Debt Collection And Covid-19: Why A Vision Matters

by Huw Vaughan

If, like me, you have been lucky enough to have continued working during the lockdown period, you have probably never been busier. No early morning virtual workouts or goat yoga for me, nor binge-watching Tiger King. However, I have managed to get hooked on BBC2’s Make Your Home Perfect, which in a roundabout way led me to this quote from architect Frank Lloyd Wright, which I feel is relevant to today’s challenges in collections operations:

“The architect must be a prophet…a prophet in the true sense of the term. If he can’t see at least ten years ahead don’t call him an architect.”

What does this mean for collections. I’m not saying that CROs, COOs, or heads of collections should invest in a crystal ball and start trying to predict the future. However, having spent the last five years working with collections clients globally, I cannot help but think that with a little more vision in collections, things might have looked very differently when COVID-19 struck.

You may well say, “What do you mean? Things are always easier with the benefit of hindsight.” But that’s not the point. Here is why.

Having a Vision Is Key

In 2009 I was lucky to be part of the senior leadership team, led by Clive Pickett, for collections at Barclays Retail Bank, tasked with delivering a four-year transformation programme.

My abiding memory of this opportunity was not the journey but the starting point. As a team collective, we had a clear and compelling vision of what we wanted to achieve and why. We had a detailed plan of action, underpinning the vision, which we stuck to regardless of internal/external pressures that tried to blow us off course.

Today, as I engage with collections prospects on various opportunities, the one question I always ask them is “What is your vision for your collections and recoveries operation?” Unfortunately, in 80% of cases this question is met with a shrug of the shoulders and an awkward silence – basically there isn’t one. This is so damaging because we know — from personal experience, and from working with clients — that those who have this clarity of vision, and the ability to execute the plan, achieve significant benefits. Examples include a major UK bank that delivered an impairment result that was 60% less than the anticipated yearly plan; a major European bank that reduced Cycle 1 and 2 roll rates by 20%; and a major African bank that is expanding its vision for digital collections across all product lines due to the results of a successful pilot with FICO.

So, my challenge to collections leaders everywhere is, even amongst the chaos of COVID-19, reimagine the future. Create a clear and compelling vision for your collections operation that will take you past the pandemic and onto the next level of collections capability.

Working from Home Must Be the Norm — and Should Have Been Already

After the initial panic, and realisation of the impact that COVID-19 was going to have on collections operations, there were many examples posted on LinkedIn of companies proudly announcing how quickly they had managed to get their teams working from home. This was reflected by the social housing organisation that my wife works for, which amazed me with the speed and efficiency at which they made the decision and executed the chosen approach.

However, the big question here is, why wasn’t this the norm anyway? For years the target operating model for many collections operations has been based on using large number of collectors based in call/contact centres and the idea of collectors working from home was seen very much as a “nice to have.” Admittedly, there were other considerations, such as data security, performance measurement and compliance — but none of these are insurmountable, particularly given the benefits of digitisation.

Let’s be honest: the mindset has always been influenced by the word “trust”, often used with a negative connotation. Were collections operations really saying, “We can’t trust people to work from home”?

COVID-19 has shattered any myths there may have been around why people should not work from home. A Times article on 5th May reported that far from being distracted by home schooling and daytime television, 22% of companies said that there had been no impact, or a positive impact, on productivity in recent weeks. The article also reported that two-thirds of businesses reported that 75% or more of their workforce were working remotely. Unbelievably, before the lockdown, 56% of companies had 10% or fewer employees working from home, according to the survey.

So, individuals can be trusted to put in a shift, even if that means working from home. Maybe home working will indeed become the “new norm”, but in my opinion it should have been that way in the first place.

Automating Customer Communication Is Critical Path

Delivering a truly seamless customer journey/experience for customers experiencing financial difficulties is the panacea for most collections’ operations. The crisis has exposed many organisations’ lack of digital capability and automation, with many scurrying around desperately trying to change inbound IVRs to alleviate demand, stopping all outbound collections activity, and wrestling with the challenges of how to implement the government’s package of measures, designed to support business and individuals.

I doubt that there has been a time before when heads of collections have had so much support made available to them to help them beat these short-term challenges. I know for a fact that FICO has been working closely with many of our clients during this initial, challenging period, introducing at speed, enhanced Inbound IVR journeys and iSMS and iVoice scripting enhancements.

In addition, we have been partnering with Tully, the UK’s first completely digital debt adviser, to look at how we can help individuals and creditors during the next round of Covid-19 challenges. Together, besides deploying solutions that immediately assist a virtual collections capability, we are exploring further how best to automate support for collections customers exiting the current measures, while ensuring appropriate outcomes for those customers who face longer-term financial hardship.

While today’s challenges may well lead to further delays in implementing or improving existing automation/digital roadmaps, it does not have to be like this. Now is the time for collections operations to rise above the noise and strike. There is unlikely to be a better time for them to make a grab for the investment they so richly deserve, by pulling together that clear and compelling vision for collections that will help them accelerate their digital capability during the remainder of 2020 and onwards.

There is a well-known saying/cliché that says, “A person going nowhere normally gets there”. I urge you not to be that person and to act now. If you would like any further information or have any questions around creating a compelling vision for collection, including the digital transformation of your collections operation, please contact me at FICO huwvaughan@fico.com. And watch for our follow-up post on the key determinants in creating a digital blueprint to help you transform your collections operation.

For more information on managing debt collection in the current crisis, see these posts: