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©2014 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public. Collections transformation turning opportunities into results Edward Stephens PECO Luke Aull Experian Cynthia Hatcher Experian #vision2014

Vision 2014: Collections-transformation-turning-opportunities-into-results

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Page 1: Vision 2014: Collections-transformation-turning-opportunities-into-results

© 2014 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc.

Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in

any form or manner without the prior written permission of Experian. Experian Public.

Collections transformation – turning opportunities into results

Edward Stephens PECO

Luke Aull Experian

Cynthia Hatcher Experian

#vision2014

Page 2: Vision 2014: Collections-transformation-turning-opportunities-into-results

2 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Test and learn / adapt to changing circumstances

Internal

data

External

data

Automated

Manual Optimization

Customer-level

optimization

Accounts

Score

payers

Non payers

Modelling

Segmentation

and scoring

Data Scoring Decision systems Workflow Reporting

Strategic and

Operational

Account Level

Segmentation

Best practices in collections strategic decisioning and operational execution

Page 3: Vision 2014: Collections-transformation-turning-opportunities-into-results

3 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

PECO opportunities

Edward Stephens

PECO

Page 4: Vision 2014: Collections-transformation-turning-opportunities-into-results

4 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Best-in-class collections performance for a northeastern urban utility is net charge-offs of 0.7% of revenue

Regulatory recovery for bad debt expense is a based upon 3-year actual net charge-offs history

Q1 Top Tier

Benchmark

Entirely different collection environments:

southern, western, & rural utilities

U.S. Panel

PECO Performance Path

Industry Average / Top

Regional Performer

2009

(1.84%)

2012

(1.3%)

2015

Aspiration (0.7%)

Q3

(0.9%)

PECO Target Gap: regulations,

demographics, systems, decision

tools and processes

Polaris benchmark – net charge-offs as a percentage of revenue

PECO opportunities

Page 5: Vision 2014: Collections-transformation-turning-opportunities-into-results

5 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Customer collections platform limited capability in flexibility and speed of response:

Significant limitations imposed by resource constraints and code conflict within the customer platform

Collections team was unable to implement changes in a timely manner, which greatly inhibited the businesses ability to be nimble in responding to opportunities to reduce cost and bad debt

Incremental improvements to the customer platform were very expensive and could not move the company to best-in-class performance

PECO opportunities

5

Page 6: Vision 2014: Collections-transformation-turning-opportunities-into-results

6 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

PowerCurve™ Customer Management

Enabled improved collections through increased segmentation and risk assessment of customers based on collection teams control and maintenance of their scorecard models and business strategies

► Provided continuous testing and refinement of alternative treatment approaches

Marketswitch® Optimization

Determined optimal allocation of field collection resources based on business-derived goals and constraints

Business solution overview

Page 7: Vision 2014: Collections-transformation-turning-opportunities-into-results

7 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

PowerCurve™

Customer Management

Cynthia Hatcher

Experian

Edward Stephens

PECO

Page 8: Vision 2014: Collections-transformation-turning-opportunities-into-results

8 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Process prior to solution implementation:

Collection treatments based on reserve risk scoring model

All customers within a determined risk segment received the same collection treatment

Changes to collection actions required opening a change request, which required time and cost estimates for implementation

PECO internal process

Page 9: Vision 2014: Collections-transformation-turning-opportunities-into-results

9 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

New process using PowerCurve™ Customer Management:

PECO business users develop and modify collection paths for customer platform implementation

Champion / challenger collection scores used to determine risk segment

Collection treatments based on a champion / challenger risk segment approach

48 collection paths created (24 residential, 15 commercial, 4 final, 5 special handling)

Champion / challenger performance measured periodically

New collection paths provide consistent pre-termination collection actions which resulted in a positive impact on inbound call volume (volume reduction)

Leverage new data elements for collection path segmentation (low income, balance, deposit coverage, etc.)

PECO internal process

Page 10: Vision 2014: Collections-transformation-turning-opportunities-into-results

10 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Collections segmentation

Risk and behavioral based

Final bill for $550

Final bill reminder

Terminate for non-pay

Automated call

Eligible for termination

Bill for $400

Agency

Write off

Bill for $200

Disconnect Notice

1

29

34

35

44

50

83

57

91

147

Activity Day

10

Risk-based

Eligible for termination

Terminate for non-pay

Reminder letter

Disconnect notice

Bill for $600

Reminder letter

Final bill for $750

Final bill reminder

Write Off

Agency

Bill for $200

Bill for $400

1

34

41

66

67

68

86

79

93

121

142

184

Activity Day

37 days improvement

Page 11: Vision 2014: Collections-transformation-turning-opportunities-into-results

11 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Twenty-five challenger summer paths were implemented – 70% out performed champion paths

Low risk segment customers were more responsive to challenger path strategies (i.e., additional number of actions or timing of actions)

Next steps:

Eliminate challenger paths that resulted in negative results – high risk residential and low income high risk residential customers

Develop and implement new collection strategies for these segments

Develop and implement strategy for high risk customers using new commercial scoring

Champion / challenger benefits

11

Population Number of challenger paths Number of successful challengers

Low risk residential 8 5

High risk residential 5 3

Residential low income 3 3

Special handling 2 1

Small commercial 7 6

Total 25 17

Page 12: Vision 2014: Collections-transformation-turning-opportunities-into-results

12 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

PECO business team controls and maintains collections strategies

Scorecards (PECO models and Experian’s Financial Stability Risk ScoreSM)

Customer segmentation (scores and business rules)

Champion / challenger and advanced decisioning (e.g., commercial disconnect notice, final proactive call, etc.)

Treatment rules definition (e.g., letter on day X, call on day Y, etc.)

Access to external collections data

Benefits of collections transformation

Page 13: Vision 2014: Collections-transformation-turning-opportunities-into-results

13 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Embedded strategy consulting and support throughout engagement lifecycle

Performance monitoring and benchmarking

Test-and-learn strategy enhancement

Benefits of collections transformation

Page 14: Vision 2014: Collections-transformation-turning-opportunities-into-results

14 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Marketswitch

Optimization®

Luke Aull

Experian

Edward Stephens

PECO

Page 15: Vision 2014: Collections-transformation-turning-opportunities-into-results

15 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

PECO to improve its collection activities by:

Decreasing annual write-off amounts

Reduce the overall cost of field collections activities

Field collections optimization project Business requirements

Page 16: Vision 2014: Collections-transformation-turning-opportunities-into-results

16 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Deploy into the current daily field collections processes

Daily selection and creation of the service terminations list

► PECO to control selection and fielding of terminations

► Flexibility to make changes as business needs change – change objective function, constraints or rules

► Flexibility to change optimization process depending upon resource availability and seasonal regulatory restrictions

Field collections optimization project Business requirements

Page 17: Vision 2014: Collections-transformation-turning-opportunities-into-results

17 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Process prior to implementation

Derive a list of all past due accounts eligible for termination that cut out collection orders issued

Volume was approximately 15,000 accounts per day

Cuts were prioritized and selected for termination by the field vendor

Field collections optimization project Solution

Page 18: Vision 2014: Collections-transformation-turning-opportunities-into-results

18 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Implement Marketswitch Optimization®

Marketswitch Optimization® processes the daily list of all PECO accounts with the last collection action eligible to cut and CNP pending

Daily volume 1,500 to 3,000 accounts

Marketswitch Optimization® selections based on the most valuable to cut accounts based on a business defined objective function

Daily optimized cut list sent to the field vendor accounts to be fielded the next day

Field collections optimization project Solution

Page 19: Vision 2014: Collections-transformation-turning-opportunities-into-results

19 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Business objective function

Primary business objective function

► Reduce past due AR > 60 days

Additional objective functions

► Maximize successful cuts

► Maximize $ collected in the next 30 days

► Maximize expected recovery past due balance

► Minimize new billings that go bad

Field collections optimization project Design and structure – objective function

Page 20: Vision 2014: Collections-transformation-turning-opportunities-into-results

20 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Business and operational constraints

Limits on available field collections resources

► Skill set (bucket, meter, or AMI) and geographic availably

► Differentiate accounts by bucket truck, meter hand and AMI

► ZIP Codes™ used to group potential accounts to be assigned to resources

Field collections optimization project Design and structure – constraints

Page 21: Vision 2014: Collections-transformation-turning-opportunities-into-results

21 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Grouping accounts using the building or premise identification

Gain efficiency by applying a rule that if optimization selects an account and there are other accounts eligible for termination

Business rules to ensure that certain accounts are selected daily based on account balance and status

► Accounts with unpaid balances greater than $5.0K

► Low income accounts with balances > $1.0K

Field collections optimization project Design and structure – constraints

Page 22: Vision 2014: Collections-transformation-turning-opportunities-into-results

22 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Two decisions made in separate optimization stages

Specific accounts to be cut by territory

► Territories defined set of contiguous ZIP Codes™ and by the type of field resource required to make the service cut

► Refined over time to reflect prior field collections experience

► Territories grouped together by the different field resources; meter hands, bucket crews and AMI (Automated Meter Infrastructure)

Field collections optimization project Design and structure – decisions

Page 23: Vision 2014: Collections-transformation-turning-opportunities-into-results

23 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Two decisions made in separate optimization stages

Assign each account to a specific field resource

► Individual field resources may be assigned to more than one territory, subject to an adjacency constraint

► Each field resource also has a schedule of availability for specific territories by date

► Rules based on grouping of territories are used to assign selected accounts

Field collections optimization project Design and structure – decisions

Page 24: Vision 2014: Collections-transformation-turning-opportunities-into-results

24 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Highest balances

Age of delinquent balances

Number of days in the eligible to cut window

Returned checks

Last payment made (date)

Defaulted payment plan

Meter location (inside vs. outside)

Resource capabilities/limitations

LiHEAP recipients

Recently removed protection

Regulatory constraints (seasonal limitations)

Field collections optimization project Design and structure – data

Different scenarios / business goals can now be run against the accounts entering the field for termination

Page 25: Vision 2014: Collections-transformation-turning-opportunities-into-results

25 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Field collections optimization project Benefits from optimized cut list benefits

2013 Annual and Monthly Field Collections Results

-30% -20% -10% 0%10%

20%30%

40%50%

60%

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

2013

14%

21%

35%

21%

22%

16%

7%

1%

-8%

-2%

-5%

12%

22%

40%

56%

12%

8%

9%

-24%

-17%

4%

20%

6%

11%

% Improvement Avg. $ Value per Cut

% Change Avg. $ Value Available Work

Page 26: Vision 2014: Collections-transformation-turning-opportunities-into-results

26 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

PECO

Collection Transformation

Benefits

Cynthia Hatcher

Experian

Page 27: Vision 2014: Collections-transformation-turning-opportunities-into-results

27 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Exelon business users have control of collections strategies

Scorecards (PECO models and Experian’s Financial Stability Risk ScoreSM)

Customer segmentation (scores and business rules)

Champion / challenger and advanced decisioning (e.g., commercial disconnect notice, final proactive call, etc.)

Treatment rules definition (e.g. letter on Day X, call on Day Y, etc.)

Access to external collections data

Collections transformation benefits

Page 28: Vision 2014: Collections-transformation-turning-opportunities-into-results

28 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Flexibility to change optimized field collections strategies

Business control of field collections

Replaced manual build cut list with new automated process

Leveraged analytics built on historical field collections performance

Opportunity to develop additional analytics to drive better collections results

Collections transformation benefits

Page 29: Vision 2014: Collections-transformation-turning-opportunities-into-results

29 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

Q&A

Page 30: Vision 2014: Collections-transformation-turning-opportunities-into-results

30 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

For additional information, please contact:

[email protected]

[email protected]

Hear the latest from Vision 2014

in the Daily Roundup:

www.experian.com/vision/blog

@ExperianVision | #vision2014

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Page 31: Vision 2014: Collections-transformation-turning-opportunities-into-results

31 © 2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.

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