The Economy Has Changed

In our third year of a fluid financial crisis affecting the global and local economies, using static, risk-based data for collections strategies is no longer tenable.

A shrinking market

The pool of what used to be easily defined as ‘good customers’ is shrinking. The reliability of past credit behaviours coupled with the ability and willingness to pay debts is not as predictable as it once was. Household incomes across Kenya, Rwanda and Zambia have suffered the devastating economic impacts of almost three years of the pandemic — followed by the global inflationary effects of the war in Ukraine.

In such a constrained market, competition for new credit customers is fierce; marketing and sales campaigns are costly; and the acquisition of new sales can be expensive, misdirected and unrewarded.

The next normal

But it’s not all doom and gloom — in fact, far from it. At the heart of the financial crisis is an economic opportunity. Forward-focussed banks and lenders looking to bolster business and prepare for the economic bounce-back can realise significant revenue by taking a fresh look at collections.

The time is now, and the technology is here to enable a more strategic and sophisticated view, along with a more predictive approach to delinquency and predelinquency.

The collections dilemma

The increase in the demand for credit through the economic downturn has led to an increase in delinquent accounts and newly-defined, high-risk customers. At the same time, their shifting credit behaviours have diminished the power of traditional collections strategies based on retrospective or historical data.

The traditional process of segregating customers into simple risk categories based on delinquency buckets and basic analytics is no longer fit for purpose. An alternative approach that leverages the enormous advances in the enhanced analysis of traditional credit data and alternative credit data is long overdue.

The new economics of empathy

Already overstretched from the last two years, many households are balancing the heartfelt desire to repay credit commitments with the need to provide food and shelter. Those falling behind in debt repayments suffer the double impact of credit score degradation and consequential restricted access to credit.

Good customers who have fallen behind on their repayments (or are facing that terrible prospect) are ready and willing to help find a way out of bad debt by working with a creditor that offers an informed, innovative solution.

TransUnion has developed that solution: A collections model offering a more sophisticated approach using deep, credit affordability and behavioural insights that can help lenders and their customers retain — or regain — mutual trust throughout the collection lifecycle.

Take a fresh look at your bad book

Using enhanced trended credit data for strategic segmentation and predictive behavioural insights, the TransUnion Collections Prioritisation Model can help turn your collections cost centre into a revenue generator by:

  • Leveraging hundreds of traditional and alternative credit data points to gain deep customer insights
  • Combining enhanced credit data with predictive behavioural insights
  • Alerting you to re-engineered repayment options for high-value, low-risk customers
  • Prioritising strategically according to business value and repayment likelihood
  • Facilitating more robust loss-forecasting strategies and improved predelinquency outreach effectiveness

Contact your TransUnion representative to see how we can specifically help your business better manage predelinquency risk, optimise collections and realise locked-in revenue.

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