There’s no doubt COVID-19 has left its mark on the finances of individuals and businesses worldwide. Some customers have experienced dramatic falls in their personal income from job losses while certain sectors of the business community are struggling to generate enough cash-flow and revenue to remain viable.
Now is a time that demands debt collectors show empathy and flexibility to those who are finding it difficult to pay their bills. In this climate of uncertainty, organisations need to look after their ongoing and loyal customers to ensure any debt collection experience is a positive one. Providing a more positive experience to those struggling financially will ultimately deliver greater rewards to organisations through higher recoveries, along with reduced reputational damage and lower compliance risk.
Unfortunately, debt collection is an industry that has borne the brunt of bad press with stories of poor customer experiences, inefficient and antiquated processes and collection methods that have crossed the line into harassment.
But the emergence of digital debt collection is changing the face of the industry – a move that is benefiting not only organisations but their customers as well.
Enhancing the Customer Experience
Customers around the world have been subject to increased financial pressures and a need for financial support thanks to the effects of COVID-19. But with this changed world comes a need for a change in the approach towards those who find themselves unable to pay their bills. Specifically, a more empathetic approach from debt collectors is required – one which digital debt collection agencies, such as InDebted, are able to offer.
InDebted’s approach is to get its platform to do as much of the heavy lifting as possible, including the sending and checking of content to customers and dealing with payments. This delivers a true customer-centric focus where the organisation engages with its clients’ customers using the communications channel they prefer and having the vast majority of collections occur without any people intervention. This approach frees up InDebted’s staff to focus on delivering superior customer experiences and building good and empathetic relationships.
One of the key benefits of InDebted’s digital approach is its customer-centric focus.
The importance of building financially fit customers
But while being more empathetic towards customers when discussing their overdue debts may provide for a more positive experience, a key goal should be to help get these customers financially fit. Being financially fit basically means customers have their finances under control, understand what it means to budget and how to do it, and are educated about managing their money.
Poor financial fitness means customers can struggle with the mental barriers of both the ability to pay a debt and their willingness to pay, and debt collectors need to be able to help solve both issues. The “ability” to pay is a logically driven process that involves getting customers to believe they can pay their debt when they think they can’t. This is where providing options around payment may help. The issues around “willingness” to pay tend to be more emotionally driven and involve how customers would feel if they fell behind in their payments.
An organisation that helps its financially struggling customers to achieve greater levels of financial fitness will find these customers more likely to stay and carry on conducting business with them. No matter where they’re based in the world during these uncertain times organisations want loyal customers; they want them to remain affiliated with their brand because those that do, return to make additional purchases or continue to use their financial products or telecommunications services.
InDebted places greater importance on providing positive customer outcomes first and foremost because when a customer has a positive experience this tends to automatically feed into better recovery rates, creating a win-win situation for the customer and the organisation. This is why InDebted chief strategy officer Lachlan Heussler believes a debt collection agency needs to be very much involved in helping their clients’ customers become financially fit.
“Our goal is to improve the financial fitness of our customers, and we provide support, tools and processes that allow them to do that.”
“In every aspect of your life, including the physical and emotional elements of it, achieving fitness is very beneficial,” he says. “So it makes sense customers will benefit from being financially fit by understanding their financial situation better and having basic budgeting skills. We understand people, for whatever reason, fall behind occasionally on some of their payment obligations. As a modern debt collection service our goal is to improve the financial fitness of customers by providing the tools and processes for them to better understand and resolve their situation.”
How Digital Benefits Clients
If you ask someone what the role of a debt collection agency is, the most common answer is likely to involve something around retrieving unpaid debts from customers on behalf of organisations by whatever means possible. The stigma associated with some of the methods used by traditional debt collection agencies has led to many businesses choosing to write off their customers’ overdue debts as they would rather do this than risk their brand reputation being damaged by collectors who aggressively pursue customers.
But working with a digital debt collection agency not only helps to deliver exceptional customer experiences that result in more loyal customers, a reduction in reputational damage and an assurance compliance obligations are met, but it also allows organisations to focus on their core business growth, rather than focus on back end processes (like collections) that could be better managed by subject matter experts.
Data analysis produces richer insights
These positive experiences are a result of digital agencies such as InDebted better leveraging the data they collect to build behavioural models of their clients’ customers. InDebted’s data models store all customer interactions onto a platform where analysis is conducted to learn about the individual preferences of each customer, right down to how they like to be contacted.
This analysis helps the digital platform determine what action to take at each step of the interaction with the customer. It also means InDebted can develop much better relationships with its clients’ customers, and do so at scale – a situation that benefits the organisation through more satisfied customers and a more efficient recoveries process.
“We believe that debt collection is not about cost savings but about implementing efficiencies that allow our clients to recover more.”
InDebted CEO Josh Foreman says being end-to-end digital means customers don’t need to spend as much time and effort resolving their accounts. “Our clients ultimately benefit because their customers are less stressed. The more positive the engagement, it should ultimately mean more money is recovered. We believe debt collection is not about cost savings but about implementing efficiencies that allow our clients to recover more.”
Digital debt collection also reduces the number of errors made throughout the process. Foreman says around 95% of compliance breaches occur when people are involved in the process. “Having a digital offering where the system checks all communications are going to the correct person with the right message means any risk exposure is reduced.”
Around the world it’s common for debt collectors to be remunerated based on the amount of money they recover. But with InDebted, staff are remunerated according to how they deal with customers – a strategy that eliminates the risk of staff being motivated by commissions. “Our staff are incentivised to spend time taking care of the clients’ customers and this is another factor that should reduce any reputational risk to an organisation,” Foreman says.
How InDebted Deals with these Uncertain Times
Many customers and businesses worldwide have had their income and revenue severely impacted by the pandemic. Retrieving unpaid bills is one of life’s necessities for organisations but in these uncertain times a change to the traditional model is required. Organisations need to show greater empathy to those customers who are struggling financially - often through no fault of their own.
In some jurisdictions during the pandemic governments implemented constraints on the collection of debts. However, as many economies move to recovery mode, organisations are ramping up their efforts to recover unpaid accounts. This means there is a greater need for the services of debt collection agencies. But traditional agencies that rely on call centre operators to recover monies will unlikely keep up with the demand or the needs of customers, especially when debts are owed to a number of different organisations.
Digital debt collection agencies are now the only option for organisations wanting to ensure a positive, supportive and human experience for their customers.
InDebted’s digital offering is more able to deal with these new demands. Customers now expect to use their channel of choice for any communication with the organisations they deal with and want to be able to access it 24/7. By providing this service, InDebted best caters to the needs of customers while reducing the cost and speed of collections for its clients.
COVID-19 has brought with it a new way of doing business including bringing digital processes into every interaction organisations have with their customers. Digital channels are now the primary means of engagement and this extends to debt collection.
If organisations want to retain their customer base, along with their brand reputation, it’s important to engage in the way the world is now operating. The relationship organisations have with their customers is now a digital one and this is why a digital approach should also apply to debt recovery: digital debt collection agencies are now the only option for organisations wanting to ensure a positive, supportive and human experience for their customers.
Global financial effects of COVID-19
The effect COVID-19 has had on business revenue and customers’ finances around the world makes for grim reading. In Australia, a survey by the Australian Institute of Family Studies found many Australians experienced changes to their employment including “job losses, stand downs and reductions in working hours”. This led to a large number of families experiencing changes to their income with just over 30% reporting a reduction, and 19% saying it had reduced “a lot”.
Australian businesses were similarly affected. The Australian Bureau of Statistics reported in March 2021 that one in five (22%) businesses recorded a fall in revenue and 8% expected decreased revenues in April.
In the USA, research from the Pew Research Center found about half of working adults believe the economic impact of COVID-19 will make it harder for them to achieve their long-term financial goals. Among those who say the pandemic has led to their worsening financial situation, 44% think it will take them three years or more to get back to where they were a year ago – including one in 10 who don’t think their finances will ever recover.
And while some larger US corporations have performed well during the pandemic, small businesses were hit hard with 31% currently deemed to be non-operational.
The United Kingdom recorded a record 370,000 redundancies between August and November and of those in work in February 2020, about 45% lost earnings in the first few months of the crisis. The number claiming universal credit – a payment to assist with living costs – more than doubled to 5.7 million by November 2020.
From a business standpoint, statistics from the Bank of England found while sales were slowing improving they remain markedly down from what would have been the case in the absence of COVID-19.
New Zealand is showing signs of recovery of levels of personal income although one in three households say they have not recovered their incomes to the February 2020 levels, including 11% of households still on a severely reduced income. COVID-19 has had a significant impact on business revenue, especially with the country’s hard lockdowns during the year. The Organisation for Economic Co-operation and Development found business investment will be “anaemic” as businesses seek to consolidate their balance sheets and build up cash buffers to cope with the economic fallout from potential future virus outbreaks.