Home Digital Lending Collections Technology

Repayment of loan needs to be collected using one or more approaches. Bank mandates are the preferred approach before creating payment schedules. Other modes of funds transfer make it convenient for the borrowers. Tracking of collection efforts provide insights into success. Several parameters like location, time, team, amount etc should be recorded.

Compliance is to be taken into consideration to avoid violating privacy laws.

Effectiveness

Lenders prioritise borrowers that are either large in ticket sizes or they are more likey to repay. Machine learning can assist with borrowers that are high risk.

Cost of managing accounts receivables can be optimised. Collaborative approach with supply chain participants can streamline the process.

1. Strategies

Skip tracing is essential to reach borrowers with a high degree of success.

1. Voice call based reminder during reasonable hours

Educating borrowers on penalties for default.

2. Text messages for upcoming payment

Templates help in automating reminder messages over email or text messages.

3. Highlighted notification in user app.

Personalise engagement with borrowers.

4. Scheduling a meeting with borrower

In person visit to preferred location of borrowers.

Borrower segmentation using analytics helps with appropriate collections. Analysis of payments performance can forecast receivables. Loan restructuring can be offered for borrowers likely to miss installment due date. Stress tests on industry segments can provide impact of macroeconomic conditions. Eligibility for moratorium should be calculated for borrower segments. Encourage borrowers to choose payment channels which they would otherwise avoid in favour of cash float. Payments metadata should be used for reconciliations so that reporting of collections is better. Key Performance Indicators should include Days Beyond Terms, and Days to Pay and Average Days Delinquent.

Effective collection of debt can reduce delinquencies. Provisions have to be made for bad debt. Forecasting on payment defaults can minimise Non Performing Assets. Data sources for surveillance should be used to monitor fraud. Fraud should be reported upon determination of sufficient evidence. Borrowers should be educated about penalties for refusing to repay loan. Further deterioration of borrower intent to pay should call for communication on legal procedures. Laws of jurisdiction has to be adhered for recovery process. Borrowers can not be intimidated, threatened, abused or humiliated during efforts to recover loan. Analysis of borrower's business will provide insights on the likelihood of application for legal relief from its creditors, suspend business operations without paying creditors, withdrawal of operations voluntarily and leave obligations unpaid. When borrowers do not have sufficient cash flow or credit to pay their debt or operate their business then they can seek legal protection from creditors by seeking insolvency laws. Distressed businesses can get a breather to change course of their operations in exchange for some adjudicated level of orderly debt repayment. Monitoring signs of declining financial health in the operations of borrowers can help identify businesses that should stop offering products and services and prioritise collection of outstanding invoices. The content here is not legal advice and an attorney should be consulted for detailed interpretation of applicable laws. In case of insolvency process, borrower has to transfer relevant assets to court appointed trustee for liquidation. The assets are made available for bidding to highest buyer. The proceeds are distributed proportionately to the creditors of the business. The borrower may still have tax and penal obligations. Bankruptcy events have to be reported to credit bureaus. Depending on the insolvency process, the court may allow the business to remain a going concern and the trustee can restructure the debt to be repaid over a three or five year plan.