In a previous post, we wrote about how the delinquency mitigation platform BackOnTrack TM improves delinquencies in collections customers. After completing BackOnTrack (BOT), delinquent customers pay remarkably better than other customers. Analysis shows that 60% of this improved payment behavior is specifically due to the BackOnTrack engagement.
When you blend BOT completers and BOT non-completers into the BOT Invite Group, the payment results outperform the existing collections process of a creditor. The graph below highlights the cure rates for more than 150,000 accounts split between two groups: BOT Invite Group and Existing Process.
With a single 10-minute session of BackOnTrack, this credit card issuer enjoyed a 70 basis point pickup in cure rates. Not bad for one-sixth an hour of work.
A fair question to ask though, is why is it that a 10-minute session of BackOnTrack improves delinquencies? The answer is by expanding the reach of collections efforts.
BackOnTrack reaches customers not responding to current collections efforts
Consider today’s professional first-party collections teams inside financial institutions. They have an array of tools in place: real-time data, risk segmentation, predictive analytics, multi-channel outreach, tailored scripts for agents, workflow optimization, etc.
Yet there are still delinquent customers who don’t get current. They somehow are immune to a powerful array of collections efforts. It’s into that environment where BackOnTrack delivers better payment performance. This leads to the following conclusion:
BackOnTrack reaches delinquent customers
who do not respond to current collections efforts.
BackOnTrack integrates a different approach into collections efforts. One that emphasizes empathy, actionable advice, and seizing the moment through nudges. The offer of BackOnTrack stands out amid a sea of requests for payments.
Analytically, let’s see how BackOnTrack does indeed reach customers existing collections efforts don’t.
BackOnTrack improves delinquencies early, but is that a sugar high?
As referenced at the start of this post, we have payment data for over 150,000 1-29 DPD delinquent customers covering two separate measuring points at Month 3 and Month 8:
For two months, a test of BackOnTrack was run on two segments: BOT Invite Group and Existing Process Group. In Month 3, we received payment data for these two populations. Five months later in Month 8, we again received payment data for these accounts. This provides a basic time series that allows some insights.
The first thing we want to know: what was the cure rate in the near term, 1-2 months after initially entering delinquency? In the table below, you can see the cure rates for the different segments.
|Segment||Cure rate in Month 3|
|Invited to BOT – completed it||84.6%|
|Invited to BOT – didn’t complete it||62.5%|
|BOT Invite Group||63.7%|
|Existing Process Group||62.7%|
The overall story is that the BOT Invite Group outperforms the Existing Process Group 1-2 months after accounts enter delinquency, by a significant 100 basis points. And it’s clear who’s driving that improvement: BackOnTrack completers. Their cure rate was 84.6%.
This is fine in the short term. But was the better cure rate of BackOnTrack completers a case of a “sugar high”? Get more payments initially, but the completers then revert to delinquent status as months go by?
The answer is a clear NO. The benefit is much more than a sugar high.
Newly reached customers stay current
Let’s examine only customers who were cured in Month 3. Because if the BackOnTrack completers are essentially short-term sugar highs, we should see a precipitous decline in their performance by Month 8. In other words, these artificially propped up accounts revert to form.
That’s not what we see. Instead, there’s a remarkable consistency in performance by Month 8 for all Month 3 cured accounts, across the three segments.
There is a minor drop-off in the BOT Completer cures who stayed cured in Month 8, at 75.2%. But it’s very close to the performance of the other two segments, around the 77.5% level. Remember that the BOT Completers had much higher cure rates initially. So a similar level of staying cured is what generates improvement for the BOT Invite Group.
These results point back to the basis of BackOnTrack’s value stated previously. BackOnTrack reaches customers your current collections efforts do not. These customers respond to the BackOnTrack offer, both getting and staying current.
Signup to be notified when we’ve posted a new article to the Scorenomics Blog!