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The rise of AI in debt collections: What you need to know

AI in debt collections

Earlier this month, TransUnion released a report titled, “Seizing the Opportunity in Uncertain Times: The Collections Industry in 2023,” which looks at the uptake of AI tools within the debt collection industry with a focus on companies known as third-party collections (3PC) companies. The great news is that 3PC companies are turning to AI to help deliver efficiency to the business and the customers they serve. This report shows that in 2023, 11% of 3PC companies have integrated AI and machine learning technologies into their operations and 60% are on their path to deployment. 

However, beyond the findings of the report, the way businesses practically apply AI can have both positive and potentially negative outcomes for the customer experience. Especially when consumers have fallen behind as is the case with 3PC companies. It’s important to understand the role of AI, the benefits, and the potential pitfalls when looking to implement an AI strategy for collections and customer engagement. 

The findings

Through a sample of 90 companies who self-identified as actively using AI in debt collections, they shared the following applications: 

  • Predicting payment outcomes
    • 58% of companies are using AI to predict the likelihood of individuals paying down their balances. 
  • Customer segmentation 
    • Tailoring workflows and segmenting customers to drive engagement strategies is used by 53% of companies. 
  • Channel preferences 
    • 43% of companies are using AI to suggest optimal channels and improve accessibility for customers. 
  • Analysis 
    • Both from the lens of driving efficiency and improvements within the workflows, but also understanding performance of their strategies (47%). 
  • Consumer behavior 
    • 46% use AI to anticipate the behavior of customers, allowing them to be strategic and proactive.

With the rapid development within the AI landscape, this will continue to expand and refine; however, there are some important factors that AI can miss, and which call for human expertise.  

Using AI within customer engagement

AI tools are now out-of-the-box solutions that you can immediately begin implementing across your business. However, most of us are still learning how to best use them, who is best or needs to be involved, and where it can deliver the greatest value—this is where human expertise is a necessity. 

At Symend, we help businesses within the pre-delinquency landscape, so before a 3PC company would be involved. With some of the largest telecommunication and financial services companies entrusting our team to deliver personalized experiences to their customers, we have a few views on how AI can be applied to deliver the greatest value to your customer engagement strategies. 

  • Acceleration 
    • AI speeds up your time to value for your business and your customers. At Symend, we leverage AI and ML to help drive our iterative process. Combining data with our behavioral science and data science expertise, we can deeply understand behaviors, adjust messages and deliver desired outcomes.  
  • Development 
    • AI has accelerated Symend’s abilities to innovate, along with providing value to our clients. For example, engineers building code can do so at a more rapid pace, allowing us to stay ahead of the latest trends in customer experience.  
  • Performance 
    • With AI embedded in our solution, our team of behavioral scientists gain access to real-time data and behavioral data that they can immediately use to evaluate performance and optimize strategies to deliver desired outcomes.  

Why human expertise is needed 

When customers fall behind, the experience you provide can be the difference between securing that customer for life or watching them walk out of the door. Much of this is based on the barriers that customers knowingly or unknowingly put up when engaging with you. In Symend’s 2023 Consumer Report, which specifically looked at consumers who were currently behind on their bills, 48% more consumers reported feeling overwhelmed or anxious when receiving messages from their provider.  

Further complicating this dynamic is the adage “perception is reality.” If a customer is already feeling overwhelmed or anxious and you unknowingly or unintentionally send them too many messages, irrelevant information, or they perceive they have been treated negatively, 78% report that they are more likely to switch providers. This is the outcome that all parties responsible for client relationships want to avoid. 

With the integration of AI within your customer experience stack, it’s important to layer on a deep understanding of each customer to ensure you’re delivering the right message, at the right time, to the right customer—layering in human expertise is the first step. 

Your message matters 

Globally, we are exchanging more than 347.3B emails every day, which represents a 4.2% increase year-over-year with growth predicted to continue at that rate. With consumers already being overwhelmed with messages, making sure yours stands apart from the crowd will be the difference between the companies that have their emails read and those that end up in the spam folder. 

Debt collections is undergoing a transformative shift with AI and the widespread recognition of its potential. It’s clear that the integration of AI, and the approach to debt collections is poised to reshape the industry in the years to come. However, don’t forget that there is an individual on the other side of every message and the messages you send can be the difference between losing them to a competitor or keeping them for life. 

Download our 2023 consumer report, Decoding Billpayer Behavior, to discover more about what’s driving consumer behavior.