In the world of consumer debt collections, there are common tools to pursue payment. A well-equipped shop will leverage:
- Live agent engagement
- Multi-channel outreach
- Risk assessment
- Portfolio segmentation
These tools do an admirable job in helping creditors manage collections. They represent a well-worn playbook for managing delinquent portfolios.
There is a new tool now available to complement the existing playbook: behavioral science.
BackOnTrack™: Improving collections roll rates with three behavioral science principles
Scorenomics’ BackOnTrack (BOT) collections platform takes a different, but complementary, approach to existing collections strategies. We designed BOT using specific behavioral principles, which have the effect of improving subsequent payment performance for delinquent customers.
You can see that effect in the chart below. Over the course of eight months, a Top Ten credit card issuer ran a test of BOT vs. its existing collections process for customers that were initially 1-60 days past due. Several months later, the account status of these customers was assessed. The finding? For each monthly campaign, the BOT invite group outperformed the card issuer’s existing collections process in terms of roll rates. This advantage held over time.
The bases for the BOT advantage are three behavioral principles: empathy, priming, reciprocity.
BackOnTrack takes the view that delinquency is as much an emotional experience as a financial one. Here are some actual responses by customers who have completed BackOnTrack.
BOT has an empathetic tone, meant to reduce the temperature of a stressful situation. This enables the consumer to more clearly process the messaging that follows, which is vital to the next principle: priming.
A known trait of the human mind is that we can be temporarily conditioned to accept and act on information around a specific topic, known as priming. Priming can be overt or more subtle. Either way, research shows that people’s actions can be influenced when they been primed a certain way.
The content of BackOnTrack primes the consumer to think about their own financial health, and on productive ways to move forward. In the near-term, this includes increased sign-up for payment aids which help with reducing roll rates. The priming also resets financial health as a top-of-mind consideration for the consumer in the weeks following completion of BackOnTrack.
We all have this natural tendency: the desire to reciprocate when we’re given something by another. According to Professor Robert Cialdini, there is no human society that does not subscribe to this rule (#). The BackOnTrack engagement represents the “giving” of something to a delinquent consumer. Rather than just outreach to get a payment, creditors using BOT give their customers:
- Empathetic approach during a time of stress
- A deal for getting the customer’s account current
- Smart, proactive ways to move forward past the delinquency
In the context of a financial incentive + valued financial health content, customers prioritize their financial provider. The result? Improved payment performance, leading to lower roll rates and increased cash collected.