Technology can be effective for successful fundraising; here’s how
The problem of non-performing assets (NPA) in India has exploded over the past decade, the genesis of which was initiated by the financial crisis of 2008.
Although the banking sector can also be blamed for the same, it cannot be denied that uncertain circumstances also played a role. The banking sector is ardently called upon to contribute to such an NPA problem, as its primary function has not been focused on inclusive fundraising for growth and selective lending, which was riddled with selectivity biases and imperfections. .
Another reason that is vehemently contributing to the problem is the fact that technology has not been leveraged for effective and successful fundraising by the banking industry.
Today, customers interact with banks in different ways. Customers of all ages, including SMBs, are increasingly using digital channels to manage their finances.
This stems from the fact that AI is a game-changer in banking. The use of AI has outpaced institutional credit decisions. To make credit decisions more efficient and less likely to be seen as a bad loan, AI has effectively and significantly replaced lending based on gender or specific trait with algorithms.
The consumer is king in the economy, and their experience must be valued for profit margins. Thus, omnichannel customer experience has become the foundation of a successful CX strategy. Currently, 9 out of 10 customers want an omnichannel experience.
Smartphones have radically changed the way customers live and changed online lender-consumer interactions. Majority of consumers prefer to connect using messaging apps like SMS, WhatsApp. Despite this huge shift in customer behavior, outbound call center collections dominate consumer credit collections, with little optimization on alternative channels.
Due to the widespread use of mobile numbers by telemarketers and scammers, borrowers increasingly prefer not to take collection phone calls. Consumers generally ignore calls from banned or unknown numbers.
After having the necessary channels in place, lenders must embed intelligence into collections processes to ensure that accounts are routed along the optimal path, using the best contact strategy and presenting the best payment options. possible treatment to the customer. In an ideal world, lenders would proactively manage their portfolios to prevent accounts from going into collection in the first place.
Lenders can use these more sophisticated models to reliably identify high-risk customers early on and proactively minimize risk exposure by modifying credit limits and optimizing authorization and pricing tactics.
To achieve this, lenders will need to implement a suite of personalized treatments across the portfolio, based on risk-reward profile and stress sensitivity.
Customers and collection cases should be segmented based on exposure, risk, and behavioral characteristics, as well as ability and willingness to pay, preferred mode of contact, and preferred interaction channels. This more diversified and personalized strategy will ensure that resources are allocated in the most efficient way possible, resulting in significant savings for the bank.
Lenders who improve their collection capacities before the next economic crisis will avoid facing increasing delinquencies when the economy recovers. As a result, lenders will see higher recoveries, lower expenses and better returns in the future. Lenders need to develop digital omnichannel collection capabilities. This will ensure adequate capacity, reasonable prices and satisfied and loyal customers.
(Nitin Purswani is CEO of AI-powered debt collection solution Medius AI-bank. Opinions are personal.)
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Posted: Saturday, March 26, 2022, 5:20 PM IST