Top 5 Challenges Facing Debt Collection Teams in 2024 (and How to Overcome Them)

Debt collection is becoming more complex as businesses expand, borrower behavior shifts, and new technology disrupts old processes. In 2024, collection teams are facing persistent challenges, from reaching borrowers effectively to managing aged debt. However, these challenges also present opportunities—if approached strategically. Below, we explore the five biggest challenges and offer practical solutions for overcoming them.

1. Low Contactability in a Fragmented Market

Reaching borrowers is tougher than ever, with people scattered across multiple communication channels. Some borrowers prefer WhatsApp, while others rely more on SMS or email. Contacting someone on the wrong platform—or at the wrong time—can reduce engagement, leading to missed payments and lower recovery rates.

How to Overcome It:

A multi-channel strategy is essential. Engage360 by Lunash ensures communication flows through the borrower’s preferred channels, such as WhatsApp, SMS, or email. Optimizing message timing and channel selection helps improve both contactability and repayment outcomes, reducing friction and frustration for borrowers.

2. Tracking and Managing Borrower Data Across Systems

Managing borrower data becomes complicated as portfolios grow, especially when information is spread across different systems or is outdated. Collection teams often struggle to find valid contact information, leading to inefficient outreach and lost opportunities.

How to Overcome It:

TraceLink simplifies contact discovery by aggregating data from various sources to identify alternative phone numbers or updated information. This ensures that collection efforts are targeted, improving contact rates without wasting time on outdated leads.

3. High Operational Costs and Limited Resources

Many institutions still rely on labor-intensive collection processes. For example, in rural banks (BPRs), officers often handle both loan disbursement and collection, leading to bottlenecks at the start and end of each month. Scaling these processes becomes challenging without increasing costs.

How to Overcome It:

Automating routine tasks with PredicAI and Engage360 reduces operational burdens. PredicAI forecasts default risks, helping teams focus on the highest-priority accounts, while Engage360 automates follow-ups, giving officers more time to manage critical cases. This approach ensures smoother workflows without adding to operational costs.

4. Adapting to Changing Borrower Behavior

Borrower expectations have evolved with the rise of BNPL and P2P lending. Many borrowers expect convenience, flexibility, and personalized repayment plans. Traditional, rigid approaches to debt recovery can feel out of touch, leading to disengagement and higher delinquency rates.

How to Overcome It:

Using predictive analytics allows teams to segment borrowers based on their behavior and tailor communication strategies accordingly. Offering dynamic repayment options and sending proactive reminders before due dates helps meet borrower expectations, improving repayment outcomes while building trust.

5. Managing Aged Debt Efficiently

The longer debt remains unpaid, the harder it is to recover. Aged debt can fall off the radar, especially as teams focus on newer accounts. Without a clear strategy, aged debt can pile up, leading to revenue losses over time.

How to Overcome It:

Data-driven tools like PredicAI help teams prioritize aged accounts by predicting which borrowers are most likely to repay. Engage360 automates follow-ups on overdue accounts, ensuring consistent outreach without neglecting new loans. This strategic focus keeps both old and new accounts on track.

Conclusion: Leveraging Technology for Better Outcomes

While debt recovery presents many challenges, the right strategy and tools can turn these obstacles into opportunities. Lunash’s solutions—PredicAI, Engage360, and TraceLink—empower collection teams to streamline operations, engage borrowers effectively, and reduce costs. By focusing on efficiency, transparency, and borrower-centric solutions, businesses can build trust and foster long-term growth.

In today’s competitive environment, debt recovery isn’t just about chasing payments. It’s about treating borrowers fairly, building better relationships, and maintaining sustainable growth. With Lunash’s technology, collection teams can stay ahead—turning challenges into opportunities for lasting success.