Article

Lending Perspectives: The Future of Collections Is Self Service 

illustration of hand holding phone with self service collections app
Bill Vogeney Photo
Chief Revenue Officer
Ent Credit Union

4 minutes

Millennials are likely to prefer managing their payments via their smartphones than in person

As millennials and other tech-savvy consumers seek to conduct more of their financial affairs on mobile devices, it should be inevitable that when faced with financial difficulties, they will want to work with their creditors in this manner as well. 

When I started in the lending business almost 35 years ago, our tools to collect from a consumer were fairly primitive. We had a phone and a phone book or—better yet—a “criss-cross” directory that allowed us to look people up by phone number, and from time to time we’d even knock on a door. Now we have social media, Google, GPS and starter-interrupt devices to locate and even disable vehicles. Yet it seems like the industry is having a tougher time than ever reaching borrowers to actually talk to them.

Millennials clearly show you the challenge ahead; the prototypical example is a table full of young people at a restaurant where no one is talking to the others in the group. They are on their mobile devices, talking with people not at the table! What is the likelihood your credit union will be able to reach them on their phones to work out a payment arrangement when they experience financial difficulties in the future?

In the future, I believe, we will need to focus on self-service. Millennials may be very hesitant to discuss their problems with a collector. They are likely to have memories of their parents’ struggle through the Great Recession, losing homes and cars. They will remember how unresponsive the big banks were when given the opportunity to assist their parents when their home was in danger of being lost in foreclosure.

Here is a future scenario: Jose Ramirez is a 30-year-old millennial in financial trouble for the first time. Burned by the memory of his parents losing their home in the Great Recession when he was a small child, he vowed never to be that heavily indebted. Other than his student loan, Jose has taken on very little debt. He is saving for a down payment on his first home and has a modest car loan and a few small accounts that financed such essentials as the furniture for his apartment. Yet Jose lost his job as a social media marketing specialist during the recession of 2020. He is unable to make his car loan payment with your credit union this month because he has burned through his savings paying his rent and modest living expenses.

Imagine Jose logging into his account with your credit union on his mobile device to see how dire his situation is. Yes, still no paycheck, only his meager unemployment compensation benefits which will not be enough to pay his rent in your high-cost-of-living city. His car loan is still past due, yet he sees a new feature on the mobile banking site: “Chat with one of our Member Solution Specialists.” 

Jose text chats with a collector, who offers to allow him to skip a payment or make partial payments for six months at a reduced interest rate until he finds new employment. Maybe instead he receives a text or email offering assistance with his car loan. Logging into mobile banking, he encounters a series of simple questions like “What has happened that you can’t make your payment?” and drop-down menus to select loss of job, family emergency, etc. Another option might allow Jose to select the date that he can make his payment.

My point is this: No one likes talking to a collector, but over time, many consumers have needed to. We know as a credit union movement, we have a much more enlightened view of assisting borrowers; it is a “story” that we needed to do a better job of telling during and after the financial crisis. My credit union, Ent, often resolved member issues with a mortgage modification in days, not months, after an initial inquiry in the 2009-2012 timeframe. 

If your credit union does not imagine a future that will allow members to self-serve through home and mobile banking, or reach out proactively via email or text, you will never make the kind of impact on the lives of your members that is essential to thrive in a vulnerable marketplace.

Bill Vogeney is a self-professed lending geek and the chief revenue officer for $5.1 billion Ent Credit Union in Colorado Springs.

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