3 Ways Text Adds Value to Collections

Consumer debt has grown more than 8% over 2021 to reach the highest levels yet, due to a combination of higher inflation, robust consumer demand and high interest rates. According to the Q3 Quarterly Report on Household Debt and Credit, total household debt reached $15.3 trillion at the end of Q3 2022. ¹   

Higher debt means higher delinquencies from credit cards, mortgages, auto loans and medical debt.  For example, the 30-day delinquency rate for consumer credit card payments has risen from 1.85% to 2.08% in Q3 2022, making four straight quarters of increases. ²

Increased delinquencies mean more placement opportunities for collections agencies. Sounds like good news, but is it? Increased opportunity means increased demand for agents, yet according to a recent TransUnion study, 93% of respondents found hiring and retaining talent in the collections industry challenging, and 79% stated that hiring is much harder today than it was two years ago. ³

To capitalize on the opportunity, collection firms are looking to increase their reliance on automation, digital channels, and self-service solutions. Texting has surpassed email and voice to become the preferred consumer communication channel, and must be a key part of any digital communication strategy. Engaging consumers via text can help mitigate talent and recruiting challenges, improve operating efficiencies, and adhere to compliance regulations.

Adoption rates of texting among collection firms have been slow but are now gaining momentum. While 37% of all collection firms use texting, only 17% of small firms (<100k accounts) utilize the channel and 51% of large firms are using the channel. The future of collection success will depend on digital adoption. Thirty-four percent (34%) of companies are setting this into motion, planning to add text messaging and another digital tool to their communication channel in the next two years. ⁴ Even more respondents (55%) from the same study plan to invest more in agent-less contactless strategies.

Reaching customers in their preferred channel provides several benefits: 

1. Increase Right Party Contact (RPC) Rate

All debt collection processes begin with locating and connecting with the correct person. It’s vital for accomplishing your goals and staying compliant. A higher RPC rate indicates a higher success rate. The high open (98%) and response (45%) rates of SMS makes it a reliable channel for reaching customers. ⁵

Keeping contact data clean and monitoring phone numbers is required regardless of whether communication is a phone call or text message. TCPA oversight requires carriers to report changes in mobile device ownership daily. SBT’s Deactivation Logic® ensures that you are reaching the right person with the proper communication and not sending messages to numbers that are deactivated and given to a new user. If a mobile number has changed carriers, no action is required, and the consent is intact. If a mobile number is deactivated, SBT manages the deactivation logic protocol and provides a daily report to the client. 

Collection firms can count on the reliability of text messaging to drive their RPC upwards by as much as 20%. 

2. Increase Promise-Kept Rate

Unlike phone calls, text transforms communication and repayment processes into a frictionless customer experience. Consumers are looking for a conversational experience with businesses and texting. Reminders, two-way conversational texting and shortened links minimize the steps leading to higher Promise-Kept rates. 

Create a superior customer experience by adding links to your text message that drive consumers to your site to create new accounts or to a payment portal to set up payment plans and make a payment. Enabling self-service frees agents from collecting payment information over the phone, minimizes the risk of canceled payments, and reduces the need for agents to chase down broken payment plans. 

This will also help your collection teams operate more efficiently, reduce overhead costs, and serve more customers. You benefit from reduced broken payment plans by as much as 20% which drives greater revenues. 

 3. Improve Liquidation Rate and Margins

In a competitive market, agencies are looking for every advantage to improve their liquidation rate and their margins. Text messaging improves agent effectiveness.  More dollars = higher liquidation rates and better margins.  

Payment reminders are powerful for driving on-time collections. However, there are still times when an exchange between agent and debtor is required, especially when working to collect outstanding balances. SBT’s two-way texting solution enables that necessary conversational experience between agent and debtor. This resource gives agents more control over the conversation and clients the flexibility to engage when available.  

Our customers that rely on texting achieve 4-6x higher revenue collected, thereby reducing the need for additional head count. 

Higher deliverability, higher RPC rates and two-way conversations mean increased connection, higher agent productivity and higher payments.  The impact of Regulation F is now well understood and has strengthened the credibility of text message communications between the collection firm and borrower. Debt collectors that follow a compliant strategy will reap the benefits of texting to realize efficiencies within their compliance efforts for the Consumer Financial Protection Bureau’s Regulation F requirements.    

Collection firms looking to engage customers in a meaningful, responsive, and convenient way will benefit from adding text messaging to their strategy. Texting delivers real-time reliability, builds trust, and is the key to long-term success in this industry. Its cost-savings features make it accessible to collections firms of all sizes looking to adopt digital innovations. 

Want to know how texting can add value to your firm? Contact us to see how SBT’s FinText™ platform delivers compliant texting and self-service capabilities, helping you improve agent productivity and bottom-line results.  

For more information on Regulation F, check out our Compliance white paper. 

References

1. https://www.telusinternational.com/insights/customer-experience/article/trends-in-debt-collections
2. https://www.lendingtree.com/credit-cards/credit-card-debt-statistics/
3. https://www.tlo.com/lp/the-collections-industry-in-2022?utm_campaign=pr+2022+collections+report&utm_content=report&utm_medium=press-release&utm_source=press-release
4. https://www.insidearm.com/news/00048724-collections-industry-sees-significant-spl/
5. https://www.gartner.com/en/marketing/insights/articles/tap-into-the-marketing-power-of-sms#:~:text=Various%20sources%20report%20SMS%20open%20and%20response%20rates%20as%20high%20as%2098%25