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Debt collection and AI/ML : The perfect partnership
Author - Shyam Yadav
The current state of debt collection and the need for AI/ML
What is AI/ML?
AI/ML stands for artificial intelligence/machine learning. AI/ML is a type of technology that allows machines to learn and act on their own. This means that they can take in new information and apply it to their current tasks. For debt collectors, this can be a game-changer.
Currently, debt collectors rely heavily on manual processes. This means that they have to sift through mountains of data to find the right customer information. With AI/ML, debt collectors can automate this process. This will free up time so that they can focus on other tasks, like strategizing how to improve debt collection.
In addition, AI/ML can help debt collectors become more efficient by helping them prioritize accounts. Currently, collection heads have to manually review each account / or use excel macros with some fixed logic to determine which ones are most likely to result in a successful collection. With AI/ML, this process can be automated. This will allow collectors to focus their energies on accounts that are most likely to result in a positive outcome.
The benefits of using AI/ML in debt collection
Account Prioritization
This one has a bit longer contentAI and ML can be used to identify which accounts are most likely to end up in default or need recoveries. By analyzing past data, AI and ML can detect patterns that human beings would not be able to discern. This information can then be used to develop a prioritization strategy for accounts that are most likely to go into default or require recoveries.
Predictive Analytics
There are a few different ways that AI/ML can be used to prioritize accounts for debt collection and loan recovery. One way is to use predictive modeling. Predictive modeling is a type of AI that uses historical data to make predictions about future outcomes. For example, if a predictive model is trained on data from past loans that have gone into default, it can learn to identify patterns that indicate which loans are more likely to default in the future. This information can then be used to prioritize accounts for debt collection and loan recovery.
NLP
Another way that AI/ML can be used to prioritize accounts for debt collection and loan recovery is through natural language processing (NLP). NLP is a type of AI that deals with understanding human language. It can be used to analyze emails, customer service transcripts, and other communication channels to understand what customers are saying about their payment plans. This information can then be used to highlight potential issues that may lead to defaults or recoveries. Voice Bots are being deployed and will bring a see change in sentiment analysis.
Automation of Repetitive Tasks
One of the biggest benefits of AI/ML is its ability to automate repetitive tasks. This is especially beneficial in the debt collection industry, where many of the day-to-day tasks—such as making phone calls, sending emails, and updating account information—are often repeated multiple times per day.
By automating these tasks, you can free up your team to focus on more complex cases while still maintaining a high level of productivity. In addition, automation can help to speed up the collections process by eliminating potential delays caused by human error.
Improved Customer Service
Another big benefit of AI and ML is improved customer service. By leveraging data gathered from past interactions, AI-powered chatbots / voice bots and other digital assistants can provide an enhanced customer experience by offering personalized assistance and recommendations.
For example, imagine you're a customer who falls behind on your mortgage payments. An AI-powered chatbot could reach out to you proactively with a payment plan that is tailored to your individual financial situation. Or, if you're struggling to make a payment, the chatbot could recommend alternative options, such as deferring your payments or consolidating your debts.
Enhanced Security
In addition to improved customer service, AI and ML can also help to enhance security by identifying potential fraud attempts. For example, by analyzing patterns in past fraud cases, an AI system could be trained to recognize similar patterns in future cases, allowing you to flag potential fraud attempts before they result in actual losses.
Potential challenges with using AI/ML in debt collection
Data Privacy Concerns
One of the most significant potential challenges posed by AI/ML in debt collection is data privacy. When sensitive personal information is involved, there is always the risk that it could be leaked or used for nefarious purposes. This is especially true when that information is being stored electronically.
To combat this, companies need to be extra careful about how they collect and store data related to debt collection. They should also ensure that their employees are properly trained in data security best practices. Additionally, companies should consider implementing strict access controls to limit who can view and modify sensitive data.
Compliance Risk
Another potential challenge posed by AI/ML in debt collection is compliance risk. Due to the complex nature of regulations surrounding debt collection, there is a real risk that companies could inadvertently violate those regulations when using AI/ML technologies.
To mitigate this risk, companies need to be very clear about what their goals are for using AI/ML in debt collection. They should then develop a clear plan for how those technologies will be used, taking into account all relevant regulations. Additionally, companies should perform regular audits to ensure that their use of AI/ML technologies remains compliant with all relevant regulations.
How to get started with AI/ML in debt collection
The debt collection industry is under pressure from increasing regulation and more savvy consumers. In order to stay ahead of the curve, debt collection agencies need to adopt new technologies; AI/ML is one such technology that hold particular promise for the industry.AI/ML can help reduce the number of calls that need to be made, identify potential new leads and improve customer service – all key pain points for today’s debt collectors.