Digital and Customer Centric: The Future of Collections?

IMG_20160511_233601The other week I was lucky enough to be able to attend my first roundtable discussion with Arum at the Caledonian Club in London.  These are held with key individuals across the industry to discuss key trends; with this time being a discussion on “the Future of Collections”.  Great to be part of this and even got to write a piece for the website.

Welcome to the Caledonian Club

The Caledonian club was indeed very grand.  Advertised as a piece of Scotland in London, you do indeed walk in to see stag heads, stone staircases and portraits on the wall.  It certainly transported me to some of my visits with the National Trust for Scotland.  (Although in Scotland I seem to remember consuming more tea and toasted sandwiches than Haggis and Neeps, but can’t complain, it was extremely pleasant).

“The Future of Collections”

The work conversation was engaging and I was struck by a couple of things.

  1. The extent of digital adoption, across all age groups
  2. The normalisation of customer centric collections

Digital adoption:  Beyond the tipping point

We have all got used to interacting online, applying for products, purchasing items, checking balances and statements.  From the conversation it really felt we are now reaching the critical mass of users, where you have to be online and full functionality is expected.  The feedback is now being heard… “many individuals prefer to interact via an app than by person”.

We all have experience of this, with many relatives, who never used computers, now becoming technology adopters.  The fear of computers has largely disappeared, everyone is and needs to be online.  This includes the collections process too and the pressure is on.

Customer centric:  Have we forgotten how to collect?

It has been interesting the last few years in the UK, to watch the massive change in the collections industry that has taken place.  Since 2008, it has turned itself inside out.  It is now much more customer centric and focused in most industries.

This is clearly seen in some of the recent figures from the Citizens Advice Bureau.

Overall the number of problem debt enquiries to CAB is down, and the comment was made that this has been largely achieved without a massive increase in impairment/bad debt charge.  The customer service element is a focus today, and is clearly becoming ever more important.

This is undoubtedly a good thing, but what about if there is another downturn?  Has the financial services industry forgotten how to collect or has the paradigm shifted so much that it no longer matters?

My personal view is the industry has shifted, and been shifted, to having more grown up conversations with consumers.  It has always been about solving issues and if there is a downturn this experience it will still be useful.  The industry hasn’t forgotten how to collect.

However there has been a more fundamental structural change.

The days when a collections process could be relied upon, by force of action, to manually control and manage impairment/bad debt is most likely over…..  extra turns on the dialer are a thing of the past… the control points are now much more subtle.

A new challenge

This presents a challenge going forward.  Ensuring a robust linkage between the front and back end of the customer lifecycle is going to be critical.

Once one of the collections team speaks with a customer, I am confident they still have the tools and sensitivity to handle a situation well.  However what is now crucial is the intelligence from these interactions is gathered and flows upstream, in real time.  Pricing and decisioning criteria are going to have to be adjusted much more dynamically to remain in control.

Collections teams are still a big part of the process, handling what is often a sensitive situation.  The need for them and their data to now become ever more embedded in the decision making process.  It is going to be critical to profitability, especially in a changing economy.

Using an analogy…. “we are now flying a B747/A380, times have changed and the old days of flying by the seat of your pants could get you in a lot of trouble”

All in all, a thought provoking and interesting evening.  Certainly with useful insight into some of the current changes, thinking and future in the UK.

You can read the rest of my report here.

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