, can tell you when consumer data changes ― like paying off a credit card or applying for a mortgage ― shifts in credit activity that indicate a greater or less likelihood of recovery, allowing you to quickly reprioritize your resources and reach consumers for payment earlier in the collections cycle.
To learn more about how TransUnion segmentation and prioritization solutions can help, visit transunion.com/solution/third-party-collections.
Understand 2021’s challenges in our new report
For exclusive insights on where the industry stands and a look at the opportunities ahead, download "The State of Third-Party Collections 2020," our second annual report exclusively for third-party collections.
Report takeaways include:
- A deep dive into consumer financial trends and overall attitudes
- How agencies plan to overcome consumer communication roadblocks
- The technology investments organizations are making to increase collections