Those operating in the collections industry have typically approached consumers who either won’t pay—which may include those in dispute—or those who can’t pay due to a change of circumstances and have fallen into financial hardship. The length of time it will take to cure the account will depend upon the cause, and now of course, take into account various forms of vulnerability including those adversely effected by Covid-19.
Future expectations of debt management
The FCA recently confirmed the level of support they expect for consumer credit and overdraft customers. In short, they expect firms to be as flexible as possible in terms of specific and tailored solutions to debt management. https://www.fca.org.uk/news/press-releases/fca-confirms-next-stage-support-consumer-credit-and-overdraft-customers
We may now however be on the verge of a new classification which recognises the hardship caused by the effects of the pandemic. It would bring otherwise solvent and responsible borrowers and account holders into the collections arena, many for the first time. It will also contain a much higher level of prime borrowers, probably with higher outstanding balances and higher household commitments.
The questions are: Do we need to treat this growing demographic differently – in terms of contact strategy and messaging, forbearance and partnerships? Do we need to develop different goals for success with a view that the customer will more than likely return to a low risk category? Do we need a different way of viewing such accounts, in terms of classification within the standard Credit Reference world, as we’re going to need a different way of assessing their likelihood of recovery?
How can we meet this challenge?
The first step in any collections strategy is data analysis, particularly within larger scale operations. They will already be using ongoing monitoring of their portfolio with Credit Reference Agencies feeding current data into their internal risk models. Those scoring models will however need to become more sophisticated for the foreseeable future. They will need to anticipate stratums of the population who are most likely to return to full time employment at their previous current levels, those returning at a potentially lower level or not at all.
This will require much more diverse account management with tailored contact strategies. We need to speak to the target group in a manner likely to receive a constructive and speedy response. We also need to anticipate much higher volumes of delinquency. If managed economically it will require higher, more sophisticated levels of automation, with much higher levels of staff working from home. Smart automation could, for example, identify acceptable proposals of payment from a Standard Financial Statement. It can automatically be assigned to a workflow that governs the right interest levels, reminder process and length of review. Such workflows need volume bench testing to ensure that sustainable arrangements are being made that meet the needs of the company and the regulator.
What is the solution?
All of the above depends on the capabilities of your collection’s software. Your consumer collections software system will need to provide a higher level of agility, responsiveness, control, user-friendliness and automation than what was needed previously. In addition, you will need to fully support omnichannel collection strategies. That ability to connect and interact bi-directionally through the consumer’s preferred communication channel(s) – telephony, email, text, portal, mail, and/or mobile app. Therefore, succeeding in the future will come down to whether your collection system has what it takes to help you succeed going forward.
Based on recent trends and the latest market conditions, collections organisations will need:
- Cloud-Based Delivery – Built specifically for the cloud to take advantage of the associated lower costs, higher performance, added security, and no client IT resources.
- Anywhere Access – Provides collectors with quick and easy access to their collections system to perform from anywhere they have internet access & browser.
- DIY Collection System Administration – Enables easily “Do-It-Yourself” with system wide configuration – additions and changes without IT or vendor assistance.
- Real-Time Processing – All data, events, and actions updated immediately.
- Advanced Automation – Increased capabilities that alleviate manual processes, back-office activities and minimise collector desktop keystrokes from many to a few.
- Enhanced Compliance Management Tools – More management controls and easier auditability over workflows, strategies and agents (data accessed/updated, information captured/displayed, actions required and taken, and any communication performed such as letters, voice, text, email, desktop scripts and messages).
- Agent/Team Real Time KPI Dashboard – Continuously updated desktop displays and performance targets (views set based on specific role in the organization).
- Embedded Digital Channel Messaging – Seamlessly integrated SMS and email capabilities for more efficient and compliant desktop and automated workflow message execution.
- Self-Serve Collection Payment Portal – Providing a more compelling portal experience through features that increase consumer empowerment and convenience.
- Omnichannel Collection & Communication Orchestration – Centralized set-up and management of ALL customer collection strategies, customer contacts, and communication channels for more cohesive, effective, and compliant collections.
- 1-to-1 Collection Strategies – Easily design and apply with repayment options that better align with each debtor’s situation and communication preference.
A modern, flexible, collection system with embedded digital communications, omnichannel management and an integrated self-serve collection portal is the technology that should be your next investment. This technology should be easy to access and develop with the times for any product at any stage of the customer journey whilst remaining compliant with ever changing regulations.
About the Author
Following an executive management board role with an operating subsidiary of Lloyds Banking Group, Bruce Turnbull has spent the past 20 years providing collections management consultancy services to a number of blue-chip lending companies including Courts International, GE Capital and Provident Group.
More recently Bruce has served as Managing Director of two UK operating subsidiaries of CoreLogic, Inc. (NYSE: CLGX), a $3 billion-dollar global data, analytics and related services company and is currently a Director of the Vulnerability Registration Service.
He can be found on LinkedIn at https://www.linkedin.com/in/bruce-turnbull-36bb5427/.