2024 Credit & Collections Technology Think Tank review

Credit Connect hosted its fourth in-person Credit & Collections Technology Think Tank last week in Manchester which saw credit and collections strategies and the impact of the cost of living discussed by sixteen professionals from a variety of industry sectors at the Midland Hotel in Manchester.

The themes of cost of living impacting customer engagement, credit and collections risk, affordability, vulnerability. fraud as well as the future of credit and collections were discussed by panellists and Chair Chris Warburton from ROStrategy.

Event Chair Chris Warburton from ROStrategy said “Once again a pleasure to be able to chair the 2024 Credit Connect, Credit and Collections Technology Think Tank.  Some fascinating topics around transparency, building trust and the role of data within the Collections and Fraud journeys… and seems like regulatory focus changes are going to continue into 2025.  Many thanks to Colin White and the Credit Connect team for putting on such a great event”

Huw Vaughan, Business Expert Relationship Manager from Exus said “The topics covered and the quality of panel conversations was excellent. The Think Tank was very thought provoking and insightful.”

Rich Evans, Director of New Propositions, LexisNexis Risk Solutions said “It was great to be part of the Credit & Collections Technology Think Tank event and share insights as part of the Fraud Panel on the synthetic identity fraud challenges we see that the financial services and collections markets are facing today.

“Following the panel session, I had some fantastic discussions on how LexisNexis Risk Solutions helps businesses identify synthetic identities within their customer base, within collections portfolios, and specifically for debt purchasers within their potential acquisition portfolios.

“The Awards event in the evening was excellent as always, and it was brilliant to see many of our clients nominated for and winning awards throughout the evening – congratulations to all who were nominated and to the winners!”

Commenting on the event host Colin White Founding Director at Credit Connect Media said “It was great to see such a great mix of credit and collections professionals take part in the industry panels. There was lots of great content.”

“We have had some great feedback from the attendees at the Think Tank and next year we will be running this event every 6 months in 2025.  The next event is planned to take place on 22nd May in York and the annual Manchester event returning on 20th November”

The Think Tank was sponsored by: Acquired, COEO, Debtstream, EXUS, Indigo Cloud, LexisNexis Risk Solutions, Moneyhub, Telrock Systems, TCN and Webio.

The insights from the event were recorded and will be available on Credit Connect’s YouTube channel early next year.

The next Online Collections Technology Think Tank will take place at the end of February 2025, with the in-person event returning in May and November 2025.

If you are interested in speaking or becoming a sponsor for the next event then call 01622 535075 or email colin.white@credit-connect.co.uk for more information. More online events will be confirmed soon.

The event was followed by the announcement of the winners at this year’s Credit & Collections Technology Awards which was attended by nearly 170 people.

Event Overview and event key takeaways

Session 1: Credit and Collections Risks

1. The ongoing cost-of-living crisis has led to financial strain and higher arrears, especially in council tax and priority debts.
2. Some consumers are adapting to financial pressures by changing spending habits or using alternative credit options such as “buy now, pay later.”
3. Persistent regulatory developments are adding administrative costs and complexity, with a record number of FCA publications this year.
4. The regulatory approach, particularly through the Consumer Duty principles, is intended to protect consumers but is perceived as sometimes stifling flexibility in the credit sector.
5. New regulatory expectations focus on consumer vulnerability and financial difficulty, impacting both compliance strategies and operational costs.
6. Data and real-time analytics are essential for effectively managing customer engagement, especially for understanding consumer affordability and vulnerability.
7. Open banking is enabling lenders and collectors to assess consumers’ real-time financial situations, aiding in compliance and enhancing customer interactions.
8. Discussion about the FCA’s capacity to handle extensive data due to its high regulatory ambitions, including potentially becoming a de facto credit reference agency.
9. Advances in AI and technology, particularly in data handling, are promising for enhancing customer engagement and compliance but may face retrospective regulatory scrutiny.
10. The regulatory environment could hinder access to credit for certain consumer segments, as lenders may retreat from subprime or near-prime lending.
11. There is a push within the industry to use data insights more effectively to tailor approaches for diverse consumer financial situations.
12. The evolving regulatory landscape is encouraging a transition from traditional collections practices to customer-centric financial difficulty management strategies.

Session 2: Fraud’s Impact on Credit and Collections

1. Fraud incidents have increased sharply, with identity theft and synthetic fraud becoming more sophisticated and pervasive.
2. Synthetic identity fraud is growing, combining real data with fabricated elements to bypass traditional checks.
3. Account takeover fraud has surged, with organised fraudsters targeting existing accounts with increasing precision.
4. Fraud detection techniques, like “fraud as a service,” allow fraudsters to refine methods rapidly and share information.
5. The balance between frictionless customer experience and necessary security checks is critical to reducing fraud without disrupting legitimate users.
6. Customisable friction enables adaptive, risk-based fraud prevention measures for enhanced security.
7. Proactive communication with customers on fraud protocols can help mitigate trust erosion in case of a fraud incident.
8. Collaboration and data sharing among institutions are essential for tackling fraud across industries, with fraud intelligence shared in real-time.
9. Economic stress has increased fraud risks, especially in first-party fraud, where individuals misuse credit due to financial pressures.
10. Financial crime and vulnerability overlap, with socially engineered individuals often pressured into committing fraud.
11. AI is both a tool for fraud prevention and an enabler for fraudsters, making continuous adaptation necessary.
12. Regulatory frameworks need updates to manage emerging fraud types and the nuances of synthetic identity fraud.

Session 3: Customer Engagement

1. Shift from Traditional to Multi-Channel Engagement: Traditional phone-based approaches are giving way to multi-channel strategies, including SMS, WhatsApp, and self-service digital portals.
2. Personalisation at Scale: Personalising engagement methods to customer preference is essential, though complex at scale, especially for organisations with legacy systems.
3. Digital Transformation Requires Data Integration: Effective digital engagement involves integrating multiple communication points into a cohesive experience with a unified customer view.
4. Early Interaction Insights: Early-stage customer interactions provide valuable data that can guide later engagement, improving personalisation and customer satisfaction.
5. AI and Advanced Analytics: AI is increasingly used to support agents through “co-pilot” tools, as well as for sentiment analysis, enabling agents to deliver more empathetic responses.
6. Cost-Efficient Engagement through Self-Service: Digital self-service portals allow customers to engage at their convenience, reducing operational costs while respecting customer preferences.
7. Empathetic Collections Approach: Businesses are adopting an empathetic approach to collections, with an emphasis on helping customers resolve debts without aggressive tactics.
8. Regulatory Compliance in Customer Engagement: Companies must balance customer preferences with regulatory requirements, ensuring transparency and documenting engagement outcomes.
9. Optimised Customer Communication: Simplified, transparent communication styles resonate better with customers, building trust and improving engagement.
10. Continued Importance of Human Interaction: Despite digital advancements, human agents remain critical, particularly for cases involving vulnerability disclosures and complex resolutions.
11. Long-Term Trust Building: Initiatives such as “early nudges” or regular non-transactional engagement can build customer trust and loyalty over time.
12. Outcome-Driven Engagement: Engagement efforts should aim for constructive financial outcomes, prioritising sustainable solutions over temporary fixes to minimise customer detriment.

Session 4: The Role of Technology

1. Digital-First Engagement Growth: The financial services industry is seeing a strong shift towards digital-only customer engagement, with some organisations reporting 90% digital interaction.
2. Blending AI with Human Interaction: Combining automation with human support enhances customer outcomes, especially in complex situations that require nuanced decision-making.
3. Data-Driven Personalisation: Effective use of data is essential for customising customer interactions, but legacy systems can limit data accessibility and impact personalisation.
4. Emerging Digital Channels: Platforms like Rich Business Messaging (RBM) on iOS and Android may soon replace traditional SMS with richer, branded experiences by 2025.
5. Agent Skills in a Digital Landscape: Shifting to digital channels demands new agent training as digital interactions differ from phone-based skills.
6. Practical AI Applications: While promising, AI currently functions best in supportive roles, helping with data analysis and simple tasks rather than direct customer interactions.
7. Explainable AI for Compliance: To meet regulatory standards, AI-driven decisions need transparency, particularly when used in financial services and debt collections.
8. Future of Hyper-Personalisation: AI-driven hyper-personalisation could redefine customer interactions, allowing more tailored support and improved customer experience.
9. Focus on Financial Inclusion: AI could potentially enhance financial inclusion by offering credit to underserved populations, aligning with regulatory goals.
10. Omnichannel Communication Complexity: Managing multiple customer interaction channels requires strategies tailored to different customer preferences and regulatory compliance.
11. Risk of AI-Driven Communications: Transparency in AI use is essential for maintaining customer trust, especially in sensitive areas such as debt collections.
12. Growing Regulatory Scrutiny: Regulatory bodies are increasingly focusing on technological applications, necessitating robust compliance frameworks and data-driven decision documentation.

Think Tank Questions round-up

• There is a lot of talk related to digital, do payment options allow for digital?

Andy Pritchard, CEO at Telrock: “I assume this question is allowing for digital payments – in which case then yes, absolutely. We are one of the few Collection System vendors who are also PCI DSS compliant. We have a digital contact engine built into our product and digital payments are accepted where the client wants them.”

• How do you manage customers differently if they volunteer more info than others (e.g. Open Banking)?

Russell Hamblin Boone, CEO at CIVEA: “Should there be a new classification on what a priority bill is?It’s not so much reclassification, but priority bills (council tax and government debt) should be recorded against credit scores. Many people pay non-priority debts to protect their credit rating, even if the consequences of non-payment of priority are more severe.”

• Does anyone see drop in non-essential spending that suggests adaptation to lower affordability?

Russell Hamblin Boone CEO at CIVEA: “Arrears haven’t quite emerged in reaction to Cost of Living. Do you believe they have been suppressed and what are the leading indicators of a wave to come? In respect of council tax arrears, the current levels of court orders are similar to 2019. However, the amount of unpaid council tax in England and Wales is £6 billion. This indicates that local authorities have not yet caught up from legacy debt and the backlog created by the reduction of collections during the pandemic.”

• With the rise of AI in communications (digital & phone) – do you think it’s misleading to make it sound human? And what are the risks with consumer trust?

Huw Vaughan, Business Expert Relationship Manager at Exus said “No, I don’t think it is misleading to make an automated voice agent (virtual agent) sound human. The more important aspect is whether the customer journey that virtual agent is involved in and the information it is providing is accurate and will facilitate the right outcome for the customer. That said I would also see it as a good thing for a business using this technology to possibly signpost to the customer that they will be dealing with a virtual agent. This could be done either upfront at the start of the customer journey or even at the end when the virtual agent could advise the customer about who they have been speaking with at the same time as asking them to complete a NPS survey for example.”

• What is ‘trust’ best practice for self-serve or payment portals?

Huw Vaughan, Business Expert Relationship Manager at Exus said “ Working with several clients on this topic I find the following themes occur regularly:

Branding – The most important factor. Branding must be consistent with the wider business branding. No deviation from this as customers invariably “trust” the business brand, meaning that a basic out of the box portal with no branding simply won’t cut it.

Language – Again consistent with business brand but also empathetic and simple, easy to understand

Customer Journeys – Be cognisant of how you move customers to a portal. Try to be as transparent as possible, for example using Alpha SMS with your business name/brand to signpost that you will be attempting to contact the customer via whatever channel you will be using. These “warm up” messages are proven to be effective at delivering increased engagement when customers receive the main message.

Signposting – Widely used but don’t forget to signpost to customers sources of support that they might find useful like Stepchange, CAB, Payplan, etc”