India is witnessing a steady increase in demand for retail credit on the back of booming and steady economic growth despite the global headwinds. As a result of this, the debt resolution industry, which has been an unnoticed and underrated sector so far in India, holds significant potential for growth and development. In an interview with news18.com, Anand Agrawal, co-founder and chief product & technology officer (CPTO) of debt resolution platform Credgenics, speaks about the debt resolution industry and its future prospect.
The debt resolution industry has always been the most unnoticed and underrated sector in India. What could be the reason?
The debt resolution industry in India has historically been relatively underrated and neglected due to several factors. This segment has lagged behind in transformation despite other business areas in the banking industry leaping ahead over the years with advancements in technology. It is perceived as a back-end function that is mostly driven by manual efforts with bulk applied strategies, different expert teams operating in silos and lacking a futuristic vision in place.
The available technology solutions were following a disintegrated and piecemeal approach, thereby missing the bigger industry-wide agenda. There is also a cultural perception barrier for debt collections because the society refrains from acknowledging and discussing financial difficulties. Debt and financial struggles are often considered private matters, and seeking expert help for debt resolution may be seen as a sign of failure or incompetence.
Until recent years, the debt resolution industry also lacked comprehensive regulation and oversight. This led to concerns and cases with unethical practices being adopted by some service providers, further impacting the sector’s reputation and public perception.
What is the potential that the debt resolution industry holds?
The debt resolution industry in India holds significant potential for growth and development.
Rising demand for credit: With a booming and steady economic growth despite the global headwinds, India is witnessing a steady increase in demand for retail credit. However, as new lending business models emerge, new segments are tapped for credit expansion and the dynamism in the economy unfolds, there is bound to be a rise for managing delinquencies at different stages including the non-performing assets (NPAs). This presents an opportunity for the collections industry to rise and help individuals and small-business owners manage and resolve their debts effectively.
Regulatory reforms: The Reserve Bank of India has taken many steps to enhance the regulatory framework governing the debt resolution industry. They have brought greater transparency, accountability, and professionalism to the sector. With the regulator coming forward to safeguard the rights of customers and tracking compliance, the sector has got a boost to transform and get ready for the future.
Growing demand for debt management: With the economic impact of the pandemic and other financial challenges, there is an increasing need for availing professional debt resolution. Individuals and businesses are looking for solutions to restructure their debts, negotiate with creditors, and avoid bankruptcy. This creates an opportunity for the debt resolution industry to expand in this area.
Technology and digitalisation: The rapid advancement of technology and digitalisation has the potential to transform the debt resolution industry. Online platforms, data analytics, and automation can streamline processes, improve efficiency, and provide better customer experiences. This digital transformation makes a significant positive impact on the performance, positioning and perception of the debt collections and resolutions industry.
Overall, the debt resolution industry in India has the potential to grow exponentially and become more recognised as individuals and businesses increasingly seek professional assistance to manage their debts effectively. Continued regulatory reforms, awareness campaigns, and the adoption of technology can contribute to the industry’s growth and enable it to play a more prominent role in India’s financial ecosystem.
What are some of the interesting trends that will shape the future of this industry?
The collections industry is continually evolving, and several trends are likely to shape its future.
Adopting Conversational AI at every stage of debt collection: The integration of conversational AI throughout the various phases of debt collections facilitates the implementation of Human-like Voicebots and Chatbots. This adoption enables a swift expansion of operations and accelerates the process of initiating outbound calls and addressing inbound inquiries, consequently bolstering agent efficiency and reducing collections costs.
By incorporating intent capturing functionalities, these automated systems are capable of engaging borrowers in conversations that are contextually relevant and empathetic, thereby creating an environment where borrowers feel at ease conversing with bots rather than human agents.
Customer-Centric Approaches: Traditional collection practices are being replaced by more customer-centric approaches including digital nudges, consultative messaging, personalized communications and hand-holding to complete transactions.
Companies are focusing on building positive customer experiences by deploying approaches that are more empathetic, solutions-oriented, and personalised. Proactive communication, easy self-service options, and flexible payment plans are being implemented to engage customers more effectively and improve recovery rates.
Data-Driven Decision Making: Deriving insights from vast amounts of data is becoming crucial in the collections industry. Advanced ML models help in segmenting customers, identifying risk patterns, predicting behavior, and prioritizing collection efforts. This not only aligns well with the customers but also increases the efficacy of the outcomes for the lenders.
Compliance and Regulatory Challenges: As regulations continue to evolve, compliance becomes a key focus for collections agencies. A proactive approach can be adopted with robust platforms that have the necessary checks built-in to avoid any human errors or misses on the compliance aspect.
Shift Towards Alternative Lending: The rise of alternative lending platforms and fintech companies has disrupted the traditional banking landscape. This trend is expected to impact the collections industry as well. Non-traditional lenders may require new collection strategies to address unique challenges and reach borrowers who may not have a banking relationship.
About $16 billion worth of loans were managed by your company Credgenics on a monthly basis in 2022. What has been the role of AI and ML in making the debt collection process a seamless experience for borrowers?
Credgenics has touched an overall loan book worth $47 billion in FY22. It manages 22 million retail loans and sends 60 million digital communications every month. Credgenics has embraced AI and ML capabilities to craft new-age technology solutions for the debt collections industry.
The insights from ML models in the Credgenics platform provide actionable insights on borrower segmentation, behavioral patterns, risk-based strategy and efficacy of digital engagements by analyzing past data. These help in equipping the collections teams with the right inputs for taking informed decisions, making the collections process more efficient, personalised, humane, and productive.
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