All about automation in debt collection

23rd May 2022, Technology

To begin with, Debt collection is the forefront of every lending business as it directly supports the revenues of a company. With the growing consumer market and the affinity of today’s consumers, debt management becomes an important opportunity for the lenders, making bad debts a probable side effect of the industry.

Bad debts being a serious concern amongst the lenders has ensured that the collectors become a company’s frontline workers in the debt collection industry. They are the first point of contact for debtors. For the same reason, companies allocate a lot of funds in training their collectors to improve their productivity to ger more returns for the company.

Debt collection used to be a call and respond industry where the collectors would make efforts in calling the debtors and any automated process would still involve a human interference thereby increasing the human error rate.  According to the recent data, consumer debt has increased nearly by USD 2.3 trillion (2019) since the Great Recession in 2009 in the United States. The COVID-19 pandemic is making it even more difficult to recover debts for the entire globe.

Today, more automated tools are available in the market to improve this process and get better results. Artificial intelligence (AI) tools, such as automated chatbots, interactive voice response systems, opt-in short message service (texts) and website portal negotiators, have grown exponentially in the debt collection industry. Lenders have noticed that with the right process and tools, these businesses are able to manage accounts and reduce Days Sales Outstanding (DSO) effectively.

Debt Collection Automation Process:

In a lot of cases, lenders spend a lot of time, money, and resources in chasing the default cases which in turn becomes a major overhead in the lending business. Loan recovery also becomes a major challenge because of the manual work involved in the collections cycle. Some of the manual task

Therefore, it only makes sense to find a simple solution which automates the entire journey and eliminates any error or negative relationships with the borrowers, thereby, showing empathy on the part of the lenders. This automation in loan recovery can be done by lenders by using a a debt collection CRM or outsourcing the same in order to streamline the entire process. This method is proven to improve the ROI of the lenders. Below is an infographic to explain the Debt Collection Automation Process.

Source: LeadSquared

When we talk about automation, let us understand what all it entails. General Requirements for the functionality of a debt collection system should contain:


At the top of the activities done through automation involve:


How does automation help in improving the debt collection process?





Potential advantageous outcomes of automation for debt collection that can be foreseen

Automation helps in monitoring debtor activities, debtors financial outlook, spending patterns, and so on, thereby eliminating clerical work.


Debt collection not only helps in getting back the amounts from borrowers, but it also helps in recommending a way out of a crisis, and automation can act as a bridge between the lenders and the customers. Automated solutions can potentially transform the way collections are taken care of, subsequently helping the lending firms improve customer experience and create rapid business value. Since debt collection is a very dynamic world, there are chances that we get to see a lot more advanced technology and more changes in this regard, making it ten times more convenient for both the borrower and the lender. Self service portals is one such step ahead in this domain.