Communicating with Millennials Entering Collections for the First Time (sponsored)

Before the current economic debacle started, Millennials were already struggling to meet their financial obligations. Since 2015, Millennials have taken on more debt—an average 58 percent more—than any other generation. Economic downturn sparked by COVID-19 will push more Millennials (the largest segment of the U.S. workforce) into collection portfolios. The New York Federal Reserve shows that more Millennials were entering serious delinquency (90+ days past due) at the beginning of the COVID-19 pandemic than any other generation:

Younger workers are more likely to say they or someone in their households has lost a job or suffered a pay cut due to COVID-19. Millennials compose the largest segment of the industries hit hardest by the economic disruption.

When these “digital natives” enter collections, they will bring with them their preference for digital communication. In a study of 1,000 delinquent customers, McKinsey found that digital channels (e.g., emails and texts) drove higher repayment action rates among “digital customers” than did traditional channels (e.g., letters and phone calls). Conversely, traditional outreach methods elicited 18 percent fewer responses from “digital customers” with accounts 30 days past due. Issuer sensitivity to consumers’ communication preferences improved payment outcomes.

The current economic circumstances and McKinsey’s findings highlight the essential role consumers’ communication preferences and behaviors plays in effective collections operations. As delinquent consumer communication preferences diversify, overreliance on traditional outreach methods or failing to freshen customer information may inflict an outsized impact on debt collectors’ operational efficiency and revenue capture.

Most CRMs are out of date

Every year, 48 million people change their phone carriers or phone numbers. Email addresses tend to be more stable; however, consumers collect email addresses over time, and knowing the primary email address is important. An email sent to a primary address is 14 times more likely to be read than one sent to a secondary address.

Data accuracy impacts all phases of collections: when accounts go delinquent, the duration of delinquency, and in the days prior to delinquency. At each phase, collectors with the most current consumer information have the best chance of reaching the consumer over his preferred channels and collecting.

As the U.S. economic situation worsens, a consumer entering delinquency on multiple loans may be contacted by multiple collectors at the same time. He may choose to make partial payments on several loans or strategically choose the loan that will receive full payment. Collectors slow to make contact over the consumer’s preferred channels run the risk of receiving only partial or no payment. Outreach over the wrong channels, or with inaccurate customer information, slows that effort. Days and multiple outreach attempts may pass before it’s clear the information needs updating, while another collector with more up-to-date information may arrange payment. The stakes could rise if the CFPB institutes the rule limiting collectors to seven contact attempts per consumer per week.

Consolidations and acquisitions compound the problem. An acquired company’s consumer data doesn’t readily update when it’s integrated with the acquirer’s databases. Multiple fragmented records for the same consumer may muddy the parent company’s data. Siloed records could co-exist for years. Most organizations have no formal data governance framework or budget dedicated to data integration. It’s often difficult and expensive to bring data together into a single, current view; yet, inaction invites the risk of non-compliance and operational waste.

Multiple phone numbers and email addresses may appear in a consumer record. Some may be associated with an employer. One or more may no longer be associated with the consumer at all or, in the case of phone numbers, may have been reassigned, presenting a risk to TCPA compliance. One may be the consumer’s preferred point of contact, while another is mostly ignored. Without knowing which is which, agents or systems will waste outreach effort and increase regulatory risk.

The cost of data decay

Consumer contact information may change faster during a recession driven by COVID-19, either from moving residences or changing phone information. Collections organizations that assess the accuracy of their CRM sources in real-time will be better prepared for what’s coming.

A commissioned study conducted by Forrester Consulting on behalf of Neustar (Why Consumers Won’t Take Your Outbound Calls, July 2019) found that over 60 percent of respondents believe “lack of contact data” was “critical” or “important” to addressing challenges in contacting customers. These challenges impact the top and bottom lines: 48 percent of firms experienced increased operational costs. 43 percent lost productivity. While perhaps a tolerable annoyance during a prosperous period, inaccurate consumer information and disregard for outbound communication best practices incurs critical costs during a downturn.

Effectively contacting consumers during uncertain times

Early and effective consumer outreach can often prevent loans from becoming delinquent or limit the duration of delinquency. However, making contact efficiently and arranging payment successfully requires a better understanding of consumer data and more sophisticated outbound communications strategies. To communicate important and timely messages to consumers, forward-thinking outbound call centers focus on improving their understanding of consumer data and their sensitivity to consumers’ communication preferences.

Refresh and deepen consumer data

An accurate, complete, and up-to-date view of consumer data underpins operational efficiency. The key is to fill in gaps in accounts that feature an incorrect phone number or email address, or none at all. To minimize compliance risk each phone number should include information on phone type, in-service indicator, and risk associated with TCPA regulations. These data insights enable the prioritization of communication strategies for maximum operational efficiency and revenue per contact attempt.

Reach out at the best day and time, and to the best number

CRM files normally do not indicate the days and times when individuals are most likely to use their phones. That may force collections organizations to place multiple calls or send multiple text messages to reach consumers. Also, a consumer’s record may list multiple phone numbers without indicating the primary number. Collectors will communicate important messages in fewer attempts if they have insight into the best time to reach out and the most active phone number.

Regardless of what disruption COVID-19 brings, collections organizations retain control over how they manage their CRMs and outbound communication strategies. To minimize the cost of wasted time and outreach, and increase the odds of revenue recovery, collectors must make the right connection the first time — at the right time. Moving beyond a narrow focus on (often poor) data sources and establishing an accurate and inclusive view of consumer information and preferences now will improve outreach to consumers, no matter what the future holds.

Neustar offers a free data analysis for organizations to understand the quality of their current data and provides insights for operational data improvements. Learn more.

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