Artificial intelligence is taking the world by storm. That’s especially true in the financial industry, where the AI market is expected to expand to a whopping $12.3 billion by 2032. In fact, research suggests 75% of banks with over $100 billion in assets will introduce fully integrated AI strategies into their operations by 2025.
If you’re looking to increase payment rates, enhance efficiency, and improve the customer experience, you should absolutely consider adopting AI in debt collection. In this article, we’ll explore some of the most common applications of AI in debt collection to help you get started.
What is AI? How do you use AI in collections?
Artificial intelligence is a catch-all term encompassing a wide variety of different technologies. It’s likely that you’re already familiar with AI tools like ChatGPT and Google Gemini, as well as AI-based assistants like Siri and Amazon Alexa.
You’ll see teams utilizing a couple of different types of AI in the field of debt collections. One of the most common applications of AI in collections is automation, where this technology is used to automatically perform routine tasks based on a series of set rules.
Generative AI is more complex, as it involves more complex decisions. This technology uses AI to create new content like images, texts, or videos. As an example, LLMs (large language models) use generative AI to understand and generate human language.
Tools like ChatGPT use machine learning to analyze large amounts of data, then answer questions and summarize key information based on that data. Collections teams are adapting this technology into their unique context to create customer-facing chatbots, internal assistants for policy compliance, and other unique tools.
In the next section, we’ll explore some of the most common applications of AI in collections in more detail.
The top 8 ways to operationalize AI in debt collection
#1 - Automate Routine Tasks
AI-powered debt collection solutions ensure teams don’t waste time or effort manually inputting data via spreadsheets. Instead, these tools leverage automation capabilities to streamline workflows and increase efficiency throughout your organization.
By automating tasks such as data entry, payment reminders, and basic customer inquiries, AI helps collection teams focus their efforts on more complex tasks. Not only does this improve team productivity, but also it reduces the potential for human error.
Best of all, AI-driven automation in debt collection helps teams focus on building relationships with customers, leading to increased satisfaction, improved financial performance, and a more sustainable collection operation.
#2 – Make Data-Driven Decisions
AI-powered analytics provide critical insights into every aspect of your collections operation. Use real-time data to monitor workloads, analyze performance metrics, and determine who’s best suited to perform specific tasks. With this technology, you ensure your team is always operating at maximum efficiency.
AI in debt collection analyzes vast quantities of data to give you a sense of what works and what doesn’t. For example, you might use these tools to analyze call outcomes to determine which approach is most effective. From there, you can adjust your team’s performance accordingly to maximize engagement from customers.
These data-driven decisions are foundational to improving outcomes throughout the collections process. For example, they facilitate better communication, improved engagement, and more strategic customer outreach.
#3 – Predict Future Outcomes
Artificial intelligence meticulously analyzes customer history and behavior to anticipate future outcomes. This advanced technology goes beyond simple data aggregation by taking a deeper look into patterns and trends and providing actionable insights to transform your collection strategies.
Your team can predict call volumes, anticipate customer payment behaviors, and identify individuals with the greatest risk of falling into delinquency. Leverage these insights to strategically allocate resources and deliver more target interventions. As an example, you might segment customers based on potential recovery value and assign your most skilled agents to the most challenging cases.
By understanding customer behavior on a deeper level, you can engage in more personalized and proactive outreach strategies. Not only does this improve collections outcomes for your organization, but it also fosters a more positive and empathetic experience for your customers.
#4 – Optimize Customer Communications
Effectively engaging with customers in hardship is critical for reaching your team’s targets. Every customer is different, and every customer’s situation is different, too. Personalized communications can make all the difference when it comes to increasing repayment rates.
Collections teams can take advantage of AI-driven insights to optimize their outreach without requiring any additional resources. These tools help teams determine what to say, when to say it, and how to say it for maximum effect. Also, they’re capable of automating routine communications to reach more customers in less time.
These days, most customers prefer to engage with their financial institutions through digital communication channels like email and SMS. Advanced AI technology in collections also integrates seamlessly with omnichannel communications systems to deliver tailored messages to customers, improving results among populations who are less likely to pick up the phone.
#5 – Add Self-Service Chatbots
67% of consumers prefer self-service over speaking with a company representative. That’s especially true among customers in collections, who may feel uncomfortable sharing personal information about their financial situation with a live agent over the phone. In these instances, self-service tools like chatbots provide customers with the comfort and the confidence they need to reach out and resolve their accounts.
Operationalizing advanced AI technology into your collections operation is the first step towards giving these customers what they want. AI-enabled chatbots integrate seamlessly with your mobile app or website to communicate with customers in real time. Customers can ask about their account balance, update their account information, make secure payments, and more, all without involving a live agent.
#6 – Assist Collections Teams
When customers choose to connect over the phone, it’s important to ensure each interaction is optimized. Making the most of every contact point improves repayment rates and enhances customer satisfaction.
Collections teams want to help customers resolve their debts while making decisions in line with internal organizational policies. Unfortunately, these policies can number in the hundreds of thousands, and they’re not always easy to access, especially with a customer waiting on the other end of the line.
Fortunately, AI in debt collection has the power to make a difference. Supercharged AI assistants leverage the latest technology to ingest all those policy documents at once. Teams can simply ask these AI-enabled tools a question to receive an answer in real time.
#7 – Reduce Staff Turnover
High workloads, high stress levels, and high turnover rates—these are just a few of the challenges that collections teams face.
Fortunately, AI-powered technologies in debt collection have the power to support hard-working collections teams in a meaningful way. Automating routine tasks reduces the strain on team members and frees them from the most tedious tasks. Self-service tools like chatbots reduce contact time and boost payment rates, all while easing the workload for team members.
Reducing the workload enables collections teams to spend more time focusing on their customers. By concentrating efforts on more complex cases, teams can deliver more humanized care to people in financial hardship, boosting overall morale.
#8 – Maintain Regulatory Compliance
Collections teams must operate in accordance with various legal requirements, such as the FDCPA, GDPR, and TCPA. Depending on the location of your organization and your organization’s customers, you’ll need to take multiple local, state, and federal regulations into account at the same time. It’s a complex landscape with a great deal of risk involved—after all, falling out of compliance can result in fines in the millions of dollars.
Fortunately, AI technologies streamline regulatory compliance. These advanced tools monitor workflows in real time to verify whether collection activities are in line with legal regulations. If they spot a potential breach, they’ll flag it straight away, so corrective action can be taken immediately.
Is it safe to use AI for debt collections?
87% of customers would avoid doing business with a company they perceive as having questionable security practices. Given these statistics, it’s no surprise that securing sensitive customer data remains a top priority for debt collections teams.
If you’re looking to incorporate AI systems into your workflows, it’s important to ensure adherence with strict data security regulations like GDPR and PCI-DSS. Top-tier providers offer solutions that are already certified for compliance with these regulations.
Also, there are steps you can take within your organization to ensure secure implementation. Experts recommend setting out governance frameworks to define access controls and monitoring procedures. It's also worth establishing ethical guidelines for AI use within your debt collection organization, so you can address concerns like bias and misuse head-on.
Your organization should also maintain a clear segregation of duties when deploying AI tools, so no single individual has sole control over critical processes. Sharing these responsibilities across teams helps reduce the likelihood of errors and misuse.
Ultimately, with the right security measures in place, you can use AI in debt collection to transform your workflows, enhance efficiencies, and improve customer engagement—all while keeping customer data safe and secure.
C&R Software utilizes AI in debt collection
C&R Software is the industry’s leading provider of AI-native debt collections solutions. Our flagship product, Debt Manager, simplifies collections and recovery through automated workflows and highly configurable rules. Its integrated decisioning engine, FitLogic, leverages AI-powered algorithms to operationalize data-driven insights throughout the collections process.
Certified for PCI-DSS and PA-DSS compliance, Debt Manager stores customer data in accordance with the strictest industry standards. To find out more about how to take advantage of cutting-edge AI technology in debt collection, contact us today.
