Learnings from Debt Collection Agencies That Thrived under COVID-19

In a recent survey conducted by Prodigal in partnership with AccountsRecovery.net to assess the impact of the coronavirus pandemic on the ARM industry’s collections operations, we found that collection agencies’ performances in the past few months varied widely. Read the survey overview at Yahoo Finance.

While a large number of collections agencies predictably struggled to perform in the new remote work paradigm, more than 50% of the third party collections industry not only thrived during the pandemic but actually outperformed their pre-pandemic metrics.

Anti-fragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better.

Upon breaking it down further, we came to realize that agencies fell into three clusters. The framework introduced by Nassim Nicholas Taleb in his book ‘Antifragile: Things That Gain From Disorder’  is useful to interpret COVID-19’s impact on the ARM industry.

  • Antifragiles (54%): Agencies that thrived or grew when exposed to the stress and chaos
  • Resilients (25%): Agencies that were robust to the shocks and uncertainties
  • Contenders (21%): Agencies that suffered from the disorder, volatility, and adversity

Cluster-wise Breakdown of Agencies

We analyzed these Antifragile agencies to understand what made them tick, and found that all these agencies had utilized three key levers to outperform the rest of the pack. Even more interestingly, while these levers served the agencies well in the pandemic scenario, they seem to be applicable (and even necessary) for the upcoming future.

So what does it take for your collection agency to also thrive in the new, rapidly changing industry dynamic? Here’s what we found:

Invest in technological infrastructure:

With the dramatic upheaval of everyday operations from the pandemic, the ongoing effects of the crisis, and even the upcoming revised CFPB regulations, it is a certainty that the way we work and the strategies we utilize have changed, and will continue to change for the foreseeable future.

Investing in technological solutions seems to not only boost your current agent productivity and revenues but also future-proof you for the upcoming changes. An analysis of the Antifragiles shows that they had heavily invested in remote productivity, cloud software, and speech analytics solutions. This investment in technology helped them quickly adapt to a remote work ecosystem, and thrive. For instance, half the agencies who invested in speech analytics reported an increase in agent productivity.

Percentage of Agencies Planning to Invest in Technology

Further driving home the perceived importance of technological investments for the future, these Antifragiles have not only invested in technology in the past but have committed to “Technology as an Enabler” by making it a part of their organizational culture. They are the largest share of the market, who plan to increase investments in technological solutions.

Make data-driven decisions:

A crucial second step from investing in technological solutions seems to be acting on the wealth of data that these solutions provide. Gone are the days of a one-solution-fits-all approach. Agencies now leverage rich borrower and agent data to create tailored calling strategies or specific, timely agent training to boost revenues and productivity.

The Antifragiles reflect this truth. By leveraging data analytics on their past interactions with borrowers, these agencies were able to tailor their communications strategy to help boost their Right Party Contact (RPC) rates, by as much as 8%.

Change in RPC Rate

Inculcating a data-driven decision-making approach not only enables you to adjust your strategies for the current situation but also helps in staving off issues before they can arise. With the multitude of agent-specific performance data around compliance metrics, language, policy adherence, etc. agencies can incorporate this information to be better poised to identify problematic trends before they spiral out of control, and provide targeted training or take immediate action. For example, with remote work solutions and agent productivity tracking software, the Antifragiles identified the bottom performing quintile early on in the pandemic and laid them off in a strategic move. That, coupled with targeted agent coaching for the remainder, seems to have driven up agent productivity.

Given the variety and breadth of data available, moving to incorporate that into your everyday operations is essential for future dividends.

Be agile and adaptable:

Topping off the chain, an essential organizational culture is the ability to make quick decisions in the face of new information and adapt to the changing circumstances. While simply investing in the right technologies and leveraging them to make better decisions will enable you to outperform in the steady-state, the true distinction between the Antifragiles and the rest seems to be their state of readiness to change up their operations in the face of a new situation.

For instance, these Antifragiles were quick to apply for Paycheck Protection Program (PPP) loans and leveraged the federal stimulus to effectively manage their cash flows. This prevented major hiccups and eased their business operations during COVID-19. The agility in their decision-making to leverage possible solutions proved to be key in obtaining these loans.

Further, while these agencies were quick in laying off their bottom quintile of agents to boost productivity and adapt to the remote work environment, they have continued to display their ability to adapt to new information – the majority of the Antifragiles have announced plans to rehire for all the staff positions they had laid off, given their new strategy.

Given what we’ve seen from the data above, these three levers have proven beneficial to the Antifragiles, and these agencies are also doubling down on them for the future.

The pandemic crisis, and the ripple effects that it has brought about, are far from over. Furthermore, borrowers are also facing hardships and unforeseen difficulties. So to better gird yourself for the upcoming changes, it’s time for you to adapt as well.

After all, it’s never too late to do the right things.

Full survey report can be downloaded here.

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Posted by

Shantanu Gangal

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