Improving debt collection

An intelligent, agile approach to debt collection, using tools such as real-time data analytics and targeted communications, can lead to higher contact rates and faster repayments, says Anat Hoida.

Changing attitudes towards debt and increased consumer empowerment are directly affecting the way people expect to be approached by debt collectors. It’s important that utility companies recognise this shift and re-evaluate how to manage debt collection, or they will continue losing loyal customers and potentially risk suffering regulatory fines.

Debt collection communication

The good news is that it has never been easier to contact customers. The boom of mobile devices and advancement of internet technologies have opened up new avenues for collections teams to efficiently contact delinquent customers. People have their phones with them 24/7, so the likelihood of making direct contact with a customer is much greater when contacting a mobile. The quickest method, and most scalable for high volumes, is usually an automated call, text or email.

However, the mass SMS blasts some creditors send every few days to all delinquent customers are not effective. It’s important for debt collectors to respond to specific communication so the customer feels like they are being treated individually. Besides, in most cases, the creditor has no perception as to whether these one-way outbound messages were even delivered to a valid number.

Customers that receive well-targeted mobile communications are more inclined to pay their debts on the spot because automated communications are less embarrassing than talking with a collections agent. Tailored, automated contact enables personal, secure and convenient self-service options for making a payment, or even negotiating a payment plan.

Thames Water: case study

Thames Water had a lot of customer data, but it was incomplete, which was problematic because collections professionals need to know exactly whom they’re dealing with. For example, if the system included just the surname Smith, it could refer to anyone in the family, and if the house number wasn’t complete, it could be another Smith on the same road. Thames Water had to do lots of data cleansing, which helped with data segmentation and data scoring for better collections and recovery.

Thames Water’s new system, implemented by FICO, retains customer-specific information, such as whether a customer has a disability, so agents are informed and can approach customers in an appropriate manner. The system recognises positive contact from a customer and prevents further contact in the following days.

The analytics directing each decision receive real-time data, so any customer contact is recorded instantly. A customer who makes a payment via a web portal, therefore, will not receive a collections call to their mobile ten minutes later. In addition, because automated systems work around the clock and cover all channels, there are no hiccups when customers are contacted through one channel and respond via another because the system can track all account activity. In fact, it can recognise and record a customer’s preferred contact channel to tailor future communication, making future contact easier.

Using customer information stored in the system, Thames Water’s debt management platform decides every customer journey. For example, if a customer is flagged as a low risk, they would be sent a reminder letter and not receive a serious call. Since adopting this customer-centric approach, Thames Water has been able to transform the way it manages customer debt and collect more than £10 million in late payments.

Adhering to strict regulations

Having the right technology in place also makes it easier to stay compliant. This is important because regulators are tough on poorly executed debt collection.

The real-time updates and recorded data provided by an automated system give companies a clear contact record that enables them to prove they are adhering to regulations. Changes in regulations add complexity to manual collections processes, but they can be easily added into analytics-based treatment strategies and automatically executed with 100 per cent accuracy and documentation of compliance.

The Financial Conduct Authority is reviewing how debt collectors manage customers that are in early arrears, and there is a focus on how frequently and aggressively debt collectors approach customers. With the ability to process quickly large volumes of cases, automated systems can identify difficult accounts early to create rules and policies and ensure agents approach early arrears customers appropriately. They can also prevent the same customer from being contacted more than twice in one week.

For collections professionals, the benefits of targeted, automated communications are not only higher contact rates and faster repayments, but also improved customer satisfaction and fewer complaints. Pressuring and threatening customers to pay back debt is an outdated and unproductive method to debt collection. Communicating in an agile, approachable and personable way is not only achievable, it’s effective.