Corporate guidance on negotiating with state-sponsored airline hijackers or cyber hackers is in its infancy. So, executives at Ryanair and the HSE can’t really be second-guessed on their responses to rogue ultimata. In truth, in both of these recent scenarios there wasn’t scope for too much negotiation – management choices were limited and feelings of fear and helplessness must have been high. Those same emotions are frequently experienced by customers in financial trouble. However, the better news is that the corporate rule book for customer engagement on debt arrears is far more advanced. And, it needs to be so.
We previously wrote about the almost 28 million financially vulnerable customers in the UK but recent news headlines/data indicate potentially similar debt stresses in Ireland. The acceleration of the vaccine roll-out is hugely positive but the price of enduring Europe’s longest commercial lockdown will be high. Consider the following:
- More than 900,000 receiving income supports in March 2021 – CSO
- Stagnant wages and higher housing costs leave young workers in Ireland worse off than parents – ESRI
- Unpaid energy bills of €90m racked up by families in pandemic – CRU
- Average interest rate on new mortgages in Ireland is more than double euro area average – CBI
The last data point might seem strange to include as it references the cost of new debt. However, this serves as a proxy for most households’ largest financial burden. Irish consumers already pay higher than average mortgage costs and the stampede for the banking exit by the likes of KBC and Ulster Bank will only exacerbate the existing shortage of credit options for consumers.
As state pandemic income supports are reduced, banks, utilities and telecoms companies need to be willing to negotiate and support their struggling customers. The regulatory guidance is clear; companies are required to ensure a customer experience that is engaging, compliant and takes account of an individual’s situation in every interaction. The use of digital channels rather than invasive cold calling can be a vital tool in a successful collection strategy. Furthermore, there is industry evidence that customers prefer using digital channels to explore and execute alternative payment options. A better customer journey can also deliver the following benefits to the creditor company:
- Reduce the cost to collect by digitally enabling customers and removing the need for collection letters.
- Build customer loyalty and drive retention by providing two-way communication for debt resolution.
- Decrease outstanding days as a result of creating alternative digital payment options.
- Increase brand reputation by identifying vulnerable customers early and targeting them with support.
CustomerMinds has extensive experience in assisting companies to successfully collaborate and engage with their customers. For example, we have helped a major telco in the UK to achieve a significant improvement in collections resulting in OPEX savings of over £40,000 per month. The digital ‘self-serve’ option was added to the collections journey in July 2020 and the impact can be clearly shown in the chart below:
Smart digital engagement with your customer builds trust and delivers a safer outcome for all parties…including the regulators. The coming debt arrears challenges may be more familiar and slower moving than the healthcare and aviation hijacking crises of recent days, but the resolution mechanism is somewhat similar. The customer, and not the money, should be the focus for a digitally smart and successful debt collection strategy.