In the wake of the global pandemic, a cost of living crisis, and political instability, a ‘perfect storm’ of consumer pressure is circling ominously. The Consumer Prices Index (CPI) showed that inflation reached 5.4% in December 2021 – the highest since March 1992. Some forecasters suggest inflation could be as high as 9.5% in the spring.

The impact on customers

Over 9 million people in the UK are already in problem debt, with the average person owing over £33k. With the cost of living crisis, we anticipate a sharp rise of customers in financial crisis. The squeeze will hit those on low incomes and the most vulnerable in our society the worst. Very few will be immune to the impact on their disposable income.

To add extra pressure, the Bank of England raised the base rate from 0.25% to 0.50% last month, and the 1.25 percentage point National Insurance hike is still planned for April. Many households across the UK will inevitably struggle. A prominent think tank, ‘The Resolution Foundation’ estimates the average household will see a minimum £1200 increase in outgoings and predicts that 2022 looks set to be the “year of the squeeze”.

The impact on service providers

Service providers and lenders will encounter a growing number of customers in a real financial crisis, unable to pay back loans and mortgages or with rising council tax or student loan arrears. Organisations have an obligation to support vulnerable customers and reduce pressure on those struggling. They must balance the need to support customers when they need it most with protecting their collections revenues.

What this means for your collections and arrears strategies

Research from The Money Charity found that council tax debt was over £4.4bn in England as of March 2021. That’s an increase of £847million from the previous year. The cost of living crisis will inevitably see debt levels continue to rise. Customers are feeling the pinch as they prioritise their payments. Arrears are likely to increase, and service providers need to respond carefully, considering each person’s individual circumstances.

The need for greater forbearance and support, including realistic repayment plans and repayment holidays, will be high. Lenders need to keep open communications channels with their customers when they need it, on their chosen device and via their preferred channel. This could be online chat, customer portal or via a phone call with a customer service agent. 

So how can technology improve the user experience?

Debt can be overwhelming and embarrassing for customers and citizens. Technology provides innovative new ways to help. We’re finding more and more people prefer exploring options via self-service. This helps give clarity ahead of what could be a daunting call. In some cases, self-serve can even resolve the issue.

Self-service, putting the customer in control

Digital self-service puts the control of payments more firmly in the hand of the customer. This removes the sensitivity and embarrassment of discussing financial problems over the phone. Offering self-service access has been proven to improve collections revenue. And customers demand it. A recent survey by Gartner found that 88% of customers worldwide expect companies to have a self-service portal. Allowing customers to self-serve means that they can manage their finances at a time that works for them, from a place and device of their choosing.

Open Banking, transforming the customer view

Open Banking was designed to bring more competition and innovation to financial services, set up by the Competition and Markets Authority in January 2018. The innovation lets customers share their financial information securely, quickly and seamlessly. Lenders can view customers’ bank details via secure APIs to conduct fast and accurate affordability checks. For service providers and lenders, it provides a consent-based way to achieve a real-time view of a customer’s finance and ability to pay. Unlike outdated investment and expenditure questionnaires, Open Banking is fast, transparent, and accurate.

Benefits for service providers

Open Banking means customers are offered personalised payment plans based on their specific financial circumstances. A Qualco survey highlighted the benefits of this changing behaviour, finding that 68% of customers set up payment plans online when combined with the correct contact strategy.

Other benefits include:

Prevention

Customers are less likely to avoid making contact at difficult times over the phone for fear of judgment. Self-service means that customers are more likely to set up realistic remedial payment plans.

Personalisation

Tailoring messaging to individual customers increases the likelihood of them choosing to set up realistic payment plans; Digital interaction allows lenders to tailor the customer experience and optimise each customer touchpoint.

Engagement 24/7

Self Service allows customers to engage at any time, in any place and from any device. This increased engagement improves collection rates and differentiates businesses.

So when should you implement digital technologies?

Remember, not all processes should be digitised! Human connection and personal service are fundamental needs and should not be overlooked, particularly when dealing with vulnerable customers. We’ve suggested triggers where a process could be ripe for digitisation:

• Repetitive Process
• Simple Process
• 24/7 needs
• Peaks and troughs in service demand
• External factors trigger service need

Six key steps to implementation

So, you’ve decided to digitise a process or processes to support your collections strategy, but where do you begin? We’ve defined six key steps to act as a roadmap to help you begin the transformation journey. These steps have been tested and learned from the successful deployment of similar projects for our high-profile clients. The steps are:

1 Utilisation

• Set opt-in goals
• Make sure the service is used and regularly
• Look for value add opportunities such as cross-promotion

2 Testing

• It’s not a one-off development
• Continuous evolution and improvement
• Test satisfaction and encourage feedback

3 Automation

• Use predictive modelling to inform next best action
• Based on both behaviour and profile
• Keep your content up to date, relevant and accurate

4 Integration

• Ensure a smooth transition to a human when required by the customer
• Create omnichannel delivery
• Think mobile-first when it comes to optimisation

5 Conversation

• Refresh content regularly and reinforce through social media
• Use machine learning to inform what content is needed
• Keep your content up to date, relevant and accurate

6 Personalisation

• Use your profile and behaviour data to personalise the journey
• Make sure the platform evolves with the customer and their needs
• Use data insights to predict your customers unique needs

Turn pressure into possibility! Supporting your customers for the long term

Open banking and self-service increase access to financial services for vulnerable customers. In these challenging times, this not only increases collection revenues but is a moral and business imperative.