Pair Finance uses artificial intelligence to address debtors individually
The task of a debt collection service provider is to collect outstanding invoice amounts on behalf of its customers. According to the Federal Association of German Debt Collection Companies, the companies process around 20 million claims annually.
But how can the willingness to pay be mobilized without permanently damaging the relationship between the company and its debtors? With its first study on an extended debtor typology, the start-up Pair Finance sees itself better equipped than before to do this job.
The company, which is majority owned by Finleap, has evaluated 400,000 individual cases under the direction of behavior researcher Minou Ghaffari, who works for Pair Finance, and expanded existing typologies in the process.
The idea behind it: the better I know a debtor, the sooner I can enter into a dialogue with him. “The biggest hurdle in debt collection is always getting the consumer to react. If I get a reaction, the probability is very high that we will come to a solution together, ”says Pair Finance CEO Stephan Stricker.
So far, research has focused on willingness and ability to pay. In the study, Pair Finance added the dimensions of financial organization and emotional behavior to these areas, says Ghaffari. 16 consumer types were distilled out. “The broader line-up enables a more detailed view of the customers,” says Ghaffari.
With the existing data from the payment cases, the algorithm could be trained in such a way that Pair Finance can address consumers individually with the help of artificial intelligence.
The establishment of contact varies in terms of the communication channel (letter, email, SMS), the way of addressing, the tone, the times (more in the morning or in the evening) and the frequency. “Small differences in the communication strategy can have a big impact,” says Ghaffari.
If the artificial intelligence identifies a potentially cooperative debtor, the salutation can be, for example: “Perhaps you simply overlooked the bill, perhaps you forgot to pay in the hustle and bustle of everyday life. Together we will find a solution.”
More and more companies in the debt collection industry are starting to use artificial intelligence to collect accounts receivable. This also includes companies such as Troy or Arvato Financial Solutions.
Economically, the industry fulfills an important function. According to the industry association, 5.8 billion euros are returned to the economic cycle every year.
There are still no studies that prove that the AI-based approach is superior to the conventional approach. But, for example, the debtor’s response rate to Pair Finance is 78 percent very high. In addition, 90 percent of the cases realized would be solved in pre-judicial dunning.