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Advanced strategies for more effective debt collection I

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How to leverage mental shortcuts and cognitive biases in delinquency management

Debt collection is traditionally seen as a purely transactional process. However, this approach overlooks a significant opportunity. Once you understand how customers make decisions—especially when they’re dealing with financial stress—you can transform collections from a frustrating, intimidating experience into a positive, empowering one, all while improving key collection metrics.  

Instead of relying solely on penalties and deadlines, successful debt recovery strategies leverage behavioral science to guide customers’ decision-making. Tapping into behavioral patterns helps you connect with customers in more personalized, empathetic ways and motivate them to take action to resolve their debt. This enables you to increase their awareness of repayment options they may be unfamiliar with or not consider due to the stress—or perceived shame—of their situation.  

In this post, we examine the following mental shortcuts and how to use them to influence customer repayment behavior: 

  • Reciprocity principle 
  • Implementation intentions 
  • Urgency heuristic

Predicting responses to collections strategies

Normally, heuristics and cognitive biases help us navigate our daily lives with ease, as we saw in our previous blog. But financial stress makes it harder for us to think straight—and that can lead to sub-optimal decisions. Ultimately, instead of making it easier for us to repay our debts, these mental shortcuts and biases can land us in a deeper financial hole.  

In the context of delinquency, this means customers often repeat the same behaviors due to these shortcuts. In other words, we see recognizable patterns. 

Here’s the good news: If you understand somebody’s past repayment behavior, you can usually predict how they’ll respond to specific collections messages. So you can tailor your future collections messaging campaigns to each specific person—and fine-tune your emails and text messages to be highly effective.  

How do you do this? By leveraging heuristics and cognitive biases in a way that empowers customers to take control of their financial situation. 

How to leverage mental shortcuts for more effective debt recovery strategies

By understanding how heuristics and cognitive biases shape decision making, you can tailor your messaging to guide customers to positive repayment behaviors. There are dozens, if not hundreds, of these mental shortcuts, and different people will be open to different mental shortcuts based on their individual experiences and circumstances. In short, understanding exactly how each one works and when a customer will be receptive to it is critical in modern debt collection.  

Let’s take a high-level look at three of the most common heuristics we can use to influence customers’ responses.

Reciprocity principle

According to the reciprocity principle, people tend to reflect the type of treatment they receive from others. If a person receives positive treatment such as a compliment, they may be more inclined to return this treatment.  

To increase collections, offer empathy and help in your communication with customers. By showing your understanding and support, you encourage them to reciprocate by taking positive action. Acknowledge the customer’s value, and make it clear that you’re on their side. This makes them more likely to feel obligated to respond positively—either by making a payment or reaching out to discuss their situation.  

Example: “Jon, you’re a valued customer, and we don’t want to say goodbye. Let’s work through this together. Call us today to discuss your options.” 

Implementation intentions

People are far more likely to follow through on their goals or intentions if they create an “if-then” plan that specifies when, where, and how they’ll complete the activity. We refer to this as “implementation intentions.” 

To use it in debt recovery, frame your message as a specific, actionable plan that outlines the steps the customer needs to take. Offer a simple checklist that breaks down the process. This reinforces how small actions can lead to significant progress toward their larger goal of being debt-free. Encouraging them to take the next step right away can reduce overwhelm and make the path forward seem more attainable.  

Example: “Frank, you may have forgotten to pay your last bill. We want to help you put a plan in place to get back on track. Take the first step by making a payment now. Next, consider signing up for a payment plan.”

Urgency heuristic

When a task is urgent, people are more likely to act on it. When you state expressly how much time there’s left before an event, it increases the sense of urgency.  

To encourage customers to repay their debts, provide them with a specific deadline that motivates them to act quickly. The closer the deadline, the more pressing the task feels, which makes them more likely to act immediately. Use time-sensitive language like “by the end of the day” or “within the next 24 hours” to enhance the sense of urgency.  

Example: “Dee, pay your balance of $287.36 within the next 24 hours to avoid suspension of service.”

Treat people like people for successful debt collection

By leveraging heuristics and cognitive biases, you can evolve debt collection from a reactive, punitive process into a proactive, personalized strategy. Each of the techniques we discussed here helps you meet customers where they are while treating them with respect. As a result, these strategies empower them to take meaningful steps toward resolving their debt while preserving a positive relationship with your business for the long term.  

Note that a customer’s capacity and readiness to pay heavily impact their responsiveness to different types of messaging. Read Understanding debt: a new approach to customer engagement to learn more.