Software for Banks and Credit Unions for Loan Collection Recovery

Bank collections software is a differentiating factor for Banks and Credit Unions. It is impossible to manage loan books without loan collection software as it provides the information crucial for the proactive management of loan collection.

Bank collection and recovery software deliver error-free, time-saving, and efficient loan recovery for financial institutions.

What Is Loan Collections Software?

Loan Collection Software is a software suite that helps Banks and Credit Unions to automate many processes that they otherwise manage manually. The features of Bank Collections software can be classified into two main categories – Front Office Management for lending managers and Back office management for the loan recovery team.

Front Office functions include entering details about new loans, their allocations, tracking the status of each loan, generating reports based on various criteria like Year date report for this Year, etc.

Back-office functions include automated reminders about missed payments, monitoring pending repayments, and generating collection reports like Late payment reports, Overdue loans list, etc.

Bank Collections software can be installed either in Microsoft Windows or Linux environments. Some banks and credit unions may prefer to use a web-based (hosted ) version of the software because it is cheaper and easier to maintain.

What to look out for in a Loan Collection Software

1. Customer segmentation

This is one of the essential features required in a bank loan collection software. It helps to segregate your customers based on their creditworthiness, payment record, and many other parameters so that you can send targeted customer reminders via SMS or emails.

Most of the software has this built-in feature, which will help banks decide who needs email or SMS notifications to settle dues on time.

They can also decide the number of times to notify their customers before they move them up in the category or grade their accounts as non-performing assets (NPAs).

2. Data management

Another important aspect is how a bank loan collection software manages, classifies, and displays borrower data. This helps banks streamline their operations faster as it provides them with better visibility of past transactions and the borrower’s creditworthiness trends.

Features like client management, online approvals of proposals, GL integration, etc., are essential aspects of software pro in managing loan recovery-related tasks.

3. Ease of use and flexibility

They must be able to demonstrate ease-of-use by administrators and end-users. Both should have a similar experience when using the bank’s Loan Collection Software. It should also provide an easy way to do credit analysis for all customers and integrate with other applications like MS Office modules, Accounting software, etc.

4. Workflow management

Workflows are of utmost importance in the loan collection recovery process as all processes start from here only. Workflow should be flexible enough to make it possible to create new workflow options and conditions on the fly (based on requirement) and modify existing options and needs quickly. This will ensure that the workflow process designed earlier is not affected and remains unaffected.

5. Reporting and MIS

A Loan Collection Software should be able to provide lenders with the ability to analyze their loan collection data, set quotas for recovery agents, generate custom reports for management information, etc. It should also allow the client to manage and view reports on a real-time basis.

6. Flexibility in managing collections process

The collection Process should start only after the correct data around the borrower transaction is captured and analyzed well. So, a Loan Collection Software for Banks and Credit unions must have such flexibility that it should be able to work with various modules like Credit (Loans), Cash (ATM/CDM/Trade Services), Treasury, etc.,

7. Cloud Computing

Cloud computing is the future of any software business. Loan Collection software should also offer cloud-based services to its customers because it will reduce their costs and help them improve their productivity.

8. Support and Training

A robust support system with good documentation makes a good Loan Collection Software. All the queries of the bank staff can be taken care of by experts sitting in different geographies. This will ensure banks have 24/7 access to experts who know the software they are using.

Benefits of using Loan Collection Software

The following points state some significant benefits of using such software:

1. Increase collection revenue

Banks and credit unions that use bank collections software have a drastic increase in borrower recovery rate. This is because the software does loan recovery agents’ work and makes them more efficient. So, they get their job done faster and with less human intervention hence increasing collection revenue.

2. Reduce costs of non-collections

A good Loan Collection Software helps the bank or credit union reduce the cost of NPA accounts since it provides deeper insight into the data by providing tools for granular analysis and accurate reporting. This, in turn, helps lenders better target high-value and written-off accounts.

3. Helps the bank leverage automation

These days, every company needs automation, especially for banks and credit unions. Loan Collection software should be such that it fully leverages automation in one or more areas such as borrower profiling, bulk mail-outs, etc.,

4. Reduce debt write-offs

A Loan Collection Software for banks and credit unions should have built-in telephony options that will help lenders reduce debt write-offs. This is because the software will minimize human intervention to rule out mistakes.

5. Improves profitability

When a bank or credit union is using a Loan Collection software, its chances of improving profitability increase substantially since it can accurately target accounts and handle them in a way that leads to a higher repayment rate.

Tips for choosing a loans collection software

Banks and credit unions should consider the following tips while choosing a Loan Collection Software for their business:

1. Learning Curve

Before choosing a Loan Collection Software, the bank or credit union must ask critical questions about how much time is needed to onboard employees with the new system. The learning curve for using the software will tell you if the bank staff is ready to use it in real-time situations without wasting too much of their valuable time by training them separately.

2. Security

One of the essential factors to consider while choosing a Loan Collection Software is its security. The software must offer security for data and transactions since banks and credit unions handle confidential customer information, and it should be well-protected.

The security of the software must not be compromised at any cost as that may lead to further financial losses for the bank or credit union.

3. Flexibility and scalability

A Loan Collection Software needs to be flexible and scalable since it should work with various modules like Credit (Loans), Cash (ATM/CDM), Forex, etc. Besides, the software should also be scalable to handle massive data like customer information and transactions.

4. Networking capability

Network with other banks or credit unions that use similar Loan Collection Software since it can help the bank learn more about the product’s stuff than what is listed on paper. This will help the bank gather more details about its strengths and weaknesses.

5. Pricing

While looking for software, one of the essential factors to consider is how much it costs to run or use that particular piece of Loan Collection Software. It should be affordable to fit into the budget since no bank has an unlimited pool of money.

6. Third-party support

One of the best ways to make sure that you are investing in a good Loan Collection Software is by finding out if they offer training for their product to help customers learn how it works, what can be done with it, and more. A bank or credit union must ensure that dealers have access to customer support in case they require help for any reason.

7. 24/7 Help Desk Support

A bank or credit union should look for software that offers 24/7 help desk support if they require assistance. This will ensure that there is someone to call when the need arises, thus, leading to lower downtime and increased productivity.

Conclusion

Loan Collection Software offers several benefits to banks and credit unions when used correctly. They can use the software to rate customers better, minimize human errors while making decisions, increase productivity, reduce debt write-offs, and more. And for this reason alone, lenders must choose their software wisely by checking all the seven factors outlined in this article so that they can maximize their chances of improving profitability.

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