The Indonesian economy is transforming rapidly. A recent report by McKinsey projects that 90 million Indonesians will join the consumer class by 2030. With a young and quickly urbanising population with improved spending power, there is considerable demand for potentially lucrative new markets and services.

However, as with any country in a state of transformation, there are challenges. While the rise of fintech companies have helped alleviate the problem of serving the financially underserved individuals and SMEs to an extent, financial organisations are grappling with challenges on the other end of the lending process – collections. According to a ‘2018 Collection Complexity Score and Rating’ report by Euler Hermes, Indonesia ranked seventh among countries where the challenge of collecting unpaid debts is “severe”.

Considering historical perceptions of a typical collections process, it is only natural that consumers are wary of debt recovery practices. According to a 2018 Benchmark Study released by Intelligent Contacts and conducted by Marketing Research Firm AYTM, both consumers and lenders want the same thing – to pay it off. Most consumers, (including almost 80% surveyed in the study) are willing to be proactive in paying off what they owe.

They need to feel empowered and not intimidated by the recovery process. Lenders need to provide them control along with a digital, safe and consumer-centric environment to engage and manage their payments. This will eventually lead not only to better recovery rates but helps build trust, provides convenience and improves the customer experience, while successfully navigating an inherently frustrating process such as collections.

Consumers today expect to be engaged in ‘new digital’ channels and this is the new normal. So, how do financial services organisations navigate this new normal to manage their debt collections?

Harnessing the growing digital ecosystem in the archipelago

Indonesians have embraced digital technology with much fervour and the digital ecosystem in the archipelago continues to thrive. According to the latest ‘Global Digital Report’ from We Are Social report, the country is home to 150 million active internet and social media users and 355.5 million mobile subscriptions and 130 million mobile social media users. While this shows the potential in implementing digital strategies to engage collections, engaging customers effectively across digital channels is yet to take off meaningfully in Indonesia.

There is a growing trend in early collections activities focused on customer-centricity and satisfaction. Customer-centricity is at the heart of building enduring customer relationships that bring better and more measurable value back to the lender as well as the borrower – particularly for a country such as Indonesia that is geographically wide and has high smartphone penetration and adoption. It is time financial services players focused on a new approach to collections.

Placing the customer at the centre of the collections process; aided by technology

In today’s digital world, the collections strategy needs to be digital, analytics-led and omnichannel. The approach needs to factor in individual customer circumstances (data) and engagement preferences (digital and omnichannel) to drive positive and consistent customer experience. Customers today want personalised services that are delivered and managed through a channel that they deem appropriate.

With the implementation of the right technologies and focusing on customer needs, the engagement strategy can be based on data that helps lenders determine effective channels and resource allocation. Identification of outreach initiatives can be correlated to customer behaviour data points – helping lenders to identify defaults early and implement strategies before the default actually happens or managing delinquencies in a more effective manner.

Getting ahead of potential future losses by deploying next-generation techniques in collections will strengthen value-added returns from customers, changing the perception of collections from a cost centre to a value generator. It also helps reduce dependencies on frontline collections capabilities such as call centres and collection personnel since it is pretty evident that consumers do want to engage collections agents, unless it is at their choice.

At Experian, we help organisations to streamline their collections process. Our analytics, segmentation & communication tools allow for better collections segmentations that drive better response rates. We also work with our clients to improve cost to collect; helping them maximise recoveries while managing operational costs incurred in the recovery process.

VIDEO: Watch PowerCurve Collections in action

Experian frequently collaborates with leading financial services providers to develop distinct collections scorecards for each of their key lending portfolios including areas such as property financing, shop house financing, structure personal financing and vehicle financing. Each score can fall under individual buckets – early stage, mid-stage and late stage. The purpose of the collection score is to stop the flow rate from the first bucket to the next.

Collections can be a win-win situation

The debt collection ‘experience’ does not have to be an oxymoron, nor does it have to be a painful process. With investments in the right technologies and focus on providing the right customer experience, debt collection can be aligned to both lender and borrower needs – making the process intelligent, accessible, positive and engaging.

Dev Dhiman

Managing Director, SEA & Emerging Markets

Portions of this commentary were reproduced in The Jakarta Post on 17 January 2020 under the title Digitalization and the promise of customer-centric debt collection.