Understanding who your customers are, what they can afford and how best to communicate with them are essential best-practice principals in any good collections set up.  Treating customers fairly is not only an essential regulatory expectation; it also makes good business sense. People respond best when treated as individuals and this is true at every stage in the customer cycle, whether shopping for new products or being prompted for overdue payments. 

The Financial Conduct Authority (FCA) sets clear requirements for how businesses should deal with customers who fall behind with their payments. Central to everything is that all customers must be treated fairly with communications that are clear, fair and not misleading.

One challenging and sensitive area for businesses is dealing with those customers who are in arrears. This is also a time however when organisations can display a culture of fairness and customer care.  This can be achieved in a number of ways.

First automate key steps in the collections process to become more consistent and transparent. This will enable you to treat customers more fairly across all processes and communications. Also conduct an in-depth review of your communications to ensure that all messages delivered to customers are consistent, timely, appropriate and non-threatening. Finally harness all the available information on customers – both internal and external data – to ensure that any repayment or forbearance options you offer them meet their needs as individuals.

Forging a connection with the online generation

It is well known that younger customers prefer to communicate via e-mail, SMS, web chat and self-service options, but research also indicates that many older people also prefer to use digital channels. Businesses need to re-evaluate their collections strategies using better segmentation techniques and adapt to meet their customer preferences. While there is still a place for traditional letter and telephone-based outbound communications, the best collections practices understand that using the right channels for each customer group will enhance contact rates and improve performance.

Digital communications can also speed up and simplify the collections process. This is especially true where text messages and emails provide an interactive experience, giving people the option to make a payment, set up a payment plan or complete a financial assessment. This process can be automated using natural language processing, meaning that customer responses can be accurately interpreted and the next appropriate message or treatment can be performed without manual intervention. Automation also offers real cost benefits. Transactions by staffed telephone cost £2.83 compared to 15p for an automated transaction. By offering additional self-service channels for payments, staff can be reallocated to more complex tasks aimed at improving the overall customer experience.

A utilities company improved its collections performance within four months of introducing a mobile engagement channel  blending two way IVR and IVM without the need of collectors making any outbound calls for early stage arrears and also reduced inbound call traffic:

• 78% of mobile payments received within 48 hours, compared to 26% of traditional payments
• 29% increase in ‘Promises Kept’ rates
• 24% reduction in number of in-bound calls
• 17% reduction in 30-60 day delinquent accounts
• 35% collector productivity improvement for late-stage accounts

Although digital is a great vehicle for collections, the use of accurate and timely data is vital.  Digital solutions are only effective if the right data (mobile phone numbers, the optimum time to contact, correct bank details) is used.

There are also significant cost benefits for businesses that replace printed letters with electronic and mobile communications. By switching to electronic communications, a leading UK energy provider reduced the number of reminder letters it sent by 33%. A second class letter can cost an organisation between 50p and £1 when including postage, stationary and printing costs.

Digital solutions are also helpful in overcoming a person’s fear and embarrassment of speaking to someone about their debt.  When called directly, an individual can reject the call.  If they choose to accept it, they may not be ready or have all the necessary information at hand to discuss terms. Using a blend of two way SMS to engage the person and direct them to a portal where they can add income and expenditure details at a time more convenient can increase the likelihood of a payment arrangement being kept. 

While the benefits are compelling, embracing multi-channel communications will require changes to existing systems and processes. Integration with an automated collections system will allow an audit trail to be maintained of all communications, regardless of channel, and ensure the customer experience is consistent. As well as helping to understand the customer’s journey through the collections process, this will also demonstrate compliance when the need arises.