Recovery Rate: The metric that defines Debt Collection success
Moveo AI Team
November 15, 2025
in
🏆 Leadership Insights
For any leader in the credit and collections sector, the dashboard is filled with metrics. However, one stands out as the vital indicator of financial health and operational efficiency: the debt recovery rate.
In a challenging economic environment, where delinquency becomes chronic, the ability to efficiently recover outstanding debts separates the companies that thrive from those that merely survive.
The challenge is immense, with recent US data painting a concerning picture. An October 2025 report from S&P Global showed the overall U.S. Commercial Mortgage-Backed Securities (CMBS) delinquency rate climbing to 6.1%, with office delinquencies nearing a staggering 9.6%. In that month alone, $4.5 billion in loan balances moved into delinquency, while only $2.4 billion moved out, highlighting a growing pool of at-risk debt.
When the volume of defaults rises, the pressure on collection operations intensifies. Simply having more to collect does not guarantee success; in fact, it often stretches resources thinner, making effective recovery harder. This is not an operational problem, it is a C-Level strategic challenge that directly impacts cash flow, loan loss provisions, and profitability.
In essence, the recovery rate is the KPI that measures a company's effectiveness in reclaiming funds after a default.
Put simply, it is the percentage of the total amount in arrears (including principal and interest) that your operation successfully recovers. This is a central credit risk indicator. As the Corporate Finance Institute notes, while it is a classic term in the lending market, the metric is perfectly applicable (and essential) for managing accounts receivable.
The basic formula is straightforward:
Recovery Rate (%) = (Total Amount Recovered / Total Amount Defaulted) x 100
Furthermore, this indicator is the direct opposite of Loss Given Default (LGD). LGD is the metric that projects the creditor's actual financial loss if a debt is not paid. The two metrics are complementary:
Recovery Rate + LGD = 100%
Therefore, if your recovery rate is 40%, your Loss Given Default is 60%.
The benchmark challenge: where does your company stand?
Defining a "good" recovery rate is complex, as it varies dramatically based on key factors.
According to data from Tratta.io, collection agencies in the US have a general average of between 20% and 30%. However, benchmarks for debt collection recovery rates shift based on the industry and, most importantly, the age of the debt:
Age of Debt: This is perhaps the most critical factor. "Fresh" debts (less than 6 months old) can achieve recovery rates of 70% to 90% in B2B scenarios, while debts older than two years see this rate plummet.
Type of Debt: Commercial debts (B2B) generally have higher recovery rates (30-70%) than consumer debts (B2C), such as those in the healthcare sector (15-25%), which are notoriously difficult to collect.
Macroeconomic Conditions: During recessions, the ability to pay decreases, and recovery rates fall. The current scenario (like the one cited in Brazil, with 42.89% of the adult population in default) makes efficiency even more crucial.
If your recovery rate is below these benchmarks or, worse, declining (as the CNDL/SPC indicator points out), it is time for a strategic intervention.
5 strategies to optimize your Debt Recovery Rate
Increasing your recovery rate requires more than just collecting harder. It demands an intelligent, scalable, and technological approach.
1. Implement Predictive Segmentation (don't treat all debt equally)
The collect everything strategy is inefficient and expensive. Predictive analytics allows you to segment your portfolio not just by the age of the debt, but by risk and propensity to pay.
This allows leadership to allocate their most expensive resources (specialized human agents) only to complex, high-value accounts, while using automated methods, like AI agents, for lower-value accounts or those with a higher propensity to negotiate.
2. Optimize the Invoicing and Reminder Process (the first line of defense)
Many defaults occur due to simple forgetfulness or process friction. An optimized process is essential to growing your debt recovery rate.
This includes immediate invoicing, automated pre-due date reminders, and multiple communication channels (Calls, SMS, email, WhatsApp). Reducing the time between the service provided and the invoice issued decreases the chance of it being forgotten.
3. Adopt a "Friendly Yet Firm" Approach
The era of aggressive, impersonal collection is ending. It creates friction, damages the brand, and is less effective. An approach that balances empathy with assertiveness ("friendly yet firm") encourages cooperation.
Offering flexible payment plans and early payment discounts are crucial negotiation tactics that improve recovery without destroying the customer relationship.
4. Automate the Front Line with Artificial Intelligence
This is the most significant strategic leverage available today. The cost of human agents for low- and medium-value negotiations is prohibitive at scale. The solution is to place Conversational AI Agents on the front line.
Unlike passive IVRs or simple chatbots, modern AI agents conduct complex, end-to-end negotiations, 24/7.
→ Learn More: Voice AI for Debt Collection
Use Case Examples
Autonomous Negotiation: A Moveo.AI agent can contact a customer via WhatsApp, understand their situation, access the collection system in real-time, calculate and propose installment plans (with interest and discounts), and finally, generate a payment link or invoice, completing the negotiation without any human intervention.
Intelligent Omnichannel Orchestration: The Moveo.AI platform ensures the highest contact rate. The AI agent can be configured to initiate a strategic collection cadence: it starts with an SMS or email. If there is no response, it automatically escalates to WhatsApp. If the customer still doesn't engage, the AI agent itself makes a voice call, maintaining the context of the negotiation. All of this is automated, at the right time, and on the right channel.
For leaders, AI offers three crucial benefits:
Massive Scale: The ability to negotiate with thousands of customers simultaneously.
Cost Reduction: Drastically reduces the Cost Per Acquisition (CPA) or cost-to-collect.
Compliance and Reliability: In a regulated environment, AI agents are 100% reliable and adherent to scripts and regulations (like FDCPA, TCPA, or GDPR), eliminating the risk of human error or deviation.
The proof is in the results. In one of our main success stories, Moveo.AI agents were implemented to reduce delinquency for the 4th largest telecommunications operator in Latin America. The results were transformational: our agents proved to be 2x more efficient in collection than traditional chatbots, managing a volume of over 200,000 conversations per month and leading, on average, 51,000 customers to pay their debts monthly (Read the full success story here).
5. Define Clear Response Windows (agility in escalation)
Time is the enemy of recovery. Defining short response windows (e.g., 5 days) for a friendly approach before escalating to a more assertive phase is vital.
This quickly filters those willing to cooperate from those who are simply stalling, allowing the company to avoid wasting precious time (and the chance of recovery) on accounts that will not respond voluntarily.
→ Learn More: Debt Recovery and Collections Management 2026: The strategy to cut delinquency
Debt Recovery as a competitive advantage for your company
The default landscape will not magically improve. The debt recovery rate has ceased to be a simple operational performance indicator and has become a pillar of business strategy.
Leaders who continue to depend on manual, expensive, and unscalable processes will see their recovery rates continue to fall. The adoption of technology, especially Conversational AI on the front line, is no longer an innovation—it is the essential tool to ensure efficiency, compliance, and, most importantly, the health of your cash flow in a challenging business environment.