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Click and Collect- Why financial services companies need a digital first collections strategy

Recent figures from the Bank of England seem to indicate that we are heading for a fresh household debt crisis in the UK. People are borrowing at the fastest rate in almost a decade as confidence in the economic recovery grows. Consumer credit rose by £1.2 billion between September and October, putting the annual growth rate at 8.2%.

The situation is now getting to the point where the Financial Policy Committee is considering action to curb the unsecured lending market and stem the ever increasing mountain of consumer debt. While these measures may help to alleviate the situation, it is also very evident that companies involved in financial services need to have  robust collections policies and processes in place that are at the same time fair, transparent and take into consideration the individual circumstances of each person struggling with debt.

The FCA recently estimated that the number of people in ‘serious debt’ in the UK could be as high as nine million. A company’s responsibility to its customer is of huge importance if we intend to learn from the mistakes of 2008 onwards. Regulation, common sense and business acumen all demand it. For many people this means digital first, with stressful calls, face to face meetings and piled up letters becoming a thing of the past. Indeed, our own research found that a third of people would always choose an online option as their primary port of call when managing debts.

The benefits of the digital first approach are wide ranging for both the individuals in debt, as well as the company when done in the right way. The most important positive for the individual is the sense that they are taking control of the situation, rather than feeling hounded in what could be a stressful and embarrassing time. The importance of this really cannot be underestimated - it is empowering for the individual and also provides a much better opportunity for a positive final outcome.

Businesses also need to remember that while people may fall on hard times there is nothing to say that they won’t become a profitable customer in the future and the collections process can either represent a future brand ambassador or turn them off your brand forever.

The additional business argument for online collections is also compelling on its own. Online collections can not only speed up the whole process, they can also increase recovery rates and reduce operational costs.

Furthermore, this is not just reserved for the digitally-savvy millennials. We are seeing a trend of people of all ages turning to the online option to gain control of their finances. There may be another gathering storm of consumer debt but a solid collections strategy can held guide customers, and ultimately businesses, to calmer waters. 

 

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Comments: (3)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 09 December, 2015, 12:33Be the first to give this comment the thumbs up 0 likes

Am I understand from this that the 9M people in UK in "serious debt" are flush with funds and are unable to repay their debts because their lenders are unable to collect them digitally?

A Finextra member
A Finextra member 11 December, 2015, 10:21Be the first to give this comment the thumbs up 0 likes

Many thanks for your question. No, this is not what I am suggesting. However, by reaching out to customers through another channel, it's very likely that a proportion of them who are in a position to begin managing down their arrears will respond to a new channel which enables them to make payments, agree future payments or set repayment schedules without the need to speak directly to a call centre agent. By re-gaining control, it may also increase the likelihood of repayment arrangements being kept. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 11 December, 2015, 16:23Be the first to give this comment the thumbs up 0 likes

TY for your response. The tepid adoption rate of mobile payments shows that, even when people want to pay, like for instore shopping, not too many of them opt to pay by mobile / digital channel. Against that backdrop, I strongly doubt if people that otherwise won't / can't pay suddenly start paying up just because they can do so via digital channel. On another note, assuming that these 9M people in "serious debt" have seriously defaulted, they may already have gone out of the reckoning for future loans from banks. Therefore, it may be prudent for banks - at least that's what I recommended to them in Let Banks Chase Their Defaulters Instead Of Seeking Bailouts - to focus exclusively on recovering their outstandings from this segment rather than get diverted by side topics like collection channel, future brand ambassadorship potential of this segment, and so on.