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Strategies
Guide Two: Extending the depth of
collections capabilities
August 2010
1. Executive Summary
There are numerous approaches to arrears
management in the financial sector and an increasing
requirement for lenders to further refine their decision
strategies, segmentation and collections activities.
1. Executive Summary 2
2. Extending the depth of collections capabilities 4
2.1 Pre-delinquent collections 4
2.2 Past due but not delinquent 4
2.3 Automatic removal of additional lending and customer limits 4
2.4 Previous delinquency level 4
2.5 Balance recoverable 5
2.6 Treatment by customer value 5
2.7 Pre-calculation of payment plans 5
2.8 Scripting driven from strategy segmentation 6
2.9 Dynamic reassessment 6
3. Summary 7
4
2.5 Balance recoverable 2.6 Treatment by customer value 2.7 Pre-calculation of payment plans
The balance recoverable is a Few lenders can afford to upset The early identification of high risk
prediction of the amount that the profitable customers. Thus the ability customers will certainly give lenders
delinquent customer will pay back to incorporate customer value into an edge when it comes to securing
over a defined period. It is useful collections strategies is increasingly payment or negotiating a payment
in later stage delinquency to becoming a financial necessity. plan, but unless the right plan is put
allocate resource to accounts most in place the first time, few of them
likely to pay the most back, while Customer value variables are may remain current for very long.
allowing harder to recover monies typically determined by the customer
to be outsourced or sold to third management system and are then Lenders need therefore to extract
party agents. Organisations can passed to the collections system relevant, fresh, customer information
also establish a Net Present Value or decisioning engine to help and other internal affordability data
for each debt and may use this to define appropriate strategies and and pre-calculate a promise to pay
determine appropriate pricing levels collections treatment paths. that drives the strongest net value for
for debt sale. the lender, which is both acceptable
Examples of high value accounts and affordable to the customer
Balance recoverable is calculated by could be large savings or
multiplying the payment projection investments, or historic or predicted A strategy tree can then be created
model/score by the current future revenue or profit growth. for pre-calculated optimal repayment
outstanding balance for an account, plans, minimum payment plans and
and can be used in combination with even settlement payment plans.
other variables to determine the next
collections activity.
6
3. Summary