Debt collection may be among the more human and manual labor-intense activities when it comes to managing accounts receivables Collections departments place calls scores of them send emails and seek to work out payment plans and very frequently none of the above translates into recovery of monies owed In fact that happens only 20 percent of the time at best Thats in part tied to legislation that is decades old such as was passed in 1991 which allows consumers to tell collectors to stop contacting them and to the traditional methods of collection that are based on phone calls and letters and repetition The mismatch between efforts and success speaks to a looming and significant issue for corporations of all sizes and across all manner of verticals but especially for financial institutions trying to manage credit card and student loan debt Consider the fact that earlier this month data from the Federal Reserve Bank showed that the total debt carried by Americans now stands at about 135 trillion Thats a record high as noted by CNBC and a trillion dollars higher than had been seen in the previous peak prior to the recession Getting a bit more granular the website noted that serious delinquencies which includes debt that is past due 90 days or more for student loans rose to 91 percent from 86 percent in the previous quarter Delinquency flows have been rising on auto-related debt through the past six years and on credit card debt through the past year Consider too that debt collection efforts are anything but well-received by consumers A debt collection snapshot from the Consumer Financial Protection Bureau found that between July 2011 and May 2018 the Bureau received more than 400 500 debt collection complaints That tally represented 27 percent of the total complaints received Want further proof positive that things could use a change perhaps a bit of a tech-driven helping hand In an interview with PYMNTS Karen Webster Dr Akli Adjaoute CEO of Brighterion a Mastercard company brought forth some salient points from the Fed that underscore the magnitude of delinquent debt Of the 598 billion in debt that is delinquent 403 billion is seriously delinquent according to August stats meaning at least 90 days past due He noted that 30 million Americans have at least one debt in collection This translates into as he termed it a big problem for the United States for the economy and obviously for the financial institutions that are owed all of this money and that not all the people will be able to pay Its an area in which true AI unsupervised learning and smart agents that can profile behavior can help but not many financial institutions FIs are taking full advantage of The AI Gap Report a collaborative effort between PYMNTS and Brighterion reports that only 55 percent of all FIs are using any kind of sophisticated true artificial intelligence AI technology to help improve their efforts True AI Adjaoute said can helps FIs take action at the first sign of trouble through personalization and outreach AI he said increases the odds that collection efforts will be successful because trying to collect from someone who has hit some personal speed bumps but nonetheless has proven a good credit risk is a better strategy than trying to collect from those who are chronic delinquents Separating and segmenting those borrowers can be done all the more effectively with true AI In fact Adjaoute said with AI there would be no such thing as a chronic delinquent AI said Adjaoute can be used to examine past consumer behavior monitor present consumer behavior and can help with onboarding efforts especially in an age where competition among FIs to bring consumers onboard with speed is the name of the game AI in effect can be helpful in raising red flags or green lights when it comes to onboarding consumers in the first place and where credit is first extended You can tell a lot about a consumers likelihood of paying down debt with insight as to how often they visit the ATM or bump up against account overdraft limits Its all about the monitoring of activities he said But after the credit is extended should missed payments start to surface the insight that machine learning offers in real time lets lenders tap into personalized methods of contact Its a lot easier in the beginning of collection efforts to get back the money Adjaoute offered the scenario of say text messages for Millennials versus phone calls that can open the door to tailored conversations and repayment terms leading to markedly improved recovery rates In fact said Adjaoute effective use of AI can help reduce delinquency rates by about 76 percent Prevention is the Best Cure It is of course best to stop the problems of debt delinquency before they ever begin in earnest said Adjaoute I believe the prevention of delinquency is more important he told Webster than efforts to eke out returns on processes that are still steeped in telephone calls and letters He pointed to artificial intelligence as a conduit toward a successful preventative mindset There are a lot of things technology can bring to actually help companies he said Its a continuance of a theme in this space where personalization of financial services can help cement relationships between firms and consumers and also optimize business efforts It is true AI Adjaoute said that can provide reliable information about who is in fact most likely to pay whether nonpayment behavior is in fact an aberration and when the best times and methods of contact might be Context is key he said as is forming a 360-degree view of the borrower that could not be done without the aid of such methods and where personalization can boost recovery rates It is important to remember that we are human and that we do not use the same script or the same language when it comes to debt he said We all react differently LATEST INSIGHTS Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation thats reshaping the payments and commerce ecosystem Check out the latest PYMNTS report on Mobile Order-Ahead