The evolution of debt recovery: From hardball tactics to AI-powered customer experience
The evolution of debt recovery series. Part 1.
When we talk to our clients about today’s debt collections and AI-powered customer service landscape, one thing always comes up: the old methods don't work anymore.
We've all seen how rising delinquencies and growing household debt have changed the game. But it's not just about financial indicators or portfolio stress. It's about mindset.
Focusing on pressure is no longer enough, and more importantly, it's no longer acceptable.
Today, we need to combine technology with empathy. And while that sounds simple, it's one of the most important shifts.
In this series of articles, we will explain the opportunity to combine artificial intelligence (AI) and emotional intelligence (EI) to transform collections into a more human, effective, and brand-enhancing experience for both customers and businesses.
Why old tactics don’t work anymore
Recently, TP partnered with Harvard Business Review Analytic Services to release a paper on the current state and trends in debt collections. According to its data, credit card debt in the U.S. hit $1.17 trillion in 2024. The rate of serious delinquencies, the accounts overdue by 90 days or more, climbed to 1.59%. Similar trends are emerging in the U.K., Japan, Australia, France, Brazil, and other economies. Whether it's inflation, job loss, or simply the rising cost of living, people everywhere are feeling the pressure.
In this environment, traditional tactics aren't just ineffective but risky. Worse, they can harm brand reputation in a matter of seconds. In an age of public reviews and viral social media posts, how you collect is as important as whether you collect.
Companies are beginning to realize this. Empathy is no longer a nice-to-have but a core part of business strategy, and AI is helping us put it into practice.
How does AI improve debt recovery and customer experience?
AI is helping us move away from blanket approaches toward more precise, insights-driven strategies. Today we can understand a borrower's likelihood to pay, identify the best time to engage, and determine which communication channel is most likely to resonate.
Let's look at the numbers. According to a survey by TransUnion, a leading global credit reporting and analytics firm, 58% of companies already use AI to predict willingness or ability to pay. Another 56% use it to segment and profile customers, allowing for more efficient workflows.
It is particularly noteworthy how this shift positively influences the overall tone of the conversation. We are transitioning from collections to consultations, and from recovery to support.
For example, one of the Latin America's largest banks, with over a million customers in various collection stages, used AI to identify early signs of financial distress, allowing them to reach out before borrowers fell too far behind. The support didn't stop there. They worked with a third-party partner to offer flexible repayment solutions, like consolidating debts or adjusting payment timelines.
The result? A 4.7 out of 5.0 customer satisfaction score for their debt collection experience. That's not just good, it's well above the industry average. And it shows what's possible when you lead with understanding instead of consequences.
Empathy isn’t soft — it’s strategic
Yes, AI helps us scale and prioritize. But empathy is what makes it all work.
When we use AI to take care of repetitive tasks like scheduling reminders or surfacing borrower insights, we allow customer experts to focus on what matters most: building human connections. That's where emotional intelligence comes in. It allows customer experts to meet people where they are, to listen without judgment, and to offer solutions that actually fit the borrower's situation.
This approach delivers real value. Borrowers feel heard and respected, which increases their willingness to engage. Agents feel more empowered to help. And companies benefit from higher recovery rates, lower complaint volumes, and stronger long-term relationships.
In the next blog, we will take a closer look at communication, specifically how timing, tone, and channel selection can make or break the debt recovery experience. We'll explore how optimized, empathy-driven messaging is redefining the way we engage with borrowers and why it's quickly becoming the new standard.
How is your team navigating this shift to AI and empathy-driven recovery? What’s working, and what’s still a challenge?
