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Debt Collection: does it really have to be this way?

Earlier this year, Mr Philip Rürup, the founder of troy, spoke with CEO Today Magazine about their surprising approach to debt collection. troy is a debt collection FinTech that helps top global brands collect their receivables. The troy approach to debt collection is a counterintuitive one because it goes against all conventional wisdom. Most people view debt collectors negatively, somewhere on the scale between evil and necessary evil. But troy has data and results to show that things do not have to be this way.

We have it all wrong

According to Mr Rürup, troy outperforms “incumbent debt collectors by up to 80%. For our corporate clients, this annually saves millions of Euros in debt write-offs. At the same time, our focus on the satisfaction of our clients’ customers (CSAT currently at 4.2 out of 5) preserves tens of thousands of valuable customer relationships. This can either support our clients’ profitable growth or can supersede having to invest seven-digit figures in customer acquisition costs to replace customers who are needlessly driven away with a traditional debt collection approach. We believe that debt collection processes are an integral part of the holistic customer journey. Therefore, our approach of data- and tech driven customer experience radically puts our clients’ customers at the heart of everything”.

Just because debt collection is not necessarily a pleasant experience does not mean that it has to be an unpleasant one. According to Mr Rürup, this stems from a complete misunderstanding of customers. First, there are fundamental misconceptions about human nature that underlie the entire debt collection industry. As Mr Rürup points out, “Both traditional debt collection buyers and established debt collection agencies believe that customers lose their economic value for the company if they don’t comply with the standard payment schedule. Therefore, debt collection success has been measured by payment rates alone, completely disregarding how customers feel about the process. To make matters worse, the predominant assumption was (and partially still is) that you do not
only have the right to pressure the customer to pay, but it is advisable to achieve acceptable payment rates. Consequently, traditional debt collection agencies still focus on paper-based, bureaucratic and even threatening processes, without investing in digitisation, individualisation, let alone customer experience”.

Companies that disrupt any sector usually do so by overturning fundamental misconceptions. In troy’s case, that means getting to the heart of why people do not pay and how to get them to pay. Troy cites data showing that “over 60% of missed payments are caused by short-term bottlenecks, or because the customers accidentally forgot to pay. These customers are worth preserving, especially if one considers their customer lifetime value—or at least the customer acquisition costs that had to be invested to win them in the first place”. If these customers are thrust into a contentious debt collection situation, all the money invested into Customer Acquisition may have been in vain, as the chances of them continuing a relationship dwindle when push comes to shove. A friendlier approach to collections, powered by machine learning, means focussing on a positive experience, which builds customer loyalty.

The key to actually implementing this is “machine-learning-driven mass individualisation. Our platform can determine the ideal moment to get in touch with a specific customer, what channel she will prefer, and the exact wording that will most likely appeal to them… We’re able to monitor relevant drivers for healthy dialogue, such as a balanced share of the conversation or the trigger of specific terminology and tonality”.

While some may harbour deep suspicions toward this kind of “programmed empathy”, is it not better than humans who are trained to be cutthroat? If you have ever spoken with someone who has worked in debt collection, you know that it can be a soul-crushing experience. The troy approach seems to be working, and since Mr. Rürup has the “CEO’s typical itch for seeing things scale”, we can only hope that troy’s disruption turns into long-term change within the industry.