Challenges with Debt Collections & What to Do About It

Challenges with Debt Collections & What to Do About It

‘Debt collections’ or ‘Collections’ is the most crucial aspect of the loan cycle. It helps financial institutions free up money that has been tied in a loan and collect interest while they are at it. Collections refer to both – collection of loan EMI or principle from non-defaulters or the defaulters. Till the loans are being paid off as per schedule, it is not a problem. The minute the loans get delayed, the issue of delinquency creeps up and the possibility of a default. In 2016, 4% of the total loans in the world were non-performing. (Source: World Bank)

This is a huge problem for banks as well as NBFCs. The non performing assets pile up and the recovery is slow. Let us look at the challenges with collections:


Communicating to the borrower is the key to making sure loans do not approach delinquency. Most of the times, the instalments of the loan are monthly and hard to keep track of and timely nudges could help in the matter. Also, the borrowers may not be aware of the full consequences of defaulting on a loan.

Tracking of Accounts

A lot of times, keeping track of where the borrower is or how to communicate with them becomes blurred. Recovery agents tend to write off loans as non performing as they are unable to reach the borrower over a period of time.

In-house vs Agency

A common dilemma for financial institutions is whether they should have an in-house recovery department of hire an agency. There are pros and cons to both. An in-house or first party loan recovery department may pose more control and have a cost advantage. However, a recovery agency may be more effective as their sole role is to collect. It may not be cost effective as contingency costs may vary 15%-40% overall.

Inability to Test Strategies

No two debts are the same and many firms apply a ‘one size fits all’ strategy which may not be apt each time. Due to the time sensitive nature, a lot of times strategies end up getting untested and there isn’t enough data to support the changes made.

Best practices of collections

Customer Education

It becomes imperative that each firm should invest considerable amount of time educating the customer about the implications of borrowing. Some of the things one can educate about are:

  1. Timelines – disbursement, payment, credit period
  2. Risk involved
  3. Late fees
  4. Effect on credit scores
  5. Payment structure – instalment amount, interest, principle


Positive Reinforcement

The borrowers which are diligently following the payment schedule and adhere to the rules of the institutions can be offered some kind of incentive to encourage timely payments. These incentives could be in the form of rebates in the principle amount or the interest. Even certain vouchers or discount coupon could be offered in addition.

Solve Queries Early On

Most financial terms are rather complicated for general people. They are bound to have queries which may culminate into delays in payments. The customer service team should be well equipped to solve all the queries head on and there should be a proper escalation process in place.

Staff Incentives

Recovery is quite a gruelling process and quite taxing for the agents as well. It should be handled delicately at the same time be firm. The agents who are effective in their approach and manage to recover loans should be incentivised adequately. The incentive structure should be attractive enough to encourage the agents to strive for it and achieve it.

Identify Defaulters Early On

Spending habits can reveal a lot about  a person and thanks to advanced technology, it has become easy to map trends based on this data and calculate the risk associated with a person in terms of credit. Things like having multiple credit cards, not paying dues in time, online shopping, irregular saving habits and so on are all ways of identifying red flags. The behaviour of the person should also be tracked post disbursement so that irregularities can be identified and curbed in time.

Segment Driven Strategy

As mentioned in one of the points earlier, no two debts are similar. Segmentation could help get some insight into what works the best with that particular segment. Some of the basic forms of segmentation could be:

  1. Based on the size of the debt
  2. Based of the term of the delinquency or default.
  3. Based on borrower’s state. For example:
  • Will to pay, doesn’t have money
  • Not willing to pay, has the money
  • Willing to pay, doesn’t have the money
  • Not willing to pay, doesn’t have the money

The strategy could be different to each of these. The payment terms could be adjusted as per each of these segments to reach an amicable negotiation.

How Vymo Solves Collections

Vymo for Collections is specifically designed to help agents focus of their core job while it runs in the background to give you the data and insight which will help you recover the debts better and faster. It helps you get a 360 degree view required for intelligent collections management.


Not all Collections are equal. To start off with, Vymo segments collection activities basis age, collection potential and location data as High, Medium, Low.


The goal of Vymo is to drive collections with customers and this is influenced by engagement. Intensity of engagement is a key metric (visit frequency & time-spend) by agent with the customer.

Agent Productivity

Meetings which are verified by geo location per day are a proxy for productivity. Vymo adjusts for show & wait times, balances it with coverage and identify cases where the agent is overloaded or underleveraged. Vymo also measures average distance travelled per day and helps normalize productivity outliers.


Effectiveness of engagement matters. Vymo measures business outcomes as businesses influenced & integrates data from external systems.


Collections is complicated since the agents usually have many pickups to manage. Vymo automates their daily calendar planning while optimizing for business sourced per agent per month as the objective function is non-trivial and requires real time algorithms.

How ICICI Bank Improved Collections with Vymo?

Problem Statement:

ICICI Bank was looking for a solution to boost productivity of collection Agencies & Agents to collect overdue payments across Home loans, Retails loans & Credit cards, ensure swift closure of pickups, and create a highly engaged network amongst it’s Collection agents.

Vymo’s Solution:

– minimizes time spent on manual data entry via smart workflows and forms
– gives real-time insights into agent & agency performance and engagement history
– enables route optimization via intelligent map-based and geo-fencing
– enables timely engagement between Agents and Customers

Impact in 3 Months:

35% increase
Avg. meetings done per day by Agents

30+% increase
Advisor activation levels

50% improvement
Collections per Agent per day

To know how Vymo could help with your debt collection process, email at

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