When developing collection tactics, debt collection agencies should take the global financial environment into account. While some consumers might be willing to settle their debt once they have the money on hand, aggressive collection tactics are just ineffective in the modern world. Many of them only require a little bit of time to pay off their debt.

There are three main justifications for why debt collection agencies need to use humane methods.

1. It’s a tough time for consumers

Mass layoffs, COVID-19, inflation, and rising energy prices are all having an impact. Global financial instability is rising as consumers struggle to pay their bills, let alone for necessities. Hence, collections teams should be sympathetic, keeping in mind the current financial struggles that consumers are going through.

2. Customer loyalty is hard to maintain

Customers can transfer firms more easily than ever, which explains why 89% of businesses compete largely on the basis of customer experience (CX). A humanistic approach to debt collection will ensure enduring client loyalty. Customers who are past due will value being treated with courtesy and humanity and will stay with the company in the future.

3. Aggressive dunning strategies lead to reputational damage

Teams handling collections who use aggressive tactics will harm the reputation of their business. Even if they succeed in convincing past-due clients to settle their accounts, these clients will make a mental note never to work with the organization once more. They might even tell others about their negative experience, which would harm the brand's reputation and damage total sales.

How can collections teams collect their debts humanely?

By following the 6 strategies outlined below, collections teams can provide a humane and customer-centric collections experience to their customers.

1. Send reminders in the pre-collection stage

To prevent customers from running into arrears, collections teams should send gentle reminders in the pre-collection stage, outlining how much consumers owe and when it’s due.

2. Educate customers about the consequence of late payments

Customers who are past due may not be aware of the dire implications of making late payments. Inform them upfront. Remind them that late payments also incur additional interest and explain how late payments will harm their credit score.

3. Offer multiple payment options

The most effective collection teams offer a variety of payment service providers (PSPs). Customers who are past due on payments may repay their debts using Apple Pay, PayPal, Apple Pay, Klarna, Paysafe, and other options. The payback rate and customer satisfaction can both increase for collections teams by catering to the various payment preferences of clients.

4. Provide self-service capabilities

Give consumers the ability to choose how much they pay. Send out dunning messages that connect to landing sites for self-serve debt repayment, enabling customers to make payments without standing in a call queue or speaking to a customer service representative.

5. Embrace digital channels

Why shouldn't collections get digital as well? Individuals frequently communicate via digital means. The collections team should use social media, email, or SMS to deliver digital payment reminders rather than calling or mailing letters.

Remember: you’re dealing with people

The most important thing for third party debt collections agency to keep in mind is that they are working with real people who are going through financial difficulties. It's an ominous time. The wallets of consumers are being impacted by layoffs, inflation, war, and an oncoming recession.

Collections teams may collect as much as possible while minimizing consumer stress and preserving the reputation of their brand by taking a humanitarian stance.