Almost everyone I talk to in the industry rates innovation as a top priority, especially today. The economy will recover. Your strategies will decide how well you do.
Not long ago, in my former role as the leader of collections strategy for a major bank, I led a full strategy overhaul. I know first-hand that such a change brings a lot of hurdles and setbacks. In our case, everything needed an update: data infrastructure, scoring models, decision engines, customer contact tools (interactive messaging, text, email, and more), and reporting. You name it, we needed it.
Below are some lessons I have learned along the way. I hope they help you move more quickly toward innovation.
The Great Debate: Be Willing to Have It
The compliance and legal debate can feel like an insurmountable hurdle when you try to innovate in collections. Debt collection laws are so dated that there is a lot of interpretation involved. If the first answer is "no, we can't do that," don't take your ball and go home. Broaden the debate instead. Seek input from peers, industry experts, and others who have had proven success. This is the single biggest missed opportunity I see in our industry. We rarely talk to each other for the greater good.
Prioritize
Let's be real: not all change is equal, no matter how shiny. I have had the greatest success with large-scale transformations when I took the time to build a value-based prioritization matrix. Start by listing the capabilities you need. Then score them against your product lines and your criteria: estimated loss impact, expense reduction, customer value, ease of implementation (funding, regulations, technology), dependencies, and more.
TIP: do not get analysis paralysis here. High-level estimates and some good intuition at this stage will not lead you astray. It is as easy as 1, 3, 5. Use one of these three numbers to rate the degree of impact for each criterion. You keep it simple and get a built-in weighting system.
Build a Case
A common myth is that collections is strictly a cost of doing business. This view is especially common on the creditor and lender side of the equation, but it could not be further from the truth. If your plan for getting technology funding is to walk in and say "c'mon, trust me," you probably won't get very far.
Do the work. Size your impacted population, outline your assumed performance improvement, and then pull that through the roll rates to estimate reduced losses (or expenses, or improved experience). The ROI is often so clear that smart leaders will pounce. TIP: don't limit your ROI to loss reduction or expense reduction. Include the less quantifiable but impactful benefits to customers, colleagues, and operational risk.
Prove It (Test, Test, Test)
People sometimes glaze over when I talk about this, but if you are still reading, you are probably with me. It is one thing to make solid assumptions in the business case. It is another to back it up after deployment. If you can't, you will lose buy-in and credibility. Think ahead about how you will test each strategy, and always keep an unchanged portion of the portfolio clean for comparison. If we want to dispel myths about being a cost center, we need to take the time to prove the value. Test and control gets it done every time.
Each of us is at a different stage of development, and there is nothing to lose by learning from each other.
Driving transformational change is by far the hardest work I have ever done. It takes a great deal of planning and perseverance.
We will talk about these strategies and more at our first annual Strategy and Tech Conference, which will be all virtual on July 21-23. At the conference you can see live demos of the hottest tech in collections, plus in-depth sessions to help you advance your collections strategy and technology.
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