At a time when fintech companies and banks are struggling to draw more consumer interest in their apps, a Reno, Nev., startup is hoping to motivate underbanked consumers to pay bills, including overdue ones, via a friendly mobile experience.

The collections process, normally associated with angry calls and limited payment options, seems ripe for an upgrade in the smartphone era.

"We need a fresh approach to collecting money," said Max Haynes, founder and chief executive of Customer Engagement Technologies.

So the company's new app, called PaySwag, is designed for auto lenders, banks and other businesses as a stand-alone, private-label product or for integration into their existing technologies at a time when regulators are scrutinizing debt collection practices more than ever.

The app is designed to be used by higher-risk borrowers who are current on payments, in addition to individuals who may need to negotiate a payment plan because of unusual circumstances such as a job loss or a slightly delinquent account. Similarly, a few years ago BBVA Compass launched an online portal that lets borrowers negotiate collection terms.

PaySwag is trying to make collections more positive and proactive through numerous methods including gaming techniques, bill payment reminders and online negotiation tools. But one of the most novel features of PaySwag, which was launched at Finovate in September, is its rewards program: consumers who pay their bills and watch educational videos will earn points that can be redeemed for, say, a Starbucks latte.

Other financial institutions have been rolling out reward programs for the underbanked. In recent months, check-cashing shops have been stepping up their loyalty and rewards program to drum up more business. American Express's prepaid card, Serve, was updated in August to let customers earn cash back.

And debt collectors have long being known to make individual deals, such as reductions in the size of monthly payments, with consumers who owe something, according to a collections trade association.

"Debt collection professionals are trained to work with consumers to resolve issues, and that could include anything from offering an incentive or a reward, to negotiating a reduced payment or a payment plan," said an ACA International spokeswoman.

But a mobile app that includes rewards and gaming techniques is potentially controversial. Haynes readily says he gets questions like: "Why should people get rewarded for catching up on their debts?" But he says he's not here to judge.

"My goal is to find a better way to settle their obligations," Haynes said.

Brian Riley, a principal executive advisor at CEB TowerGroup, believes it is an interesting idea that requires more investigation. He would want to see what kinds of rewards are available through PaySwag and monitor whether they resonate with underbanked consumers, and if so, if it drives them to pay up.

"These kinds of things need to be tested," said Riley. "You never know what you will learn."

Rewards are but one way the PaySwag app tries to inspire people to pay their past dues. Others include push-notification bill reminders, the ability to pay through a variety of methods including cash, and online negotiation tools. Rather than call an 800 number, a consumer can fire up the app to request a payment plan. After telling the app why (think losing a job, or unexpected car-repair costs), the software crunches the data within parameters set by the creditor-partner to determine what can be offered.

Consumers can also pay by ACH, credit card or debit card.And for those who prefer to pay in cash, PaySwag integrates with PayNearMe so consumers can pay their bills at participating retailer locations.

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