Ragini Gupta does not own a house and never applied for a home loan. Yet every week she receives a phone call from a loan recovery agent. Ragini’s contact details were used by her friend as she filled up forms for a home loan. When her friend started defaulting on the monthly EMIs, Ragini started receiving the pesky calls. She tried to explain the situation yet there is no change.
Ragini’s case is not unique. There are many like her – borrowers, defaulters, their relatives, friends – who get unpleasant loan recovery calls, messages and visits from recovery agents. How effective are these methods? Not much, going by the rising NPA pile in the country. The loan recovery function itself looks faulty, neglected and hasn’t changed over the years.
Indian Banking and Finance companies have been one of the fastest to adopt technology, offering consumers innovative banking and financial products and services. While the digital transformation of the sector is impressive, debt collections has remained untouched by technology.
“Loan recovery methods today are a result of the customs of the past. There are numerous instances of unacceptable practices and high handedness in the loan recovery industry. Today, loan recovery is looked with suspicion because of the cases of harassment,” said Rishabh Goel, Co-Founder & CEO, Credgenics, a SaaS platform for digital debt collections.
But why has loan recovery been a perennial problem? While delinquencies cannot be wished away, the recovery methods adopted by loan recovery agents raise more questions than provide answers. “Traditional systems restrict lenders’ ability to leverage automation and tech intelligence to optimize their returns, streamline workflows, and minimize agent involvement. Despite all the help from technology, collections are still hard in remote areas due to barriers of awareness, language, education, and entrenched cash use,” according to Goel.
But technology is trying to change the past, minimizing human intervention and maximizing humane treatment of borrowers. After demonetization and post the pandemic, there has been a strong push for more digital transformation in collections. India’s Debt Collection Software Market in 2022 is pegged at US$ 174. 98 million. Growing at 9.28 percent CAGR, the market is expected to reach $272.7 million by 2027.
“Using AI automation, the debt collections process has evolved to meet the digital demands of the customers and has the potential to drive the overall business strategy. The customer’s preference for a superior experience during loan collections has led to customer-centric processes and intelligent systems, which rely on advanced technology,” added Goel.
Traditional collection processes are like a one-bullet gun. The single purpose is debt recovery. Customer satisfaction is not priority. Understandably, there is no incentive for the recovery teams to do more. On the other hand, technology take a more nuanced or tailor made approach for connecting with a customer. There is more to gain rather than just the debt.
Goel explains that debt collection technology is today the key tool for lenders to build and cement their relationships with their customers while also recovering debt. Technology offers the potential to improve efficiency with innovation.
“New, AI-ML-enabled solutions and systems in collections are making borrowers’ financial experiences more effortless while improving efficiency and profitability for lenders. It is also helping lenders further assist these borrowers by providing a 360-degree analysis of their overall financial management. This analysis helps lessen the debt recovery burden on banks by automating manual tasks and ensuring timely payments,” Rishabh Goel said.
(Edited by : Anshul)
First Published: Dec 21, 2022 5:59 PM IST
