The founder of TrueAccord, Ohad Samet, used to work in the anti-fraud technology company “Fraud Sciences”. Later, after the company was bought by PayPal, he transferred to the Swedish online payment company “Klarna”, which allows consumers to “enjoy first, pay later” as the chief risk officer .
Klarna’s annual financial flow is tens of billions of dollars. As the chief risk officer, Samet usually not only looks forward and backward for the company, but also carefully evaluates the financial impact of the small number of customers who enjoy first but “do not” pay on the company’s finances, and cooperate with relevant departments Find ways to reduce the proportion of these bad debts.
One day in 2013, Samet received a call from a stranger who immediately asked, “Hey, do you know that you have a 150 yuan bill at Macy’s that you haven’t paid yet? How do you plan to pay it back? Cash, check or swipe Don’t give me a card to repay this money?”
He was very surprised that the call was not from Macy’s customer service, which meant that his personal information had been leaked to an unknown debt collection group.
Afterwards, Samet quickly found out the bill and paid the money, but this unpleasant experience made him think carefully about “debt collection”.
He did some research and found that debt collection was a huge market: more than 70 million consumers in the U.S. were in debt each year, each with an average of four different creditors. In household spending, an average of 9% of income is used to repay various debts. The annual “output value” of the United States alone is as high as 13 billion US dollars.
However, debt collection still works in a very old way: the operator buys a whole batch of debts from creditors such as banks, credit card companies or payment operators at a very low price, and then collects debts from the debtors; even if most of them cannot receive money, as long as There are a few successes, and the considerable price difference in the middle can allow the industry to obtain high profits, which is very similar to the “business model” of a fraud group.
In addition, the New York Times Magazine has also made a related feature, reporting that in order to reduce labor costs, most of the collection agencies employ low salaries and high bonuses to hire ex-convicts and hooligans on the fringes of society, and train them to use procedures beyond the limits of regulations to collect debts , For example: Make 5 phone calls a day to collect money, threaten with a fierce tone, and so on.
As a result, debt collectors only want to collect money, and those who owe debts have nowhere to go. Rough methods often cause conflicts between the two parties. In addition to not helping debt collection, it also makes consumers feel disgusted with the original creditor.
In view of this, Samet recalled the experience he learned while working in an anti-fraud technology company, and believed that the strategies needed to succeed in “debt collection” are actually almost the same as “marketing” and “fraud”. For example:
- How to make the person answering the phone willing to listen to you instead of hanging up the phone?
- Remove the “emotion” first to avoid conflicts, and then we can talk about it later
- The last mile: reduce payment resistance and allow the other party to pay easily
With an idea, after Samet’s tenure at Klarna came to an end, he resigned and two co-founders founded TrueAccord, trying to flip the debt collection industry with the thinking he learned in fintech start-ups.
Get rid of “emotion” first, and then deal with “logic”
At the beginning of its establishment, Samet decided to reduce the proportion of traditional telephone calls, and increase the more indirect and diverse ways to communicate with consumers such as text messages, emails, and instant messages.
In this way, the “entry barrier” is solved: compared with spoken language, written language has a lot less emotion, completely avoiding the possibility of the two parties being hung up on the phone at the beginning due to conflicts caused by emotional factors causing the negotiation to break down.
But these asynchronous methods also have corresponding challenges: After you send a letter, is the other party willing to click on the message to read it?
Therefore, in addition to finding engineers responsible for technology, Samet also found social scientists and behavioral scientists who were responsible for analyzing data. Together, they study negotiation skills, switch the angle of interpretation of data, collect public content from social networking sites for analysis, and then build machine learning models based on this.
The purpose of this is to analyze which copywriting can effectively open the defenses of different types of debtors, and at what time do they most often browse the Internet and read information? The machine then uses this to adjust the frequency and content of the next automatic message sending.
The debtor’s age, gender, amount of arrears, and period of arrears all represent different meanings. The content, tone, target, and time of transmission of the message are all key factors that affect the opening rate of the message.
For example, older people with full-time jobs take their debts more seriously, and keep letters brief, formal, and bureaucratic; baby boomers (born between 1945 and 1965) emphasize their Social responsibility, telling them that “it is still a dishonorable thing to owe money.”
But millennials (born between 1980 and 1990) don’t like listening to preaching at all, and that’s where a little humor comes in: “Hey, I’m your debt, have you forgotten me?” or “I’m sitting eating ice cream, listening to broken love songs, because it feels like you are avoiding me…”
If the letter is not opened at all, the subject line is not to the debtor’s liking, then send it again with a different wording. Compared with the “greetings” of traditional operators five times a day, TrueAccord only sends messages three times a week, but it can create a 65% open rate and a 35% click rate, replacing the hassle of shooting birds with improved communication quality .
When the debtor is willing to open the letter, the next step is to find a way to make them willing to pay back the money.
How to successfully complete the last mile? Make every effort to increase repayment willingness and reduce repayment barriers
In many cases, the debtor does not deliberately not repay the money, but the financial situation is relatively tight. However, traditional debt collection methods only provide limited options such as “cash and credit card”, and there is no room for bargaining at all. The two parties can only continue to chase each other.
TrueAccord changed its approach and first discussed flexibility with creditors, for example: authorizing them to provide different plans such as discounts for repayment within the debtor’s term, amortization in installments, and delayed payments. If the debtor is still not satisfied, TrueAccord’s customer service will even ask the other party to make a proposal, and then negotiate with the creditor for a more flexible repayment plan.
What’s even more powerful is that the repayment plan provided by TrueAccord is a one-stop solution. You only need to use your mobile phone to complete all the processes. If the computer cannot handle the situation, then the human customer service will take over, which greatly reduces the repayment barrier.
On the other hand, TrueAccord will also remind debtors from time to time that continuing to carry debts will seriously affect credit. In case of urgent needs in the future, it will become very difficult to borrow money. What they do is not just debt collection, the ultimate goal is to help all debtors improve their financial conditions.
Since its establishment, TrueAccord has handled 13 million debts. Samet mentioned: “85% of the debtors were unable to repay at all. With our flexible repayment method, we successfully got rid of the debt-ridden dilemma.”
Win-win situation: creditors can not only cancel bad debts, but also keep customers
In terms of performance, the success rate of debt collection for one-year arrears by traditional companies is about 10-30%, and TrueAccord claims that their success rate of debt collection is 50% higher than that of traditional collection companies. The revenue source of TrueAccord comes from taking 30% of the collection as a commission after successful collection.
The 30% commission seems to be high, but Samet has a different view: “For our customers, these bad debts are nothing if they don’t receive them, but if we achieve our goal, we can get 70% back, which is much better than zero “.
And TrueAccord has another advantage, because the experience of the debtor being dun is still “pleasant”, so for the company, these people who pay off the debt will not have an aversion to the brand. In addition, due to the proper use of technology, the marginal cost of machine learning technology is not high. As long as the debt is more than 3 US dollars, TrueAccord will accept it, regardless of the size of the debt. It is a financial service that micropayment companies can also use.
At present, many well-known financial technology companies such as Shopify, Stripe, and Yelp, the largest review website in the United States, are TrueAccord customers. The accounts received in 2019 are double that of previous years. A win-win situation can be achieved without violence.
Although we do not want to be chased by creditors one day, but in the event of an unfortunate event, we should also hope that the debt collectors can be as friendly as TrueAccord.