Servicing and collections: where operations and technology meet

Servicing and collections get less attention than origination, but they are where a lending business is won or lost over time. They are also a good illustration of the balance we try to strike with every client: the operating model comes first, and technology supports it.

Start with the operating model

Before choosing tools, settle the fundamentals. How are accounts segmented, by risk, by stage of delinquency and by borrower situation? What contact strategy applies to each segment, and who decides when to change it? How is work routed to people with the right skills? How is quality measured and coached? How are hardships, bankruptcies, military borrowers and complaints handled, and by whom?

Written playbooks and a real quality program matter more than any particular system. Technology configured around a clear operating model works. Technology deployed instead of one does not.

What a strong in-house operation looks like

At Octane, servicing began as a function run by an outside servicer. We opened the first in-house servicing operation in Irving, Texas, starting with a single hire in May 2018, and built contact center, collections, loss mitigation, bankruptcy, compliance and quality functions from scratch. The team grew to 175 people, held customer satisfaction at an NPS above 40 and passed state and third-party audits. Investors and rating agencies saw that control as a strength, and it supported AAA ratings from S&P and KBRA on securitizations totaling $1.9 billion between 2019 and 2022.

The lesson for a community institution is not to copy the size. It is that control, documentation and quality in this function are valuable in their own right, and that they come from the operating model, not from software.

Where technology helps

• Prioritizing work queues so staff reach the accounts that matter first.
• Quality review of interactions at scale, with people examining what the tool flags.
• Summarizing long account histories so an agent gets up to speed in seconds.
• Drafting routine letters and notices for a person to review and send.
• Forecasting volumes so staffing matches demand.
• Spotting patterns in complaints early.

Where to be careful

Treat anything that communicates with a borrower, or that decides how a hardship is handled, as high risk. Contact rules, unfair or deceptive practices standards and state requirements apply, and mistakes land directly on members. Keep a person in charge of hardship decisions and of any message that could affect a borrower's rights. Review and approve templates in advance, and log what goes out.

Measure what matters

A balanced view includes roll rates between delinquency stages, the share of promises to pay that are kept, complaint rates and their causes, quality scores, cost per account and employee turnover. If a new tool improves speed but pushes complaints up, you want to see that quickly. We explain how to set this up in how to know it worked.

People are the point

Collections and servicing are emotionally demanding jobs. Good tools remove tedious work and give staff time to handle the conversations that need judgment and empathy. Involve the team in choosing and testing anything new. They will find problems the vendor never saw, and they will adopt what they helped shape.

A practical first step

Choose one segment, such as accounts thirty days past due, and document the current contact strategy, who handles it and how quality is measured. Then look for the single most tedious manual step in that flow. That is usually the best first candidate for automation, and the documentation you create is useful regardless.