Balancing digital scale and human touch in collections in the age of AI

Across the UK, financial pressure on households continues to mount. The Bank of England recently reported that around one in five households are finding it difficult to keep up with bills and credit commitments, while StepChange Debt Charity notes that almost half (48%) of UK adults experience some form of financial difficulty each year.

For many lenders—especially specialist and non-traditional ones—this creates a unique challenge: scaling collections without losing the tailored, human expertise that defines their brand. AI, automation, and predictive analytics promise efficiency, but deploying them in a way that strengthens trust rather than erodes it requires nuance. That tension is the paradox at the heart of this piece.

Collections pressure is rising across the board

Even portfolios with historically low arrears are feeling the strain. Rapid loan growth in emerging segments, rising consumer credit demand, and the expansion of hybrid or embedded credit models all compound complexity. More customers mean more varied data streams, repayment profiles, and product mixes. Each of these factors multiplies the number of decisions collections teams must make daily—who to contact, how, and when—and traditional infrastructures simply can’t scale fast enough to keep pace.

For specialist lenders, that pressure is especially acute. Their strength lies in niche expertise and personalization—understanding the customer’s story as much as their balance sheet. Yet those advantages can become bottlenecks when manual workflows and fragmented systems prevent teams from acting quickly or consistently at scale.

Legacy workflows can’t keep pace

Many banks and lenders still rely on human‑intensive processes: spreadsheets, siloed systems, and manual hand‑offs between departments. These workflows are slow, error‑prone, and difficult to scale without compromising customer experience.

Data fragmentation compounds the problem. When customer information lives in separate systems, it’s nearly impossible to build a unified understanding of someone’s financial situation. Without that holistic view, even highly capable collectors find it hard to detect early warning signs or tailor contact strategies that genuinely help customers get back on track.

Automation isn’t one-size-fits-all

To manage growing workloads, many organizations are turning to automation, AI, and predictive analytics. These tools streamline repetitive processes such as data entry, account triage, and case allocation, giving teams more time to focus on complex cases.

More advanced systems also integrate disparate data sources to generate comprehensive, real‑time insights into customer behavior. That integration enables smarter, data-led decisioning such as flagging pre‑delinquency risks before they escalate or routing vulnerable customers to specialist support teams automatically.

But technology alone isn’t a silver bullet. Surveys consistently show that UK consumers still strongly value human interaction, especially when discussing arrears. The EY Future Consumer Index found that over 70% of customers prefer empathetic, person‑to‑person support when managing financial difficulties. Collections is, after all, about understanding the “why” behind the numbers, not just processing the repayment plan. This is where purely digital strategies often fall short.

The challenge, then, isn’t whether to use technology, but how to deploy it in a way that enhances trust and reinforces human connection.

Advanced tech blends AI and humanization

Successful collections teams today aren’t replacing collectors with AI—they’re enabling them to deliver more value. Decisioning AI and smart automation help collectors focus where it truly matters: supporting customers through informed, humanized conversations.

For example:

• AI‑driven automation can handle routine tasks like case updates, document capture, or next‑best‑action recommendations.
• Predictive models can identify at‑risk customers earlier, segment accounts by behavioral patterns, and personalize treatment paths.
• Unified customer views provide collectors with a complete picture of financial exposure and recent interactions before any contact is made.

A powerful use case lies in collector‑assist tools. These AI chatbot assistants, trained on internal policy and process documentation, can answer a collector’s policy and process questions in real time as they speak with a customer. The result? Faster resolutions, greater consistency, and a better experience for both customers and collectors.

Ultimately, these innovations don’t replace humans: they amplify them. When manual friction is removed, collectors can focus on listening, understanding individual circumstances, and co‑creating sustainable repayment solutions. It’s the perfect example of technology serving the human connection at the heart of effective collections.

How AI supports the Consumer Duty imperative

This human‑plus‑digital balance also aligns squarely with the UK’s Consumer Duty obligations, which require firms to deliver demonstrably “good outcomes” for customers. Firms must show that customers are treated fairly, receive appropriate support, and achieve better long‑term financial outcomes.

Modern collections solutions directly support these aims by:

• Embedding policy guidance within workflows, ensuring collectors follow approved processes and language during every interaction.
• Providing data transparency and auditability, so decision rationales, including treatment strategy, forbearance options, or hardship escalations, can be easily traced and justified.
• Monitoring outcomes continuously, using analytics to evidence whether repayment plans are sustainable and communication is tailored appropriately.
• Enabling proactive intervention, as predictive alerts help identify vulnerable customers earlier, triggering compassionate outreach before financial distress deepens.

In short, digital doesn’t have to mean distant. When designed thoughtfully, technology becomes the mechanism that proves fair treatment, so specialist lenders can grow responsibly.

Build AI-forward, human-first with C&R Software

Specialist lenders stand out because they know their customers better than anyone else. Their strength lies in personalized service, deep understanding of niche markets, and a values‑driven approach to helping people through financial challenges.

At C&R Software, we’re committed to helping specialist lenders deliver that level of service at scale. Our Debt Manager collections and recovery solution brings together advanced AI, automation, and seamless system integration within an open, highly configurable architecture. It’s built to flex around your operating model, supporting smarter decisioning, consistent compliance, and humanized customer engagement across every stage of the credit lifecycle.

By combining the speed and precision of AI with the judgment and compassion of human teams, Debt Manager enables collections leaders to scale responsibly, meet evolving regulatory expectations, and strengthen customer relationships for the long term. To learn more, reach out to inquiries@crsoftware.com.