[Collections & Credit Risk - Table of Contents] March 2002

Software Innovations Net Better Collections

By Peter Lucas

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A slew of new software applications make it easier for collections agencies to exchange information with credit grantors via the Web, receive debtor payment via the Internet, and boost employee productivity.

With collections agencies facing stiffer competition than ever to not only win new business but retain existing accounts, they are placing greater emphasis on software applications that enable them to differentiate themselves in the market—and collect monies owed more cost effectively.

To meet the changing needs of agencies, many software vendors are upgrading their applications to enable agencies to offer clients greater choice of operating platforms, improve communication with clients, allow agents working from remote locations to seamlessly interface to their collections systems, and more accurately measure collector performance.

Software vendors are also developing modules to let agencies receive debtor payments through the World Wide Web by way of the automated clearinghouse system. Using the Internet to secure payments via electronic check means agencies can process a payment faster, discovering sooner whether the debtor has made good on a promise to pay.

"Collections agencies need to reinvent themselves on a regular basis to differentiate themselves, so they are always looking for new products and services that will allow them to do so," says Amy E. Kennedy, a strategic research analyst for Muncie, Ind.-based Ontario Systems Corp. "Consequently, vendors are offering more choices within their product lines."

Web-based applications continue to be a hot property. Many agencies are seeking to offer management, employees, and clients, secure real-time access to their database. Allowing clients to check on the status of their portfolio, such as the number of accounts worked on a specific date and dollars recovered, can improve productivity by letting agents focus solely on working accounts rather than having to divert their attention periodically to answer client questions. Some lenders may contact an agent several times a day for updates on their portfolio. Agencies can also speed client communication by using e-mail, instead of playing phone tag.

"Internet access is not new, but a lot of clients are dictating that agencies have the best tools available to improve recovery rates, because they know what tools are coming into the market," explains Steve Cohen, vice president of sales and marketing for Simi Valley, Calif.-based Collections Data Systems. "Agencies need to utilize today's technology, of which the Internet is a big part, because clients will leave an agency for a competitor that has better technological tools."

In an attempt to remain on the cutting edge, Collections Data Systems recently released two Internet-based collections applications written in Java—InternetDebtor and InternetTiger. The primary advantage of Java, considered the programming language of the Web, is its compatibility with most operating platforms. So lenders do not need special software to properly interface with a collections agency.

Java also allows programmers to squeeze more speed out of their applications for accessing screens and downloading information via a dial-up modem. The latter ensures that lenders can communicate with an agency from a remote location using a laptop or another Internet-enabled device, such as a personal digital assistant.

InternetDebtor is a consumer-oriented application. Once contacted by a collector, debtors with Internet access can dial up the agency's website and review their account for, say, the balance owed, and initiate a payment via an electronic check, credit card, or offline debit card. E-checks are initiated by the debtor providing a checking account and bank routing number.

Once the debtor selects the payment method desired and enters a checking or credit card account number, the transaction is automatically placed under review. The agent can score the payment based on the debtor's payment history and make a decision to accept payment or place a hold on the payment until it is clear the funds are good.

"Agents can notify debtors via mail or e-mail that this capability is available to them, which can encourage debtors to take action rather than avoid an agent's phone calls," says Jay M. Ford, executive vice president and director of software engineering and support for Collection Data Systems.

InternetTiger enables agents working from remote locations and lenders to access a collections agency's database. Both parties can review the status of a portfolio on a per-account basis, modify notes pertaining to an account, and communicate with each other via email. The application features a security override that restricts access to data based on the user's identity.

Open Systems
While Web-enabled applications provide agencies with more versatility in accessing data and client communications, many agencies are demanding ways to grow their business without having to purchase custom programs. Indeed, many agencies and lenders support a hodgepodge of operating systems and database applications built through acquisitions and adoption of common software platforms, such as Windows XP. Traditionally, agencies and lenders have turned to their primary software vendor to write custom programs that enable them to integrate new applications across the enterprise and ensure those applications are scalable within their core-operating platform.

Late in 2001 Vancouver, Wash.-based Columbia Ultimate Business Systems Inc. took a major step in this direction with the launch of its Agility platform. Intended to reduce the need for custom programming by supporting mixed-mode operating systems, Agility is a Windows-based operating system that is database independent. As a result, it is compatible with Oracle, DB2, and Microsoft SQL Server. Other database platforms will be added later.

In January 2002, CUBS introduced QuickFlow, its newest application for Agility. QuickFlow interfaces with the end user's accounts receivable system. Employees can pull specific pieces of account data, such as balance owed and notes about the account, directly from multiple databases using drag and drop technology. Workloads can be prioritized by user-defined categories and other criteria that direct data flows to the appropriate employee or manager.

"Our aim is to create applications that mitigate the need for custom programming and support mixed-mode operating systems," says Tim Hickey, vice president of product management and marketing for CUBS. "As agencies move into more vertical markets, it is important to deliver applications and products that run on common platforms."

To reassure existing clients it intends to continue supporting its flagship Collector System platform, CUBS has made several enhancements to the product. Upgrades include local and remote Web-access to account data and the ability to initiate e-payments from debtors through the ACH. In addition, CUBS announced a new support program in January named Look Forward. The program is a combination of customer support incentives for existing and new licensees of the Collector System. "The program is a way to demonstrate to customers we are committed to Collector even as we diversify our platform offerings and become more of a technology company than a software vendor," Hickey says.

Common Standards
CUBS is not the only software vendor moving away from customized enhancements toward common operating standards. Montville, N.J.-based Commercial Legal Software recently introduced a common interface standard for its Collection Master application. The standard ensures that attorney collections firms can use its software and move data between different hardware platforms in a common format without a customized interface. Previously, CLS had written about 150 EDI interfaces to accommodate its clients. An interface typically cost between $1,000 and $1,500.

The standard allows end-users to add new data fields for specific market segments and consolidate multiple accounts into a single file for transmission between the client and collections agencies via the Internet, making it less time consuming to send the information. Upon receipt, the data within the file can then be parceled out to individual employees or divisions within the company as specified prior to sending. "The aim of the standard is to boost electronic traffic so agencies and lenders can communicate more easily with collections attorneys," says Nicholas D. Arcaro, director of marketing for CLS. "The new standard makes it less costly to interface with attorneys using our software and ensure that data appears in a standard format regardless of the platform."

In addition to making their applications more user friendly via compatibility with other platforms, software vendors are also focusing on ways to boost end-user productivity. One approach is integrating collections software with power dialers and call centers to more effectively manage inbound and outbound calls.

Seeking to capitalize on this concept, Ontario Systems recently introduced a new module for its FACS software that allows collections agents to record the time and date of each call to a debtor and store the data on a separate server. Typically, call records from predictive dialers are erased once a new campaign begins. With Ontario's new module the call log becomes a permanent part of the debtor's file which agents can retrieve from their workstation. After reviewing the data, agents can cue the predictive dialer to attempt calls at different times of the day and days of the week.

To help agencies better manage inbound calls, Ontario has added a new module that allows call centers to override directing the call to the phone extension dialed if the agent at that extension is unavailable. Instead, the call is sent to the next available agent so it does not go unanswered. The agent taking the call can then call up the debtor's file and work the account.

"Increased productivity is essential for agencies, because there is a lot of wasted time when it comes to outbound and inbound calling," adds Michael K. Meyer, national sales director for Ontario Systems. "The key is getting to the account at the right time on an outbound basis and getting the account to the right person on an inbound basis."

Analytical Tools
Productivity can be measured in several different ways, such as the success of a collector negotiating payments from debtors. For the most part, agencies and lenders have measured performance on a manual basis, which makes the results more subjective than definitive. That trend is changing as software vendors build analytical models to more accurately measure employee performance.

Golden Colo.-based Narex Inc. recently introduced a model that uses 12 criteria to measure collector performance. The criteria include number of promises for payment received, number of payment promises that failed, size of the payment received, and number of calls handled per day. The model, developed in conjunction with the Center for Business Solutions, identifies patterns in the data gathered and compares the results to agents working accounts with similar characteristics.

Supervisors can use the data to spot and correct weakness in an agent's approach or the company's collections strategy. "A lot of goals for individual agents are set at the macro level without really understanding the agent's strengths and weakness," explains Bernhard Nann, president of Narex. "Once supervisors can determine what drives performance, they use those drivers to build better businesses strategies and apply them across the entire organization."

As agencies are discovering, software vendors have plenty of tools available to help them boost productivity and differentiate themselves in an ultra- competitive market.

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