Roundtable: Debt Collection – London, 15 September 2016

Indebtedness is a problem for all society, not just utilities, and data protection laws are hampering strategies to deal with it, Mathew Beech hears.

Debt, in particular bad debt, is a perennial issue for energy and water companies to deal with. So in London on 15 September, representatives from across the sector, including regulators and charities, met for a roundtable organised by Utility Week and sponsored by Fico and Cognizant to discuss the best ways for customers and the companies to tackle it.

The problem of bad debt is getting worse for utilities. Analysis from PwC has revealed a 60 per cent rise in bad debt across the energy sector, while the water sector has seen a 44 per cent increase.

This burden adds hundreds of millions of pounds to the total customers have to pay, and utilities are eager to recoup as much of this as possible. With this challenge in mind, our guests comprising senior debt collection representatives, regulators and consumer bodies met to discuss how best to help indebted customers.

The first hurdle all the delegates agreed on, and one that is also seen as the most difficult to overcome, is identification. Utilities, especially incumbent suppliers, sometimes have difficulties knowing exactly who they are supplying because they do not have full contact details.

This is coupled with a disengagement by the customer, meaning there is often no contact until debt collection procedures, either letters or a debt collector knocking on the door, have begun.

However, rather than this being purely a negative, which could further erode what little trust there is in utility providers, delegates stated this should be taken as an opportunity to build trust and that this first contact be used to help the customer, who may be vulnerable and in need of financial assistance.

It was at this point that the issue of debt was extended beyond just utilities, with some delegates saying it is often a wider issue affecting other areas – such as banking and telecoms. Third party organisations, such as charities, are often contacted by an individual if they are struggling to pay their bills, and this information is a potential goldmine for utilities, provided data protection and sharing regulations are not breached – which is something of a sore point.

There were passionate calls for the Data Protection Act to be reformed, and some delegates stated that legislation going through parliament is looking to address some of these problems.

If data is able to be shared, something ­everyone around the table was keen to see, then an all-encompassing debt strategy, whereby all utilities can ensure ­customers get the ­necessary support, could be developed.

This strategy would deal with those in debt, but the representatives were all keen to see a more proactive stance taken and one that does not have to wait for legislation.

Data was widely agreed to present a potential solution – especially with smart meters being rolled out.

The depth of real-time data that smart meters will bring should allow analytics solutions to spot trends on which utility companies can act. This would allow one-off late payments or more entrenched trends to be spotted, and again, the right help to be provided.

This segmentation, off the back of greater data, would also help to address the identification problem, which was returned to at the end of the debate as an overriding challenge.

If that could be cracked, the debt issue – and not just collection – should become an easier puzzle to solve.

“We need to look in depth at the pertinent industry problems such as debt so we can deliver solutions to help resolve the issues.”

Nilesh Patil, sales director – energy and utilities, Cognizant

“The extra data from smart meters must be welcomed and it can be transformational. You can notice these debt issues a lot earlier.”

Daniel Walker-Nolan, principal policy manager – energy and consumer policy, Citizens Advice

“We’ve got a large group of customers who have never had any contact with us and the question is how do we identify the vulnerable customers who have never engaged with us particularly when we don’t have full customer details, for example just a title and surname?”

Ross Betts, collections system, strategy and segmentation manager, Thames Water

“Using analytics to track past behaviour and using credit referencing agency info you can find out the likelihood of a customer having problems. You can distinguish lazy payers against someone with more issues and you can use this to stop the problem early.”

Daniel Bowles, senior director, head of business development and pre-sales , Fico

“You can go through the entire debt collection process without getting a response – it’s the classic ­problem.”

Mark Fawcitt, credit risk manager and collection strategy lead, Scottish Power Energy Retail

Five key points to take away

1. Identification.

Identifying customers who are struggling to pay their energy or water bills remains the biggest challenge. Often customers who are finding it difficult to pay remain anonymous, meaning utilities are unable to provide them with assistance.

2. Cross-sector work.

One way utilities are seeking to address the debt problem is by working with other utilities and the third sector. This makes identification easier and helps customers to pay, and the utility to recover at least some of the debt owed.

3. Data.

The use of data can help to identify if and when a customer begins to fall into debt. It will also show whether this is a one-off due to unforeseen circumstance or a more regular occurrence, allowing appropriate action to be taken.

4. Trust.

Trust with utilities and debt collection agencies is low, so engagement levels are low as well. Building trust will improve customer engagement and help to address the issues of debt.

5. Debt as a whole.

Joined-up thinking across utility companies, and other service providers, including banks, is required to fully address the problems of debt. This will allow the issue as a whole to be tackled, improving the customer’s circumstance and the recovery of debt.