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Can Open Banking and AI Help Us Manage At-Risk Customers?

Pandemic-related borrowing and arrears now top £10.3bn, the number of UK customers deemed to be in ‘severe debt’ has jumped to 1.2 million, while a further 3 million at-risk consumers are teetering on the brink of delinquency. The numbers are starting to reveal the scale of the debt tsunami. Right now, there has never been a better time to plug into pre-emptive, automated and AI-driven customer management.

Charts of UK employment

Source: OpenWrks

Many businesses are slowly being overwhelmed by customer requests, calls and multi-channel contacts, as we start to approach the peak of the pandemic’s mounting debt pressures. In fact, many banks and institutions have doubled headcount in key areas to help handle the demands.

As restrictions continue to affect regular branch banking and heap further pressure on alternative channels, many customers may feel they lack options for thorny discussions around the financial impact of the pandemic.

It prompted the top performers to innovate, pivot and quickly move towards greater adoption of automation, early warning systems and pre-emptive AI-driven solutions to help meet their customers’ needs and deliver timely support for agents. Crucially, customers also noted an easing of common pain points that helped improve their overall experience in banking. But there’s also a salutary tale here, as our research shows that failure to serve customers satisfactorily will simply see them switch to a competitor – and once they’ve gone, they’ve gone for good.

Even before the impact of the pandemic started to disrupt our everyday lives and hammer the global economy, discussions around AI were already getting louder across banking and financial services. Customer expectations had continued to skyrocket thanks to the services provided by tech giants and fintechs. It’s clear consumers now want to bank at the time of their choice, anywhere, with instant communication and instant assurance, paving the way for the end of outdated contact routes like the one-way SMS.

Pre-emptive messaging, virtual assistants and AI-driven support have fast become second nature for both digital-savvy customers and our strategic clients alike. Now, UX (user experience) and the UI (user interface) are underpinning rising customer expectation and transforming the way banks meet the challenges of client journeys, intelligent workflows and reinvented relationship models.

The Impact of the Pandemic on Spending and Household Incomes

Our partners at OpenWrks Group have been analysing the transaction trends of customers facing a financial squeeze. It’s clear that while income is down, it's partially balanced by the lockdown's forced spending restrictions with transport and travel, leisure and socialising, eating out, childcare, often lower. But other costs have quickly increased due to being at home more including energy use and groceries.

Spending and Household Income charts

Source: OpenWrks

Open Banking Is Part of the Answer

Since the start of 2021, Open Banking is now front-of-mind for far more major creditors. In fact, a number of high street banks and financial institutions are looking at ways to incorporate Open Banking affordability and transaction-based analysis directly into default scorecards, to help supplement scores and datasets.

Understanding credit risk is heavily weighted towards current and future affordability. But given the dramatic affordability challenges experienced by many consumers within the past 12 months, accurate and up-to-date information is now deemed far more valuable than historic behaviour.

A number of credit card companies are also now implementing detailed Open Banking-based affordability evaluations to help inform marginal credit increase-decline-accept decisions.

Many creditors across financial services, motor finance and the energy sectors are now offering self-serve digital tools to support customers' affordability assessments. It's a channel that has saved many firms thousands of man-hours in advisers' time and ensured those that are not in need have been able to maintain their payments. Elsewhere, the energy sector has embraced the use of Open Banking data and self-serve channels to help determine appropriate repayment plans at-risk customers - often done without needing to talk directly to an agent. 

FICO is also enabling greater adoption of Open Banking by integrating systems like Debt Manager with affordability tools like MyBudget, to provide the seamless integration of affordability assessments with existing strategies, saving agents time and increasing both accuracy and successful outcomes.

AI Adds Context

Agility, speed and scalability are some of the obvious benefits to banks, by helping reduce the time staff spend on labour-intensive or manual tasks, in favour of helping address more critical customer needs, financially vulnerable and at-risk sections of the credit portfolio.

Across the UK, AI has helped deliver appropriate and manageable pre-emptive solutions for thousands of customers keen to apply for payment holidays, or deferrals on their mortgages, loans or credit cards. Thanks to the scalability and flexibility of AI, combined with tailored digital offerings, new customer journeys can be devised and delivered within hours rather than weeks.

Rather than adopting blanket reliance on Open Banking data, analytics is also being used to help inform some marginal cases. In instances when there’s a lack of clarity, consumers may instead be directed to answer some questions to help offer a more accurate picture of their affordability. 

Conversational AI helps identify the minimum number of questions to ask each consumer in order to increase the confidence of affordability, delivered in as low-friction and high-satisfaction way as possible for the customer.

The Art of the Possible

In fact, the pandemic has only just started to offer a peek at the art of the possible. It’s a trend that’s only going to continue as more and more back-office processes continue to leverage the power of Big Data, drive next best actions and service recommendations for at-risk customers. In fact, AI-driven solutions will not be an optional subject for banks, but a fundamental differentiator as to why consumers opt for a given institution.

It’s also worth noting that even before the impact of the pandemic had been felt, the Financial Conduct Authority (FCA) has already set out its expectations around resilience, with a clear vision around business continuity and the maintenance of high customer service standards. It’s a position that urges lenders to consistently highlight how and where they are doing their very best to uphold the guidelines and keep the customer at the centre of everything they do.

To discuss low-risk approaches to platform transformation, simply click here.

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