AI-powered virtual agents are becoming more common in debt collections. In 2024, 18% of debt collection companies adopted AI/ML technologies, up from 11% in 2023, mainly for account segmentation, payment prediction, and self-service interactions (TransUnion, 2024).
In 2025, 73% of companies plan to invest more in technology, indicating rapid growth in AI adoption.
Debt collection volumes continue to rise, driven by economic pressures and increasing consumer debt. Virtual agents offer scalability and operational efficiency, enabling companies to handle more accounts without increasing headcount. The demand for 24/7 availability, reduced operational costs, and enhanced customer experience is propelling this adoption.
The debt collections virtual agent market is competitive, with new players emerging every day. Many of these newcomers build virtual agents with strong natural language understanding but falter when solving industry-specific problems like compliance, payment processing, and collections nuances. These 'tourists' may explore multiple industries, and while some might stay, it is up to collections leaders to assess the risk of partnering with them.
There are horizontal players serving multiple industries, similar to tourists in that they have no specific affiliation to any industry and often apply a one-size-fits-all approach.
Vertical-focused vendors dedicated to debt collections with industry-specific expertise, providing tailored solutions that address compliance, payment handling, and unique collections challenges, making them distinct from horizontal players and newcomers in the market.
And recently, we are seeing many tech-first agencies building in-house solutions that challenge legacy players to modernize or risk extinction. Many of these agencies also sell virtual agent software to other collections companies, creating a potential conflict as they learn business logic from their clients and implement it in their own collections operations. This dual role as vendors and competitors poses a unique risk for collections agencies.
Through numerous conversations with medium to large debt collections and debt buying agencies, it is clear that speed, accuracy, and reliability are top priorities for virtual agents.
They value virtual agents that can quickly understand and respond to consumer requests with minimal latency.
There is a preference for functionality over hyper-realistic voice quality, as too human-like voices can feel deceptive once consumers realize it is AI.
Clients also emphasize that virtual agents must handle key tasks such as taking payments, rescheduling payment dates, updating payment methods, and answering account-related questions.
Another critical client need is seamless integration with any CRM or payment system they currently use.
Clients are looking for virtual agents that can reduce operational costs, handle high call volumes efficiently, and ensure compliance, while also performing tasks traditionally handled by human agents, such as payment negotiations and scheduling callbacks.
The feedback underscores that clients prefer vertical-focused AI agents trained specifically for consumer finance conversations. These agents understand the industry's nuances, compliance requirements, and the unique nature of collections conversations, unlike horizontal AI solutions that take a one-size-fits-all approach.
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Virtual agents in debt collections are addressing key challenges like reducing operational costs, 24/7 availability, consistent interaction quality, and scalable omnichannel engagement.
However, they still face critical challenges. Many struggle with understanding nuanced human conversations, including tone, sarcasm, and hyperbole. Hallucinations remain an issue; our tests on a leading virtual agent showed it could be easily derailed by unrelated queries. Payment processing is the biggest hurdle - unlike e-commerce, collections need real-time payments. Virtual agents often redirect to portals or collect details for later, both prone to drop-offs due to poor integration and lack of seamless validation, making this a major industry pain point. Our recent blog highlights these gaps and the need for innovation.
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New virtual agents are frequently entering the market, each tackling different pain points—some focus on empathy, others on reducing latency—but none offer a holistic solution with deep industry expertise, compliance understanding, and complete functionality. Buyers and decision makers should be cautious of 'tourists' in the space who are testing the waters without true commitment. In 2025, the industry needs virtual agents that provide comprehensive solutions grounded in industry knowledge. Stay tuned for our upcoming checklist on what to look for when choosing a virtual agent for collections.
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