Collections Technology Think Tank 5.1 Review

29th February 2024

Credit Connect hosted its sixth Online Collections Technology Think Tank last week which saw collections strategies and the impact of cost of living economic stresses discussed by eight collections professionals from a variety of industry sectors.

In the eighth edition of the Collections Technology Think Tank series, hosted by Credit Connect Media, industry professionals gathered to discuss the evolving strategies in collections amidst the rising cost of living. The forum, labeled 5.1 aimed to explore the dynamic relationship between technology and human interaction within collections, assessing strategies to address the challenges faced by consumers due to high interest rates and insurance costs. The discussion underscored the importance of customer engagement, the impact of digital transformation on collections, and strategies for addressing affordability and vulnerable customers.

Over 140 collections professionals from banks, building societies, motor finance, utility firms,  local authorities, telecoms, media, debt collection agencies, and fintechs were amongst the viewers across the four sessions.

Commenting on the event host Colin White Founding Director at Credit Connect said “It was great to see such a great mix of collecyions professionals take part in the industry panel discussions supported by the viewer interactions responding to the survey polls and asking questions at the event.”

“I look forward to continuing the conversation at the next virtual event in June and the face-to-face version of the event taking place on 7th November in Manchester planned.”

Chris Warburton, Director and RO Strategy and Event Chair said “ It was great to be able to chair the Collections Technology Think Tank again, there is always something new and it is great to watch how the thinking is developing.
A couple of themes for me this session, especially; how we are blending human and digital interaction to a much greater extent that we ever were before, the gradual acceptance that more data is being gathered and being used, together with an almost expectation that this will be used to deliver personalised service to help us. Thank you to the panellists for a great event.”

Speaker, Enzo Montagnino at Quality Assurance & Training Manager at ARC (Europe) said “Fantastic event, enjoyed meeting the rest of the panel and the Credit connect team took good care of us. Interesting discussion, lots to take away and think about.”

The event was supported by Webio and Moneyhub.

The insights from the event were recorded and re-runs can be viewed by clicking on this link.

Event Questions round-up

Responses to selected questions:

  • What are the biggest hurdles faced within the payment process?

Enzo Montagnino, ARC (Europe): Obvious answer but the ability to make payments is the biggest hurdle given the volatility of customer’s personal finances. This gives rise to a need for a flexible approach to payments which is not always available

  • How do we balance using data to gain insights on customers and then customers’ concern over how we have obtained that data and therefore get a feeling of intrusion, especially in a debt market with lot of customers that are not as familiar with the industry?

Enzo Montagnino, ARC (Europe): “Great question, I feel there is genuine customer concern about the level of intrusion which they are being requested to undertake. If this is contained within the customer journey as a whole where say open banking is used to check affordability from the start then the perception of intrusion will be lessened. However, if this were attempted post default to carry out an affordability assessment for a payment plan then this is where there could be cause for friction.

Other factors are also at play here such as proportionality, for a larger debt then a little more “intrusion” would feel more acceptable but at the lower end of the scale with lower balances customers will often push back when asked sometimes rudimentary questions.

In short, strategies need to take account of many factors to arrive at a workable compromise for the customer’s benefit to get the balance right.

  • What potential pre-arrears solutions are being used in different industries and is there any data suggesting what the most effective solutions are?

Enzo Montagnino, ARC (Europe):  From what I’ve seen with our client base in terms of loans then utilising open banking on application seems to work well followed up with a robust credit control strategy where agents can have engaging conversations with customers. In this way, this prevents a higher default rate cutting the cost of a post-default strategy. I feel there can be a tendency to overly lean on digital solutions due to their apparent cost-effectiveness.

Selected Event Poll Results

Is your company using ChatGPT in their business processes?

  • Yes 13%
  • Yes we plan to 9%
  • No 69%
  • Don’t know 9%

What measures do you use or are putting in place to ensure you maximise the chances of increasing customer engagement?

  • Implementing a digital channels communication strategy to reach customers (eg SMS.Whatapp, Webchat) 43%
  • Implementing or enhancing self-service options through digital platforms –
  • Utilising customer segmentation and personalised communication tactics to make outreach efforts more relevant and effective 22%
  • Leveraging AI to better understand customer behaviour/predict payment likelihood and tailor engagement efforts accordingly  29%
  • Other 6%

What digital channels have you implemented in the last 24 months have had the greatest impact?

  • SMS 11%
  • WhatsApp 11%
  • Web Chat 57%
  • Other 21%

What emerging trends or innovations do you believe will shape the future of collections risk measurement?

  • AI and Machine Learning 53%
  • Big Data Analytics 23%
  • Regulatory Technology 7%
  • Customer Engagement Platforms 17%

From your experience, when will companies be able to evidence that vulnerability data and insights is truly influencing their day-to-day operational strategies?

  • Already started 53%
  • Next 3 months –
  • Next 6-12 months 32%
  • 12+ months 15%

Open Banking affordability would help me most to?

  • Write more loans 10%
  • Reduce arrears 25%
  • Both 65%

Key Points

Session 1: Customer Engagement and Collections

  • The ongoing cost of living crisis and its impact on collections strategies.
  • The rise in interest rates and insurance costs affecting consumer challenges.
  • The significance of customer engagement in collections.
  • The shift towards digital channels and their role in improving collections outcomes.
  • The necessity of blending technology with human interaction to enhance customer experience.
  • The importance of addressing affordability and supporting vulnerable customers.
  • The role of data and analytics in tailoring collections strategies to individual needs.
  • The potential of AI and machine learning in refining engagement and collections processes.
  • The challenges and opportunities presented by digital transformation in the collections industry.
  • The need for regulatory compliance and ethical considerations in collections practices.
  • Strategies for leveraging digital tools to preemptively engage with customers facing financial difficulties.
  • The importance of continuous learning and adaptation in collections strategies to meet changing customer behaviours.

Key Statistics

  • The average reading age of the customer group in the collections sector is seven or eight years.
  • Digital engagement in collections has reached a point where it is as significant as engagement through traditional channels.
  • Approximately 47% of all conversations in the collections process exhibit some traits of vulnerability, requiring specialized handling.
  • Conversion rates on digital platforms can significantly impact collections outcomes, emphasizing the importance of understanding customer behaviour online.

Key Takeaways

  • The cost of living crisis is directly influencing collections strategies, necessitating a more empathetic and tailored approach.
  • Digital channels are increasingly vital in engaging customers, yet they must be balanced with human interaction to address complex or sensitive issues effectively.
  • Understanding customer behavior through data and analytics is crucial for optimizing collections strategies.
  • AI and machine learning offer significant potential for improving collections outcomes but must be used ethically and in conjunction with human oversight.
  • Training and empowering collections agents to handle complex cases, especially those involving vulnerability, is essential for both compliance and customer satisfaction.
  • Regulatory compliance and ethical considerations remain at the forefront of collections practices, emphasizing the need for transparency and fairness.
  • Continuous adaptation and innovation in collections strategies are necessary to address the evolving challenges faced by consumers.
  • Financial education and support for customers can play a significant role in improving collections outcomes and building trust.
  • The integration of technology in collections processes offers opportunities for efficiency and effectiveness but requires careful implementation and ongoing evaluation.
  • Personalization of collections strategies based on customer data can enhance engagement and resolution rates.
  • Preemptive engagement strategies, supported by data analysis and digital tools, can help identify and address potential collections issues before they escalate.
  • The collections industry must balance the pursuit of efficiency through digital channels with the imperative to maintain ethical standards and provide genuine support to customers.

 

Key Points

Session 2: Affordability and Vulnerable Customers

  • The event addressed customer engagement, future collections challenges, and the importance of affordability assessments.
  • The role of digital engagement tools and information accessibility for customers was underscored.
  • Discussion on the blurred lines between affordability issues and vulnerability among customers.
  • The impact of the cost of living crisis on customer financial stability and mental health.
  • Emphasis on the importance of early intervention and personalized support for customers in financial distress.
  • The potential of open banking and data analytics in improving affordability assessments and customer outcomes.
  • The regulatory backdrop, including consumer duty, influencing collections practices and customer treatment.
  • Strategies for engaging with customers who are new to financial difficulties.
  • The significance of training and technology in identifying and supporting vulnerable customers.
  • Challenges and opportunities presented by AI and machine learning in collections.
  • The evolving customer expectations for personalized and immediate service solutions.
  • The importance of financial education and transparent communication in preventing and managing debt.

Key Statistics

  • 75-80% acceptance rate for customers sharing data through open banking for better service.
  • 79% of UK adults are too embarrassed to discuss their financial situation.
  • A significant percentage of customer calls contain potential vulnerability indicators.
  • Improvement in first bill performance and ongoing engagement through data monitoring.
  • The numeracy age of a significant portion of the UK population is equivalent to that of an 8-year-old.

Key Takeaways

  • The integration of digital tools enhances customer engagement and information accessibility.
  • Early intervention and personalized support are crucial for customers facing financial difficulties.
  • Open banking and data analytics offer significant opportunities for improving customer affordability assessments.
  • Regulatory changes, including the introduction of consumer duty, are shaping more responsible collections practices.
  • Training and technology are key to effectively identifying and supporting vulnerable customers.
  • AI and machine learning present both challenges and opportunities for the collections industry.
  • Evolving customer expectations demand personalized and immediate service solutions.
  • Financial education and transparent communication are essential in preventing and managing debt.
  • The collections industry is moving towards more uniform and aligned expectations across different financial products.
  • Consumer Duty forces a reevaluation of customer journeys and outcomes, ensuring better alignment with customer needs.
  • The industry must balance treatment and collections to ensure fair outcomes for customers.
  • Continuous review and adaptation of processes are necessary to meet changing customer circumstances and regulatory requirements.

*All data and statistics copyrighted to Credit Connect