Digital Services: Humanising debt collection with technology

This article first appeared in Digital Edge, The Edge Malaysia Weekly, on November 9, 2020 - November 15, 2020.
Digital Services: Humanising debt collection with technology
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Debt collection in many parts of Asia is still conducted manually, involving local agencies that tend to resort to hostile phone calls and oft-violent confrontations to get debtors to repay their loans to banks and other financial institutions.

This is something that Collectius, one of the largest debt management companies in the region, hopes to change by transforming the industry digitally and humanising the processes.

“One of the biggest challenges for the industry is a lack of productive communication between debtors and collectors. Many other agencies in Asia are still running a ‘pen and paper’ business with manual phone calls and intimidation tactics, an inefficient use of resources that results in customer complaints and delays in collection.

“This old school approach is not viable in today’s digital age,” says Leong Yam Meng, Collectius country managing director for Malaysia.

Financial technology has upended many segments of finance and banking in the last decade, but the debt collection industry has been slow to change.

Gustav A Eriksson, Collectius founder and CEO, says the company employs technology to ensure the best possible experiences for its customers, using insights gained from machine learning and artificial intelligence.

“This includes providing easy online payment options, allowing them to choose the means of contact, omnichannel payment gateways and a self-service portal.

“Apart from the external customer experience, internal operational excellence is key. We have automated our workflow and processes to increase efficiency and invested in extensive technology-based quality control training to deliver seamless and standardised customer services across the region.

“Our tech platform helps our mediators facilitate conversations with customers and set up customised repayment arrangements that meet the customers’ needs, including their preferred time of contact and most popular payment plan options,” says Eriksson.

The agency, founded in 2014, has operations in Indonesia, the Philippines, Singapore, Malaysia and Thailand. It manages US$2.5 billion (RM10.4 billion) in debt in more than 40 portfolios.

In Malaysia, the level of non-performing loans in the banking system is at a historical low. As at end-February 2020, the gross impaired loan ratio for the banking sector stood at 1.57%, according to Bank Negara Malaysia.

“That is why Collectius has adopted a customer-centric approach that combines advanced technology tools with a humanised, empathetic style to fill this communication gap and facilitate a more efficient and professional mediation.

“We ensure all our calls are recorded and monitored by our quality assurance teams. Our fundamental principle is to collect compliments rather than complaints from customers. We are continually training and monitoring mediators/collectors that deal with customers to improve communication skills to ensure a pleasant experience,” says Leong.

Apart from the lack of innovation, the sector is also impeded by the complex regulatory landscape in Southeast Asia. Each country comes with the added complication of local laws, customs, systems and processes that are incompatible with global practices, says Leong, adding that this aspect is very challenging when it comes to debt collection.

So, Collectius partnered with the International Finance Corporation in September to launch a US$60 million regional investment platform dedicated to acquiring and resolving unsecured debt in Indonesia, the Philippines, Malaysia, Thailand and, soon, Vietnam.

Through the partnership, Collectius hopes to contribute towards improving and developing industry-wide best practices.

Eriksson says the company is very particular about complying with local and international regulations. “We develop a personalised, tailored solution for each and every debtor, whom we prefer to call ‘customers’. This means really listening to the customer and understanding the circumstances of their situation and offering flexible and realistic repayment plans.

“We are sensitive to the challenges of vulnerable demographics and frequently offer curated discounts to support them in becoming debt-free. Compassion for our customers and their financial situation has always been at the core of our approach, now more than ever. Reputation and compliance with local regulations is of utmost importance to us and is strictly monitored.”

Seeing that the local economy is expected to contract this year, with business activity almost at a standstill since the start of the Movement Control Order (MCO) to flatten the Covid-19 curve on March 18, Collectius has also come up with a special programme to assist its customers.

“Since the start of the outbreak, we have rolled out special discounts and packages to serve our customers better. Most recently, we extended waivers to those in a difficult position,” Eriksson says.

He adds that the company even offered discounts of up to 50% on principal for some customers. “We were also there to listen to their needs and provide them with payment holidays and pausing of any interests and fees.”