Key takeaways from Better Debt: Scaling a global collections function

In this Better Debt episode, Klarna’s VP of Collections Jan Hansson sat down with Josh Foreman (CEO & Founder, InDebted) and Hugo Rajotte (VP Growth, InDebted) to dissect the fintech’s approach to taking collections across borders. 

Whether your need to scale is a result of entering new markets, rapid  growth, or due to macro impacts increasing customers entering into collections, Jan has experienced it all. Here, we unpack the essential takeaways from the session.

1. The number one priority is customer-centricity

“The customer-centric approach is really of great importance for us, because we want the transition from Klarna to a debt collection agency to be as frictionless and as seamless as possible.” --Jan Hansson

Third-party collections agencies are often seen as an extension of the original creditor’s brand. This means that when looking for the right partner it’s essential to find one that not only mirrors your values, but demonstrates a true commitment to upholding them. 

Klarna places a significant focus on creating an exceptional customer experience. They want to ensure that if customers fall behind, they have a smooth transition from using Klarna’s service, to being referred to collections. When vetting potential partners, they look for those who prioritise customer centricity, and can evidence how this is done throughout a collections journey.

2. Digital-first collections are the first choice

“People nowadays are used to being able to get things done when and how they want to do it. They don’t want to sit in telephone queues. There are some people, of course, that still do that, but the absolute majority want to take care of their unpaid debts in the way that they prefer.” --Jan Hansson

Customers prefer digital transactions, and integrating this into a collections experience is a necessity, especially in multi-market operations. This enables you to meet their needs, eliminate manual processes and focus investment on more complex areas. 

Klarna’s case for digital is two-fold:

  1. Klarna’s customers originate digitally, their collections experience should be no different.
  2. With millions of customers distributed globally, traditional engagement channels would require significant resources and overheads. Digital provides a greater level of coverage and more room for scalability.

With digital-first collections, BNPL customers have more convenience and autonomy to manage their account - in a way that’s familiar to them. This also makes way for a sophisticated approach to handling collections, as straightforward elements such as account referrals can be automated using custom-built technology.

3. Market experience doesn’t always guarantee success 

“Klarna has experienced success in entering new markets with debt collection agencies that are also new to those markets.” -Jan Hansson

Jan touched on how incumbent collections agencies with significant market experience can be challenged (and often superseded) by newcomers that step into these regions with a fresh approach. 

Speaking specifically to Klarna’s experience in France, they’ve seen positive results from newer agencies - likely due to innovative solutions that are shifting the status quo. However while healthy competition is always welcomed, both newer and more established agencies can (and should) learn from one another.

4. Find a partner that you can trust 

“Klarna trusts their partners, like InDebted, to innovate the product and maximise performance and customer experience.” - Josh Foreman

Like any partnership, choosing the right third-party collections agencies relies on trust. Trust in their ability to execute a high-performing collections strategy, and do what’s best for your customers. 

Jan emphasised that he looks for partners who are true collections experts, so that Klarna can rely on their knowledge and skill to obtain the best outcomes for their customers, without being overly prescriptive on processes, strategy and requirements. By establishing relationships with aligned collections agencies, Klarna can focus on their core business, knowing that their recoveries are in safe hands.

5. The secret to measuring success

“Some people might think that a customer’s relationship with the original brand might be over, but that’s not the case because circumstances change. If you can rehabilitate them, they can become a customer again.” - Hugo Rajotte

Aside from industry standard reporting, Klarna has an interesting KPI for their collections partners. They look at the proportion of customers who try to reuse their service after going through a collections process to measure customer lifetime value.

This metric underpins a customer-centric approach, as it demonstrates that if customers have a positive collections experience, they’re more likely to return back to Klarna once they’re back on their feet. Taking this approach to measuring success makes way for a like-for-like comparison of different collections partners in various regions, as providing a great customer experience is the ultimate goal. 

Click the button below to catch up on the full episode and explore Klarna’s take on scaling a global collections function.

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