Responsible customer communications are of key importance as we enter what could be a fragile economic climate. Debt advice remains hard to get, not because it isn’t available or creditors are unwilling to provide schemes, it’s hard to get because of the stigma that remains on the topic. In fact, according to the Money Advice Service (MAS), only 20% of customers seek debt advice when they need it, largely put off by a model in the UK based of long and intrusive phone conversations and reams of paperwork, far from removing stress from the process. We know this is going to be compounded by the outturn of Covid with the impact of the pandemic most stark on the young.
Only recently have we really started to fully appreciate the impact financial stress has on the life of a person and all those around them – having lived and breathed collections for the last 15 years, we at Arrow have seen this first-hand. The 2020 Financial Lives Survey reports there are over 20 million people in the UK with characteristics of vulnerability. This number is likely to grow as we recover from the pandemic, while 15 million people living in the UK already have less than £100 of savings and are just one small step from financial difficulty.
User journeys that are in tune with how customers want to interact with arrears processes require the same decision science/engineering flexibility that is currently applied to origination, on the frontend of lending, to be available to customers requiring forbearance on the backend. This is widely acknowledged, but a challenge in cost and focus on execution, with some functions not yet deploying this dynamically. A litmus test on this could be reviewing how your forbearance function was structured in April 2020. Had it learned that customer voice and non-voice response had increased so significantly between 11:00 and 15:00? Or that previously convenient contact hours, for example post-school drop off, were now a poor time to make contact due to lockdown home schooling, or that customers were less keen to engage in the evening.
If your models were adaptive, to what degree have they responded as we work to the new norm now? The most supportive communications strategies tracked these behaviour changes dynamically and responded accordingly in near real time to support customers through this period. The analytic rigor deployed by so many on the frontend is now being utilised by some smart operators and servicer provides to support customers on the backend. For those with a need to accelerate their focus here, or where internal resources are scarce, acceleration can be gained through plugging into specialist servicers to take advantage of ‘Collections as a Service’ in much the same manner as we now consume Software (SAS).
Collections as a Service is a fast-track option available to accelerate the support provision to this underserved 80%. The best Collections models now manage customer journeys seamlessly across 8+ (mostly) integrated / OMNI channels. In the route to getting to this, we typically see Collections as a Service support being requested at three different levels:
- Data enrichment – often neglected in the rush to plug in new channels is taking stock of available populations for selection. We’ve seen some creditor files with digital data provision as low as 6%, with best in class at 97%. Expanding the population of customers that can be supported through non-voice, less intrusive channels is task one and a necessary focus before the rush for channel proliferation. Improvements can be delivered through the cleanse of digital data/access to proprietary data sets or appends/scoring of digital data for contact probability and response propensity including automated testing of channel outcome data without a customer interaction.
- Augmenting channels – legacy operating models can be supported by ‘off the shelf’ products from specialists at little cost. We do not all need to become specialists in these areas to support customers with a preference for non-voice forbearance interaction out of hours. To the point made by the MAS, 80% of customers have preferences not supported by traditional forbearance provision. At Arrow, we see an increasing number of customers engaging with us digitally with a quarter of our digital payment journeys incepted out of hours. It is now not uncommon to be testing journeys for customers which completed between 03.00-04.00. This is a more convenient time for them and a demand that was always present but just infrequently served. In addition, Progressive Collections operations are already supporting some of the 3.5m customers engaged with Open Banking and preparing to operationalise the payment API’s when they are added to offer what will be game changing Variable Recurring Payments.
- Fully outsourced solutions – creditors have switched from a desire to outsource voice seats to wanting to outsource customer journeys, which are supported through integrated channels. Voice is obviously part of this provision and will remain so for the foreseeable future, but some customer-centric operations are targeting a 90% non-voice ‘North Star’ to align to preferences seen from customer groups, so it makes sense for the outsourcing narrative to have altered in this way. Some case studies we’ve seen have enabled customers to benefit from a four-fold increase in contact channels with creditors benefiting from an 80% reduction in their operating resource. Business cases for outsourcing are transitioning from cost reduction (typically through cheaper seats sometimes derived from offshore operations) to progressive structures of supporting customer demand through channels and more importantly reduction in compound roll rates/loss rates due to far better customer engagement, supported through channels of choice and timely engagement.
The same test and learn principles that have built so many successful consumer credit origination functions are now appearing across the whole of the forbearance function. Success in this area to support customers can either be delivered over time with investment and focus or accelerated through partnerships with ‘Collections as a Service’ now available.