ANALYSIS: Digital-collections strategy amidst coronavirus pandemic
It is an interesting time for both lenders and borrowers. The impacts from COVID-19 have been unexpected and far reaching, raising questions for many lenders as their customers seek convenient and applicable repayment alternatives. As delinquencies rise or threaten to rise — creating concern and potential portfolio volatility — many lending businesses are searching for alternative ways to navigate this new normal. Moving toward a borrower-focused digital collections strategy is a safe route being traveled by many.
As a lender, what does it mean to have a digital collections strategy? While the term “digital-collections strategy” may seem vague at first pass, the key is to focus on the importance of meeting your borrowers wherever, whenever, and however they want to be met. This must be the backbone of any digital approach and is a foundation many lenders have not yet constructed or even considered.
When businesses evolved to adopt an online presence in the early 2000s, consumer communication and payment collection was barely an afterthought if given any thought at all. Companies by and large applied traditional “print” strategies and methodologies to the new online medium essentially focusing on brand and product advertising. As technology advanced and consumer trust grew, more businesses began harnessing the true power of the internet and started meeting, conversing, and ultimately transacting with their customers online. Apple released the first “smartphone” to the masses in 2007, and consumer engagement changed again — now people could conduct personal business from the palm of their hand from almost any place in the world. By 2015 smartphones had made it into the pockets and on the nightstands of most Americans, and the opportunity to redefine the collections experience for lenders and their customers became abundantly clear.
Giving borrowers the ability to engage lenders on their smartphones – away from home or work – was a positive dynamic shift, but we know that it is only one of many potential conduits for communication and repayment. Consumers expect more choices, and while lending institutions that employ just one or two digital lines of interaction will indeed see benefits, only companies with a comprehensive and cohesive digital strategy — one that transcends the traditional collector and borrower communication and repayment relationship by investing in an omnichannel borrower experience — will benefit the most.
At Payix, we’ve seen a clear trend with lenders utilizing our platform as part of their digital collections strategy to combat the impacts of COVID-19. Although anecdotal evidence points to industry-wide decreases in payment collections beginning in March and continuing through May, we saw a week-over-week drop through March — coinciding with the conclusion of tax season and start of the pandemic, a recovery in April (most likely due to government stimulus checks), and a return to baseline in May and into June.
In a pandemic state, when many people are hesitant to resume normal activities, a lender who invests in borrower-facing tools, designed to aid in communication and repayment, highlights a willingness to not only accommodate the needs of their customers, but also increases the probability of returning to pre-pandemic collection rates.
Relying solely on in-person payments to drive revenue, collecting a mailed check sent to an office address, or hitching a horse to a wagon as a means to get where you’re going — these are all things of the past. Companies with a digital platform that includes communication and collections solutions aimed at customers wrestling with the ever-changing complexities of this new world — these businesses are breathing easier today as the future continues to unfold.
Preston Cecil is the chief operating officer and co-founder of Payix. Offering white-label products and real-time loan management system integration, Payix helps lenders and loan servicers improve their ability to engage with borrowers and collect payments. More details are available at payix.net.