What makes a good collection method? The collections game has largely stayed the same, with methods based on direct debits or some form of peer or authority pressure remaining the most popular.<\/p>\n
Payroll lending and some digital lenders use direct debits as their main collection method.\u00a0 This improves repayment rates because the debit coincides with the customer’s salary or the debit is on a digital wallet the customer uses frequently.\u00a0 The limitation here is that it creates a psychological\u00a0barrier between the company and the customer.\u00a0 There’s little to no communication between the two groups.\u00a0 So the company might resent the customer, and the customer doesn’t trust the company.<\/p>\n
Microfinance companies and banks rely on peer or authority pressure.\u00a0 This improves collection rates because the customer prioritizes\u00a0their repayments over other repayments they owe.\u00a0 When your community knows you’re\u00a0refusing to repay your debt, or you receive a certified mail demanding payment, the probability of you repaying that debt goes up. The limitation\u00a0here is that it’s expensive.\u00a0 It’s expensive to hire staff to create connections with all your customers, and it’s expensive to train and manage\u00a0debt collectors.<\/p>\n
The answer to which of these methods is better isn’t obvious.\u00a0 Both methods are still common in the marketplace and used by forward-thinking businesses on both sides.\u00a0 I think there is room for both methods, as it comes down to what the customer wants.\u00a0 If they want a quick and easy loan they don’t have to worry about repaying, they will select a company that has direct debits.\u00a0 If they want a relationship with their credit provider or information about products or someone to talk to when times are tough, they will use a company that provides peers or an authority.\u00a0 When companies are managing collections in a\u00a0transparent and healthy way, everyone wins.\u00a0 When they don’t, we get a debt crisis.<\/p>\n
<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
What makes a good collection method? The collections game has largely stayed the same, with methods based on direct debits or some form of peer or authority pressure remaining the most popular. Payroll lending and some digital lenders use direct debits as their main collection method.\u00a0 This improves repayment rates because the debit coincides with […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-343","post","type-post","status-publish","format-standard","hentry","category-fintech"],"blocksy_meta":[],"_links":{"self":[{"href":"https:\/\/www.jongore.com\/blog\/wp-json\/wp\/v2\/posts\/343","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.jongore.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.jongore.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.jongore.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.jongore.com\/blog\/wp-json\/wp\/v2\/comments?post=343"}],"version-history":[{"count":1,"href":"https:\/\/www.jongore.com\/blog\/wp-json\/wp\/v2\/posts\/343\/revisions"}],"predecessor-version":[{"id":344,"href":"https:\/\/www.jongore.com\/blog\/wp-json\/wp\/v2\/posts\/343\/revisions\/344"}],"wp:attachment":[{"href":"https:\/\/www.jongore.com\/blog\/wp-json\/wp\/v2\/media?parent=343"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.jongore.com\/blog\/wp-json\/wp\/v2\/categories?post=343"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.jongore.com\/blog\/wp-json\/wp\/v2\/tags?post=343"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}