Developing Collections Strategy for a GCC Based BankBFSI
Designing a collection strategy is one way to ensure that your accounts receivable stays under control and that you continue to collect your cash. Without one, It will be a chos in the account receivables department because of disorganization, disconnections, and miscommunications. A collection strategy sets a standard for how accounts receivable collections will be conducted. When will you be sending out the first invoices? How often will you get in contact with your customers? Are you making follow-up phone calls? If there is no order, then customers will fall through the cracks. If you aren’t ensuring that a follow-up phone call is made after a collection letter goes unanswered, then your average days late will only increase.
The client, a large bank in UAE, aims to further improve provisions and reduce collections operations costs by leveraging an analytical strategy.
Approach
The goal was to reduce net credit losses and optimize provisions while improving the efficiency of the collections team. We followed this approach:
- Used modeling insights and segments to create priority groups.
- Developed a collections strategy, leveraging the analytical models.
- Developed the contact strategy.
- Implemented the models through SAS scripting to directly integrate model outputs to Finone.
Our team collaborated with the client to deliver the following solution tailored to meet their needs:
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Reducing Net Credit Losses
By implementing the collections strategy, the bank was able to reduce net credit losses by approximately USD 10 million per annum.
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Improving Collections Efficiency
The strategy also improved the efficiency of the collections team by reducing the number of self-curers and initial low-intensity collections efforts on safer segments.
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Optimizing Provisions
Optimizing provisions by providing empirical evidence on safer delinquent segments for rebuttal in IFRS9 (USD 14.5 million per annum)
By leveraging segmentation and modeling techniques, the bank has optimized its collections operations and strengthened its risk management practices.
Key Benefits
- Cost Reduction
The bank achieved significant cost savings by optimizing collections operations and provisions through the implementation of the analytical strategy.
- Risk Mitigation
By prioritizing high-risk accounts and optimizing collections efforts, the bank reduced its exposure to credit losses and improved overall risk management.
- Efficiency Improvement
The collections strategy improved the efficiency of the collections team by enabling them to focus on high-priority accounts and adopt more targeted approaches.