The Japanese financial system has always favoured lending to larger firms with strong collateral compared to consumer and small business lending. In the early 1980s, with underdeveloped credit risk assessment, individuals and small businesses were finding it difficult to obtain financial help from the traditional banks.
This gave rise to a new segment in Japan – the non-bank lending segment. As more small businesses and individuals turned to such establishments, the Japanese government realised that regulation was necessary. The ‘Sarakins’, a Japanese term for a moneylender who makes unsecured loans at high interest rates, expanded quickly in the market. So much so that it is estimates that 10 percent of the Japanese population have borrowed through these players. With the growth came some unscrupulous lenders and practices.
It was against this background that regulations were brought in, including tightening conditions to enter the money lending business, mandatory credit bureau checks and restraints on collection activities.
To remain competitive under the new regulations, it was important for all lenders to provide a good customer experience — especially for debt collection, as it can often be a highly sensitive and emotional experience for customers.
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Aiful Corporation, a provider of consumer and business credit based in Kyoto, understood there were challenges with human call centres in remaining consistent and legally compliant. It also found that with high numbers of staff and ongoing training costs, call centers are very expensive to operate in Japan.
Aiful faced many of these Japanese market challenges in collections but also wanted to find a way to free call-centre agents from low-level collections activity to give them time to assist with more valuable contributions to the organization. This could only be achieved by reducing cost to collect, enhancing the customer experience but maintaining cure rates.
The company wanted to bring collections automation to Japan and tailor it for the Japanese customer. So it worked with FICO, to develop a best-practice automated collections communication system based on FICO® Customer Communications Services (CCS) and the company’s expertise on how to derive benefit from automation.
“We have been able to leverage automated voice best practices to match the cure rate that a human call contact can achieve, and at a lower cost to collect,” said Shinichiro Okuyama, Executive Officer at Aiful. “I had heard this was possible in overseas markets and am excited to achieve this in the Japanese market, while ensuring customer experience is high and we are fully compliant with local collections legislation.”
Working in partnership with Aiful, FICO used its experience from global projects to tailor an automated collections solution to the Japanese market. This included designing the tone and sentiment of scripting as well as incorporating legal compliance and strong customer experience wording.
FICO also worked with Aiful to design collections strategies that optimised the blend of automated voice with human agents to deliver the optimal cost-to-collect, cure rate, customer experience and legal compliance goals.
These recommendations were verified using an agreed roadmap of tests (known as champion/challenger testing). These learnings helped highlight the optimal contact strategy that delivered the cost, cure, customer experience and compliance targets – creating a best-practice approach for the Japanese market.
As a pay-as-you-go cloud-based platform, CCS for collections is specifically designed to meet the challenges and sensitivities of debt collection. Aiful used the complex customer experience workflow engine in CSS to complement its collections systems and manage automated dialogue. With segment and customer level rules, Aiful was able to tweak and optimize the customer experience—and improve the collections result.
Early analysis showed that Aiful customers had extremely high interaction and self-service rates with the automated voice collection service, indicating that they were very happy to use and engage with it.
Since it implemented CSS for collections, Aiful has been able to match the cure rate of human agents and in some challenger tests collect slightly more. Eighty percent of contacts who hear the reason for call proceed to self-serve without the need to speak to an agent. In addition, all the peak volume periods were handled without additional staff.
Aiful has used CSS to bring global best practices in automated debt collection to Japan, and to maintain its cure rate, lower its costs and ensure a high-quality customer experience.
The company’s dedication to smart automation successfully illustrates that respect and professionalism can be built into an optimized debt collection experience that significantly contributes to repayment.
The CCS solution employs a continuous business improvement philosophy, where Aiful and FICO work together to find and regularly implement improvements to performance. Incorporating two-way SMS and inbound voice are just two of the initiatives planned for the near future. Aiful are also planning to extend the use of CCS into their sister company, Life Card, with the aim of replicating this success in their credit card portfolio.