Intelligent debt recovery

With energy debt rising, smaller suppliers have an opportunity to differentiate themselves through the way they handle customers experiencing payment difficulties, says Mark Sussex.

The combination of increased wholesale prices, price caps, a crowded market and regulation are squeezing UK energy suppliers, young and old, big and small. Since the beginning of 2018, 16 challenger energy companies have collapsed and the combined profits of the six largest providers for domestic energy supply decreased by 35 per cent in 2018.

Record levels of switching between January and November 2019 (5,367,738 people moved to new suppliers) have and continue to create opportunities for suppliers able to differentiate themselves on price and brand experience.

A good level of customer service from energy suppliers is often found lacking, according to a 2019 Citizens Advice customer service league table. In that, a quarter of energy companies failed to achieve an average of even 2.5 stars out of five.

According to Uswitch, an energy debt of £400 million was owed by three million households at the end of 2018 – up by nearly a quarter on the previous year. Ofgem’s report, Vulnerable Consumers in the Energy Market 2019, revealed that the overall number of customers in debt increased by 4.2 per cent in electricity and 4.8 per cent in gas during 2018.

Among these customers there was an increase in those in arrears without a repayment plan, meaning that there is an increase in the number of customers in debt who need to be contacted to work out their repayment options.

Ofgem regulation requires the industry to address affordability issues and treat customers in arrears fairly. The regulation requires “suppliers to offer certain services for customers who are in payment difficulties, and to take all reasonable steps to ascertain the customer’s ability to pay”.

Undertaking affordability assessments is a central element in adhering to these guidelines and the first step in setting affordable payment plans. Completing income and expenditure (I&E) forms via phone and paper can be a time-consuming and expensive process. These assessments often create a poor customer journey and don’t always capture the most accurate data. Smaller providers may not have the infrastructure in place to undertake these, nor can they afford to blight the brand experience for relatively new customers.

Self-service tools

Self-service, digital channels that enable the agent, customer or both to complete I&E forms across multiple devices, as well as on the phone, can be transformative.  Where previously an I&E analysis could tie up agents and customers for an average of 45 minutes, at a cost of £40-80 each, the omnichannel I&E process takes just 15 minutes on average.

Intelligent self-service data validation tools make the assessments more accurate and, consequently, the payment plans more realistic. Digital channels promote more collaboration between both parties and internally between departments, helping to better educate customers and give them greater visibility and control over the I&E process.

For challenger brands, a digital affordability process not only lowers the burden and cost of assessments, but also empowers them to adhere better to industry directives.

Streamlined processes

Technology in collections itself also has a huge role to play. By harnessing back-end technology to streamline the collections process, smaller utility companies can compete with larger providers in debt recovery and communications. Providers must offer their customers choice and flexibility in paying their debts to encourage prompt payment.

Automated and omnichannel collections technologies, such as SMS, outbound and inbound interactive voice response, mobile, email, web and online portals, better engage customers and encourage loyalty. Moreover, funds are recovered at an earlier stage and the cost of collections is reduced.

Omnichannel communications and payment channels also help to reduce early-stage debt. Ofgem requires suppliers not only to manage and recover debt, but also to focus on preventing debt. This means making early contact with customers before they accumulate debt. Digital messages and payment options that tie in with affordability assessments will improve the rate and speed of collections payments, reduce early stage debt and improve the collections experience for their customers.

Collections is too often an after-thought. Many of your good long-term customers may be struggling to pay their utilities bills, so it is important to create a consistent brand experience in collections. The first step is to harness omnichannel technology that enables you to assess affordability, set plans and collect payments.