Industry
Banking
Banking Services Transformation: Unlocking Exponential Value
Highlights
- As Australian banks grapple with the combined pressures of rising interest rates, persistent inflation and changing consumer behaviour, the need for a smarter, more adaptive approach to credit risk and collections has never been greater
- GenAI offers not just efficiency, but a strategic opportunity to reimagine engagement, streamline operations, and enhance outcomes
- Australian banks who act early can turn this inflection point into a competitive advantage- reshaping their debt management landscape for resilience and long-term growth
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Introduction
The Australian banking industry is entering a critical inflection point. Rising interest rates, mounting inflationary pressures, and evolving consumer expectations are combining to create a challenging environment for credit risk and debt management. With over $17 billion in credit card debt accruing interest as of 2024, the need for innovative and efficient collections strategies is greater than ever.
Amid these challenges, GenAI emerges as a powerful enabler for change. Unlike traditional automation tools, GenAI provides contextual intelligence and hyper-personalization capabilities that can elevate customer experience, optimize recovery rates, and significantly reduce operational overhead. This is a strategic overview of how GenAI can reshape the collections function in Australia’s highly regulated and customer-sensitive banking ecosystem.
Australia’s credit card landscape continues to shift. Despite tighter lending standards, many consumers are struggling with revolving debt as cost-of-living pressures rise. As of 2024, Australians owe more than $17 billion in interest-accruing credit card balances, posing both financial risk and reputational exposure to banks.
Historically, credit card collections have relied on rigid workflows—standardized scripts, manual call center interventions, and broad-brush outreach methods that fail to reflect individual circumstances. Additionally, regulatory bodies such as Australian Securities and Investments Commission (ASIC) and Australian Competition and Consumer Commission (ACCC) now expect banks to take proactive, compassionate steps to support financially vulnerable customers.
The moment calls for transformation, and GenAI presents a strategic pathway to evolve collections into a more effective, empathetic, and intelligent function.
Current challenges in credit card collections
Australian banks are grappling with several persistent challenges in the credit card collections domain:
- Low engagement rates from customers receiving generic or poorly timed outreach.
- High operational costs of call centers and manual follow-ups.
- Limited segmentation or personalization, despite large volumes of behavioral and transactional data.
- Compliance risks associated with miscommunication, bias, or insufficient hardship identification.
The Role of GenAI
GenAI goes beyond automation—it synthesizes large datasets and natural language to generate highly relevant, human-like content. In the collections space, this translates into:
- Hyper-personalized messaging tailored to tone, channel, and customer financial behavior.
- Conversational AI agents that adapt in real time to customer responses via chat, voice, or email.
- Predictive content generation for recommending hardship solutions, payment plans, or educational nudges.
- Sentiment analysis to detect distress and escalate cases with empathy and compliance in mind.
Benefits and use cases
- Improved Engagement - Custom messages increase response rates and reduce customer churn.
- Operational Efficiency - AI handles high volumes of interactions, reducing dependency on human agents.
- Better Risk Segmentation - Dynamic content and next-best-action models refine how banks engage delinquent customers.
- Regulatory Compliance - AI can be trained to follow ASIC/ACCC guidelines on fairness, hardship, and transparency.
Use-case scenarios
GenAI can be deployed effectively in several different scenarios.
a) Early-stage Delinquency
AI-generated SMS and emails offering reminders, contextualized payment options, and soft encouragement before accounts fall too far behind.
b) Hardship Management
Virtual assistants identify signals of financial stress and generate tailored hardship communications with empathy-driven language.
c) Recovery Optimization
Personalized recovery scripts, adjusted based on customer history, sentiment, and credit behavior, leading to more successful outcomes.
d) Call Centre Augmentation
Live agent assistants powered by GenAI suggest real-time conversation prompts and documentation summaries.
Implementation Considerations
A successful GenAI deployment requires more than just technology, it requires thoughtful design, governance, and change management:
- Data quality: Strong data governance is essential to ensure relevant and unbiased output.
- Human-in-the-loop: AI should support, not replace, human judgment—especially in sensitive hardship cases.
- Training and governance: Models must be fine-tuned with Australian data, legal input, and rigorous audit mechanisms.
- Customer trust: Transparency and explainability in AI decisions will be critical to retaining customer confidence.
Compliance and ethical use
Australian banks must align GenAI deployment with:
- ASIC RG 271 on internal dispute resolution and fair treatment.
- Privacy Act 1988 (Cth) for data handling.
- Consumer Data Right (CDR) for secure use of customer data in AI workflows.
Banks must proactively mitigate risks like model drift, hallucination, or unintended bias through robust testing and ethical review boards.
Conclusion
Generative AI represents a transformative opportunity for Australian banks to not only collect more effectively but to do so with empathy, efficiency, and compliance. As institutions balance innovation with responsibility, those who move early with a thoughtful, customer-first AI strategy will lead the future of credit card collections. By putting customer needs and compliance at the core of innovation, financial institutions can unlock stronger recovery performance and enduring customer relationships.
