In my 15 years of experience running a company that offers collection software, I have seen a dramatic change in how credit unions operate. The credit union industry should be proud of the ways it has embraced technology.
Every time I travel, I see credit unions doing amazing things. Smart things that drive efficiency, such as bringing business intelligence into their collection processes. In fact, I've observed the industry really evolve through a desire to work smarter, not harder. I've seen it in industry news and I've heard it in conversations with credit unions and business partners.
The days of simply segmenting past due accounts into queues based on criteria like priority, product and alphabetical order are over. Today, credit unions have more access to information than ever, but they need to begin taking advantage of this data in order to combat many of the challenges that our unpredictable marketplace presents.
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It's time credit unions ask, "How can I get smarter using the information I have?"
The first step is to truly understand your members. Your software should allow you to gain visibility into behavior patterns. Understanding the likelihood that members will react a certain way or do something specific depending on the situation will help you to build and apply a more comprehensive member understanding.
For instance, you can determine how many times a collector called a member and when was the highest likelihood to reach that person. Business logic should be used to only call during that time rather than wasting effort when you know the call will be unsuccessful.
In the past, it was not as important to aggregate information from databases and anticipate behavioral patterns. Now, collectors are, or should be, asking things like, "Which member is habitually late but always pays by 15 days after the due date? How can we use this knowledge to benefit us?"
All of the actions listed above are best practices credit unions should begin taking advantage of now. However, I have seen a desire to take this business logic even further, demonstrating where I believe the industry is ultimately headed.
A small but rising number of credit unions are incorporating collection information into their lending decisions, including evaluating ability to pay during the lending process. They are taking the time to understand the historic pattern of behavior of potential borrowers.
Especially with government agencies putting pressure on financial institutions to cooperate with members rather than just charging off the accounts, credit unions are cognizant of the reality that not all delinquent members are bad members.
The next step is for credit unions to begin using collection conversations as opportunities. Yes, forgetting to pay a bill is unfavorable, but it allows your collectors to get people on the phone and find out, for instance, that a member has three credit cards through other providers who charge high rates and require high minimum payments. With increased integration, a collector is prepared to offer other services from your institution to that member, providing your credit union with more wallet share.
Most credit unions likely have access to the information they need to begin taking advantage of business intelligence through their existing software platforms, credit bureau information and other third-party relationships, but it is important that they demand that their business partners help them bring this data together in an effective way.
Push your technology partners to continually move forward and innovate. Do not allow the vendor community to stand still. What is best for the entire financial services community is to work smarter, not harder.
Jay Mossman is founder and CEO of Akcelerant Software. He can be reached at 610-232-2763 or [email protected].
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