Using a collection ruler will give clear steps on the collection process. We name this a collection ruler because it ends up looking like a ruler (such as illustrated below) at each step of the collection.

Using this method makes it easier to manage a large portfolio of customers and clearly defines the collection policy and the resources to be used at each stage.

It is important to understand that the collection process does not start when the bank sees a missing payment. It starts before the due date, by reminding customers of their financial obligations.

The first step is before the payment day.

  • Remind the customer that a repayment is due – this is often done by sending a statement a few days before the payment is due.
  • If the repayment is made according to the contract, it has one step more, that is to thank the customer for the repayment, reinforcing whatever aspect the service provider has, or benefits for fulfilling the contract (for example, a higher credit limit in the future).

The second step is on the repayment day.

  • If repayment is made as expected, thank the customer for prompt repayment to reinforce such behaviour.
  • If not, send a first warning message.

The third step is when the repayment remains unfulfilled.

  • If, following the first warning message, repayment is made as expected, thank the customer for the repayment to reinforce the behaviour.
  • If not, send a second warning message after a defined period.

Subsequent steps when the repayment remains open.

The bank continues with collection efforts in line with its policy until the repayment is made – or the bank decides that recovery of the debt, with outstanding repayments and fees is the only option. This is called Recovery and we will discuss it later in this module.

A bank that understands its customer will have rulers that reflect its different customer segments. These will use a different tone of voice, communication and collection approaches, and contact channels.

Normally, the first and second steps are done through digital channels, such as email, WhatsApp, or SMS. Some banks call the customer and leave a recorded message to contact them if their call isn’t answered.

No matter which channel is used, the tone of voice and content must be aligned with each customer segment, so the customer will understand the message.

Empathy is very important in any collection process, and to get good results the bank must communicate using their customers’ preferred modes of contact.

By thanking the customer for prompt repayment, the bank reinforces positive behaviour that may lead to increased credit limits or better rates of interest, or simply help customers keep up with their financial obligations.

At each step, if there is no repayment, the bank can choose to change the channel of communication, the tone of voice or the content, always respecting what one knows about the customer.

Another important point to consider is the cost of each channel and approach, against the amount due. This is the reason the first two steps always use a digital channel as the preferred way to communicate.

The Collection Ruler must be backed up by a database that tracks the collection contacts, the customer’s response and behaviour – and triggers the next defined step.