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Lenders are using innovative tactics that have been established through study to boost collection efficacy and efficiency. Dynamic queue management and text communication are the two main advancements being used.
Fremont, CA: Retail lending and leasing have risen rapidly in the decade since the financial crisis, with non-bank financial companies driving the majority of the growth. These institutions used technology to improve speed and access in order to take market share away from more traditional sources of lending. However, increased competition in the market and the demands imposed by younger, more tech-savvy clients are driving further loan lifecycle improvements. A low-interest rate and favorable terms are no longer enough to entice new borrowers.
The lending game is increasingly being won and lost at the front-end (originations) and back-end (collections) of the lending process. The middle — a compliant servicing platform — is no longer optional.
Key Loan Origination and Collection Trends:
"Digital honey": To ensure a consistent flow of applications, indirect financing still relies on old-school tactics such as forming agreements with dealers and other middlemen. However, getting a significant number of potential borrowers to a lender's website in the direct arena is vital to business success. To do this, lenders use digital marketing strategies such as paid advertising and "canvas fingerprinting" to increase traffic to their websites.
Multiple Payment Option: Once a loan or line of credit has been funded or leased equipment has been deployed, the focus shifts to guaranteeing regular payments. The trend is to accept as many payment methods as possible, giving borrowers options ranging from wire transfers to credit cards. A new payment option is for the lender to use programs such as Plaid to withdraw funds from the borrower's bank account on the due date. This is especially true for lenders in the merchant cash advance industry.
Delinquency Management: Lenders are using innovative tactics that have been established through study to boost collection efficacy and efficiency. Dynamic queue management and text communication are the two main advancements being used.
Collections managers can use dynamic queue management to create queues based on conditions other than account aging and then allocate these queues to individual collectors or a team of collectors. This has significantly enhanced collection quality.