Balancing Recovery Cost and Customer Experience

1. Context and Challenge: Smaller Balances Change the Economics

Manual outreach can make sense for a large installment balance. The same approach may cost too much for a smaller point-of-sale balance.

A digital collections plan therefore has to balance two concerns:

1. Recovery cost: Repeated calls and manual follow-up can cost more than the balance justifies.
2. Customer treatment: Frequent contact may create unnecessary friction. We are treating its effect on future engagement as a risk to test, not as a proven outcome.

graph LR
    subgraph Larger [Larger balances]
        L1[Higher balance] --> L2[Manual outreach]
        L2 --> L3[Cost may be justified]
    end

    subgraph Smaller [Smaller balances]
        S1[Lower balance] --> S2[Digital contact first]
        S2 --> S3[Lower service cost]
        S2 --> S4[Monitor customer impact]
    end

The planning question was straightforward: How could we lower recovery costs without weakening compliance or creating avoidable customer friction?

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2. Action Taken: Separate Delivery from Decisions

We planned the system in two parts:

1. Message delivery: A vendor would manage approved communication across channels, along with compliance controls, audit records, and reporting.
2. Decision rules: We would retain control of how account context informs the choice of an approved channel, message, and time.

This separation lets us use existing delivery tools without giving up control of customer treatment or future decision models.

A Future Learning Model

A later version may use contextual learning to compare approved actions and their outcomes. That model is a design concept, not a production system. It would have to operate within fixed compliance rules and consider both repayment and longer-term customer outcomes.

graph TD
    C1[Account context] --> C2{Approved action}
    C2 --> C3[Channel and message]
    C3 --> C4[Repayment and feedback]
    C4 -->|Future review| C1

We also assigned the build its own team and schedule so daily collections work would not displace implementation.

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3. Plan and Next Milestones

The planning work produced three completed outputs:

• Technical Fit: Confirmed that a vendor could support message delivery while keeping decision rules separate.
• Compliance Requirements: Documented the controls, audit records, reporting, and operational-risk requirements the system must meet.
• Approved Milestones: Set and approved implementation and testing milestones while keeping exact dates private.

The next phase is to build and test the system. Recovery and customer outcomes should be measured before any learning model is introduced.