Exus Blog Article
Practical considerations and best practice for debt collections teams facing the Coronavirus outbreak
The worldwide spread of Coronavirus (COVID-19) has affected almost all aspects of our everyday lives - from hygiene and travel to social gatherings and, perhaps most significantly, the workplace.
The outbreak has created financial difficulties for all of us, regardless of sector, speciality or social standing. The same is true for debt collections, with the virus and its complications creating problems for those already in debt, and practical difficulties for collections agents.
The pandemic has made it increasingly difficult for debt collections teams to do their jobs, with more people than ever struggling to make payments amidst economic collapses and global lockdowns. Then there’s the thinning of support staff, which will make it harder to prevent retail banking, utilities and even telecoms customers from going into arrears. What can debt collections teams do to navigate these uncertain times?
Getting through it
Government involvement in the financial fallout of this crisis has been unprecedented, with the UK government recently unveiling an economic bailout model for workers that amounts to 80% of their monthly salary. This is bound to take some of the slack off debtors who might otherwise spiral even further into arrears during a prolonged period of unemployment.
Pandemics affect not only national health but economic health too. Household debt in the UK stands at a staggering £1.28 trillion and households owe an average of over £15,000, so economic health has never been more important. Things look even bleaker elsewhere in Europe, with the household debt to income ratio expected to reach 83.5% by the end of 2020 in France. In Spain, that number will be closer to 85%.
Of course, in most European countries, government intervention has been a major relief, with new debt holiday and relief strategies being announced seemingly every other day. However, there are still people out there who will be unable to pay their debts throughout this crisis and the pandemic is certainly not going to be helping matters on their behalf. For collections teams, all we can do right now is take things one day at a time whilst also keeping one eye on the future.
Keep abreast of recent government announcements (they are happening every day now, after all) and work together to ensure you’re all doing everything in your power to keep on top of the situation.
The banks have, of course, been coping with the crisis as best they can. The outbreak caused a major disruption in China, with the pandemic leading to small corporate defaults that created big problems for the sector overall. In Germany, meanwhile, where interest rates are already at or below zero, there are severe limits when it comes to room for manoeuvrability.
Many leading economic voices are calling for debt relief from banks during this crisis, particularly for debtors at the lower end of the wealth spectrum. But logistically speaking, this might not prove realistic. For banks, the main thing they can do is to be transparent with their actions and keep a line of communication open with their debtors.
Then there are, of course, the more practical considerations to discuss.
In the short term, it’s likely that many customers will either fall ill themselves or be cast into employment limbo for other reasons - either the pandemic has led to their workplace being closed or they need to be home to look after children no longer in school. All of this will affect their ability to maintain payments on existing repayment plans. So, in the short term collections departments may need to look at alternative strategies to assist these impacted customers for the duration of the outbreak, and indeed many banks are already moving in this direction.
The Chinese bank CBIRC, for example, has relaxed all policies on bad debt during the crisis and Italy’s banks have also been forced to instigate a policy of “debt forgiveness” in many cases in order to stave off a major financial crash.
For the collections industry, another key short term concern is the potential reduction in call centre capacity, as employees may not be able to get to work due to illness. This could impact customer support capability and areas of performance around keeping customers out of arrears. It’s a domino effect that needs to be culled at the source by collections teams by prioritising the most at-risk cases and ensuring that all debt collections software systems are up-to-date and working at full capacity.
Long term considerations
Depending on the length of social distancing and lockdown restrictions across Europe and worldwide, we may seriously need to start thinking about alternative ways of working. This goes for both call centre and non-call centre staff, each of which presents their own challenges and their own considerations.
For call centre staff, this might mean working remotely, which is going to require some major infrastructural changes regarding high-speed internet access at home and necessary hardware. Because if these workers are not able to work from home, then if things continue to escalate the way they have been doing, we could reach a point in a few weeks where there are no workers left in the office whatsoever.
This loss in capacity will impact performance dramatically, so all teams currently on the fence about pulling the trigger on remote working should really not be delaying the choice any further.
Of course, the digital revolution has created a situation where it’s not only called centre staff that are able to work remotely and this is only going to become more commonplace as the epidemic wages on. There might be challenges to face regarding teamwork and coordination, but we are all perhaps going to need to adjust to a world where video conferencing becomes the new normal and face-to-face interaction becomes more and more selective.
Nobody can truly say when this is all going to be over and behind us. It could be 6 weeks, it could be 6 months or it could be even longer. What is guaranteed, however, is that it’s going to have a major impact on how collections teams operate in the future.
With larger call centres shutting across the globe and mobile chat and AI chatbots being used more regularly to communicate with customers as social distancing becomes the ‘new norm’, trends are bound to emerge that have a lasting impact on the way the entire financial sector operates.
We predict there will be a bolder move towards remote working, with even companies that once perceived the notion as being beneath them starting to understand the benefits and the possibilities. Audio and video conferencing will also start to take the place of face-to-face interactions.
Finally, the pandemic might catalyse the industry’s emphasis, going forward, on digital collections strategies that are able to function without direct human intervention. This chimes quite neatly with the industry’s overall shift towards digital transformation and customer-centricity.
The new normal
These ‘future’ trends could potentially represent the new normal in a matter of weeks, so banks and collections teams need to act now to ensure they are not being left behind. This means asking some serious operational questions about whether or not it’s a viable option for certain employees to work from home, what equipment they might need to allow them to do so and whether or not security measures are in place to safely facilitate a remote working strategy.
This emergency is unprecedented but it also presents several opportunities for transformation in the debt collections sector. What’s required is a greater push towards remote working, automation and cohesive systems.