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Collections

In 2022, our primary goal was to enhance the collections process to increase the percentage of funds collected from users who go overdue on their loans. To achieve this, we embarked on a comprehensive research project that involved engaging with various stakeholders in the collections ecosystem. 

Ancient Coins

Project Details

The increase in delinquency rates over the course of 2022 raised significant concerns within Branch. To address this issue effectively, I initiated a research project to comprehensively understand the underlying factors contributing to the rising delinquency rates and to develop strategies for improvement

Project Objective

The goal was to enhance the collections process to increase the percentage of funds collected from users who go overdue on their loans. To achieve this, we embarked on a comprehensive research project that involved engaging with various stakeholders in the collections ecosystem. Our approach was to gather insights, identify pain points, and lay the foundation for further research and optimization. 

My approach and research process
 

I leveraged a diverse range of research methodologies, blending both qualitative and quantitative methods. The primary objective was to extract actionable insights and craft tailored recommendations for each stakeholder group. This approach aimed to drive significant improvements in collections processes and elevate the overall user engagement experience.

Developing an understanding of the collections ecosystem

I engaged with a diverse group of stakeholders, including collections leads, agencies, in-house collection teams, and defaulted customers, to gain a comprehensive understanding of the collections ecosystem. Each stakeholder group offered unique insights and pain points, allowing me to consider a wide range of viewpoints and experiences. This approach helped me identify challenges, understand user behavior, and develop holistic solutions that addressed both internal and user-facing issues. 

User Interviews with users who had defaulted on their loans

I interviewed users who had defaulted on their loans for a specific reason. Their experiences and perspectives were vital in understanding the challenges and motivations related to loan repayments. By speaking with these users, I aimed to:
 

Understand User Behavior: Defaulted customers could provide insights into how they managed their loans, what motivated them to repay or delay payments, and whether certain communication strategies were more effective than others.
 

Identify Pain Points: Their firsthand experiences allowed me to identify pain points in the collections process from a user's perspective, helping to tailor solutions that addressed these issues.
 

Tailor Strategies: Gaining insights from those who faced challenges in loan repayments enabled me to tailor strategies to better meet user needs and expectations, ultimately improving the collections process and user engagement.
 

Engaging with defaulted users played a crucial role in ensuring that our solutions were user-centered and effective in addressing the challenges we sought to overcome.

Quantitative Data Analysis : Survey 

I conducted a survey with users who had defaulted. Conducting a survey with defaulted and delinquent users was a vital part of our research. This approach had several key benefits:
 

Broadened My Insights: Gathering responses from a larger group of defaulted users allowed me to obtain a more diverse range of insights and perspectives regarding their loan repayment experiences.
 

Quantified My Findings: Surveys provided quantitative data that complemented the qualitative insights from interviews. This quantitative data helped me identify trends and preferences among defaulted users.
 

Validated My Assumptions: It enabled me to validate assumptions and findings from my interviews, ensuring that my strategies and recommendations were firmly grounded in robust data.

Data Analysis

In analyzing data from three distinct stakeholder groups, I followed a structured process tailored to each group's unique perspective:
 

  1. Collections Lead and Teams:

    • Communication Strategy: I evaluated the effectiveness of existing communication strategies, including deep links in SMS/PUSH messages and the potential of WhatsApp as a communication channel.

    • Timing and Message Delivery: I assessed the outcomes of experiments with timing and message delivery on repayment rates, aiming to optimize user engagement.

    • Operational Challenges: I identified and addressed operational challenges reported by collections leads and in-house teams.
       

  2. Collections Agencies and Agents:

    • Agent-Customer Interactions: I delved into the interactions between collections agencies and users to understand pain points and improve the user experience.

    • Live Repayment Links: I explored the feasibility of enabling collection agents to send live repayment links during calls, enhancing convenience for users.

    • Partial Repayments: I examined user awareness levels regarding the option of making partial repayments within the Branch app.
       

  3. External Collections Agency:

    • Communication Strategies: I focused on evaluating the effectiveness of stern communication strategies, especially for users who defaulted beyond 30 days.

    • User Behavior Analysis: I analyzed user behavior and motivations, exploring the need for mechanisms to re-engage users who clicked on repayment reminders but did not repay.

Key Findings 

Late fees :
Customers with multiple loans or those in default prioritize loans with higher interest rates and penalties over Branch Loans.

 

Stern Communication:​
Employing stern communication tactics proves more effective in encouraging repayment, as customers fear having their relatives contacted or legal actions taken.
 

Communication Modes:

Preferred channels for repayment reminders are SMS and WhatsApp, with IVR reminder calls mentioned but not favored due to excessive calls.
​

Communication Challenges:
​The contactability rate is low, with only about 30% of customers reachable by phone when contacted by collection agents.
 

Repayments:
Customers are aware that they can make partial repayments within the app.

Repayments are primarily conducted through the Branch app, although some customers prefer alternative payment methods via third party apps.

Magnifying Glass

My Recommendations

I made several recommendations based on the collections research findings, with approximately 80% of these recommendations being successfully adopted.

Incorporate Late Fees as Motivation

Change the tone of Communication

Allow partial repayments on the app

Increase the frequency and timing of reminder messages

Integrate with alternate payment gateways

The Final Outcome

After conducting research in India, we found key strategies that significantly improved our collections and profitability. We improved our communication methods, introduced late fees to motivate borrowers, and added a partial repayment option. These changes were so effective that leadership decided to implement them across other markets in Africa including Nigeria, Kenya & Tanzania

Enhanced Profitability and Reduced Delinquency:

The introduction of late fees as a motivation mechanism proved highly effective. Borrowers started prioritizing the repayment of Branch loans to avoid late fees, resulting in a substantial reduction in delinquency rates. This improvement in timely repayments significantly enhanced Branch's profitability by ensuring a consistent and steady flow of repayments, reducing losses associated with defaults.

Optimized Communication Strategy:

The collections research resulted in a refined communication strategy. By recognizing that customers preferred digital channels like SMS and email, Branch adopted a more effective and convenient approach to reach out to borrowers. This streamlined communication led to higher contact rates and improved borrower responsiveness.

Motivation through Late Fees:

One of the pivotal outcomes of the research was the strategic introduction of late fees. Understanding that borrowers tended to prioritize loans with late fees and higher interest rates, Branch implemented late fees for its loans. This move successfully motivated borrowers to prioritize the repayment of Branch loans to avoid incurring additional charges. As a result, delinquency rates decreased significantly.

Partial Repayment Option

The research highlighted that customers were not aware of the option to make partial repayments on the app. Recognizing this gap, Branch introduced a partial repayment feature, allowing borrowers to reduce the burden of EMIs. This feature not only provided relief to borrowers but also contributed to a more positive borrower experience, fostering trust and loyalty.

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