The banking industry is evolving at a rapid pace. Large commercial bank monopolists appear to be facing stiff competition from small banks and financial institutions. While this may sound bad for the banks, it’s good for the end consumer who has more options at their disposal.
Plus, with the introduction of blockchain things are now changing at a rapid pace. You don’t even need banks to make and accept payments anymore. However, you do need financial institutions if you wish to take a loan.
Fortunately, there’s ease in this regard as well. You can apply for a loan online without having to worry about collateral and other such issues. However, technology appears to be making things difficult for banks and collection industries. It has affected overall collections i.e. repayment of the loan by borrowers on time.
This is why experts appear to be working hard to ensure that borrowers pay back the money on time. There’s a new technology that plans to help financial institutions by making it possible to push borrowers to pay back on time.
If you’re an entrepreneur struggling to receive payments, you should consider the following tips:
The Misunderstood Loan Defaulters:
About 5%- 10% of the borrowers are loan defaulters by will, the others find themselves stuck in a bad financial situation. Hence loan defaults cannot be avoided but with this technology, you can let borrowers know well before in time about their upcoming financial situation, which will let them do something about it before defaulting on the loan.
The lender can give access to this simple tool to the borrower, which will assess the borrower’s Credit and Financial History and lets him/her update this knowledge over the span of the loan.
This system keeps the borrower engaged with the overall financial status and helps them in times of financial distress. However, borrowers must be pushed to use the tool. A small reward may be a good motivation.
Some borrowers will always still end up being no-payers, especially due to the loss of contact. A system can be made to find borrowers through the internet given how 90% of the US population uses the internet and 70% has a social media profile.
An internet search can help find defaulters and reach them. There is no need to make calls or send an individual. Everything can be done via messages. Plus, it is also legal to send messages to defaulters for as long as you don’t spam.
Non- intruding intervention
Lenders need to be careful about how they recover the money. It is common in the industry to send recovery agents to recover money. This can cause problems for the borrowers who may not be missing payments intentionally.
Businesses should understand the situation and not harass the borrower. Such behavior is not only unethical but is also illegal as well. Visiting the borrower at random hours, calling recklessly, threatening, etc., can get you into legal trouble so follow a friendly route.
People are more likely to open up if you chat with them. Intelligent chatbots can be used for this purpose. It’s a big investment but it can have good results. People usually lie or give excuses when you threaten them or land at their door unexpectedly. They are more inclined to be honest on a chat so give them the opportunity to be real in front of you.
You don’t need humans for this purpose. Chatbots can do the job. They can also be programmed to gauge if a customer is telling the truth or not.
Fintech startups are already using the latest technology to recover bad debt. You should also consider the same. The key to success lies in adapting the latest technology and moving head.