It often feels counterintuitive for financial institutions to write off bad debts. After all, a loan portfolio is an asset toward any financial institution’s future revenue. Also, if a financial institution is unable to practice debt collection effectively, how can other businesses follow suit? So, why do financial institutions write off bad debt? How can they find opportunities to recoup this lost revenue? Could data analytics be useful in helping organizations to work out which debtors are likely to make payments on time? Also, could finding the right card services for credit unions make a difference?
Lost Revenue, Debt Collection, and Lender Attitudes
These days, lending organizations are facing more regulatory scrutiny than ever before. Operating these institutions is, therefore, more expensive. Margins are tighter and regulation has increased. So, if debtors don’t make payments, the situation looks bleak. The skyrocketing number of past due debts has exacerbated the problem. An environment now exists where practices surrounding debt collection need to change to accommodate this increased risk. Yet, if collection practices are aggressive, the possibility of breaking the compliance regulation exists. How can financial institutions resolve this problem? Every financial institution has in place a reserve for bad debt. However, the traditional solution of writing off bad debts after 90 days can no longer be effective. So, what can companies do in this respect? In the end, it comes down to making it easier to make payments while also analyzing the previous behavior.
Harnessing Intelligent Analytics
Today, the tight margins faced by financial institutions mean it is important to take a different approach toward mitigating risk. Intelligent analytics could prove to be important in this respect. By analyzing previous payment behavior, it’s possible to identify patterns. This allows companies to develop new strategies and make a more accurate forecast of incoming revenue. The latest predictive analytics and machine learning can optimize revenue recovery. It can do this by helping to determine the debtors who have the greatest likelihood of paying. This allows a company to put in place a more efficient accounts receivable management system.
Improving Payment Systems
While intelligent analytics have a role to play, making the process of paying easier is the true solution. The more difficult it is to make payments, the less revenue a company will receive. This is the reason why it is paramount to find the right card services for credit unions.
Credit unions and other smaller financial institutions need to increase the number of ways in which people can make payments. By relying on paper checks, the chances of receiving monies owed on time dwindle dramatically. In the modern world, institutions that fail to utilize the Internet are on a losing streak. They will lose out to competitors that can offer the facilities and systems that consumers demand.
Streamlining the payment process is key to this. By offering telephone IVR systems and web portals, institutions cater to the needs of today’s consumers. These systems make it easy to use preferred payment methods. They also allow debtors to make payments at a time and location to suit them. By simply facilitating easy payments, the chances of receiving timely payments increase.
BillingTree’s Solutions for Financial Institutions
BillingTree offers cutting-edge payment solutions for financial institutions. By offering cutting-edge card services for credit unions, we simplify the process of making payments. No longer do credit unions and small financial institutions need to write off bad debts. By taking steps to streamline the payments system, the process of debt recovery becomes simpler. Not only can financial institutions increase their revenue, but they can also maintain their own brand integrity.