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Over the past 12 months, debt collections has continued to evolve at a rapid rate. Customers are demanding more flexibility and streamlined service which better reflects the high demands of modern-day living.
On the flip side, customers are struggling to manage their money and make their money stretch, with a recent report from TUC revealing that household debt is continuing to hit new record highs. The figures recorded for the first quarter of 2019 show that unsecured debt is up to £15,880 per household, which is an increase of £1,160 from TUC’s last report released back in 2018.
With this in mind, retail banking is having to quickly consider these struggles and create debt collections strategies that benefit both the business and the customer. Aggressive calls, email notifications and stern letters are no longer proving successful.
This is where a smart debt collections process comes in. Taking a different approach can help the retail banking sector identify a hard but fair approach that’s empathetic to a customer’s individual situation, yet effective from a business/financial standpoint.
In this piece, we take a look at the biggest debt collections trends set to make a difference in 2020.
With a significant increase in technology and artificial intelligence (AI), it’s hardly surprising to learn that digitisation is going to play an integral role in debt collections in 2020.
One of the main reasons the retail banking industry experiences delinquencies is because they aren’t tracking their customers effectively. A large number of these defaults can be prevented if companies are better equipped to predict the issues before they arise.
Utilising machine learning and AI gives retail banks the opportunity to take a proactive approach, instead of reactive, by forecasting delinquent customers and default rates. Having access to this kind of information will allow companies to create personalised repayment plans and send automated reminders suited to the customers’ preferences.
In 2020, the companies that embrace AI and machine learning with their debt collection strategy will know the best time to contact customers, tighten up on compliance by eliminating human error and reduce workload so the company can focus on the customer experience. The professional and methodical approach of machine learning will protect a company’s reputation too.
Further legislation
The General Data Protection Regulation (GDPR) has already altered debt collections strategies in Europe.
Furthermore, the new rules proposed by the Consumer Financial Protection Bureau involves UK companies having to use a debt collections letter template and limiting the number of recovery calls every week. Just like GDPR, if these debt collections laws are ignored, there will be big financial consequences for the companies involved.
An improved customer experience
Incorrect or inflated debt information is a real pain point, resulting in wasted time spent on the phone and heaping further stress on an individual.
AI’s predictive and accurate nature will help revolutionise the debt collections industry in 2020 by enabling companies to forecast correctly and analyse customer communication preferences before compromising the customer experience.
Creating a better journey for the customer will break down the communication barrier between them and the company, so they feel more comfortable explaining their situation and taking positive steps.
Self-service demands
Life comes with a lot of demands. Customers don’t have the time or patience to be put on hold on the phone during working hours. According to VCC Live, 50% of customers prefer self-service and more than 20% like to resolve their debt out of hours.
An essential benefit of digitalising debt collections is that it helps increase collections rates and enables companies to use their time more effectively. The year 2020 is all about giving the customer 24/7 flexibility to serve themselves, and giving the companies deploying it more power to improve other areas of their debt collections process. And this can be achieved via self-service collections tools that are web-based and app-based on a centralised system.
Smartphones hold the key
Another major customer behaviour trend to think about in 2020 is smartphone ownership and usage.
With over 95% of the UK population owning a smartphone since 2015 and every owner, on average, checking their phone every 12 minutes of the waking day, there’s a real chance for companies to put this added knowledge to good use.
In 2020, app solutions, push notifications and SMS reminders will give customers the gentle nudge they need to take action when they have a moment. Just like online banking, the debt collections journey is calling out for easy repayment solutions at the touch of a button via apps and mobile-optimised web platforms.
The start of a new decade brings an opportunity for companies in the retail banking industry to positively transform the perception of debt collections. As we mentioned before, utilising AI/machine learning-based debt collections software can analyse customer preferences and assist in the completion of monotonous processes.
It’s a smarter, more innovative way of recovering debts in a customer-friendly manner and preventing any problems at the source.
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