How portfolio segmentation leads to an optimised debt management process

How portfolio segmentation leads to an optimised debt management process


Customer segmentation, the process by which businesses divide their customers based on similar key characteristics, is a powerful tool for financial institutions. By tailoring their approach, from the payment reminders sent to customers to the channel used, businesses that manage debt can boost their results while customers enjoy a smooth experience. However, despite its importance and respective benefits, many organisations have left behind and still treat all their customers the same way.


How does segmentation improve the debt recovery process?

1. It facilitates resource allocation

Grouping customers according to common characteristics and behaviours helps businesses that deal with debt focus on high-risk customers that are less likely to pay on their time instead of contacting customers who will pay on time. This method empowers creditors to reach their accounts receivables in a more targeted way and allocate agents to tasks that have high value for the business.

2. It empowers adaptation to evolving customer behaviours

Creditors can form high-performing strategies according to each segment by considering multiple factors. For example, a bank can have customers with various paying characteristics. Through segmentation, the bank will be able to set the proper contact strategy for each one of them (from a few reminders to restructured payment plans). By having defined multiple segments, financial organisations can be assured that they have a sound and effective strategy in place.

3. It makes payment seamless and promotes customers engagement

Customers today expect smooth payment journeys and top-notch experiences across every industry. Businesses that manage to combine the above effectively will gain a significant competitive advantage. Focus on the customer has become of high importance in the debt industry. Segmentation enables creditors to leverage this sophisticated method and bring the desired results for every party involved.


Despite its value for every C&R function, there are a few challenges to its implementation:

1. Scattered data across various systems and platforms

While creditors have access to many different data sources to make more informed decisions, their use can become complex. The absence of a single platform where all data can” live” together is the most common challenge financial organisations need to overcome to efficiently manage data and create valuable segments.

 2. Lack of data uniformity 

The existence of data in various places comes along with the issue of data format being substantially different. Besides, the time needed for the manual clean-up, can slow down any creditor and take up much of their personnel time.


Segmentation is a powerful tool, regardless of the challenges it brings. Every financial organisation needs an action plan to fully exploit segmentation and apply the proper strategy to each segment.

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