New rules from the UK’s Financial Conduct Authority could require new forms of communications aimed at raising awareness with consumers, increasing transparency and tackle the issue of persistent debt across the UK. If the new FCA persistent debt rules come into effect, the way issuers communicate with customers will determine how successful they are and could affect customer risk and retention.
The Financial Conduct Authority issued a consultation in 2017 called the ‘Credit card market study: consultation on persistent debt and earlier intervention remedies’ that was completed in July. A formal policy statement has yet to be issued by the FCA, but the FCA indicate that it will published in Q4 2017 and it suggests some new rules that might potentially become law in 2018, including: From early 2018 issuers will need to alert their cardholders of any offers/promotions that are about to expire.
From July 2018 issuers will need to prompt their cardholders if their expenditure surpasses pre-defined thresholds.
The FCA is keen for UK Issuers to educate cardholders who continue to pay the bare minimum monthly repayment amount each month, meaning that they never make inroads into their overall debt level and are in a state of persistent debt. The potential regulation is aimed at warning customers in advance of going over their limit and the consequences of doing so, such as over-limit fees.
Credit Issuers will have increased responsibility to alert borrowers of the implication of this practice - but how best should they do it?
Options for Contacting CustomersHere are some options for issuers, based on our experience helping banks contact customers using FICO Customer Communication Services:
1. SMS: A one-way SMS from the card issuer to the consumer to alert them to the potential expiry of the offer/promotion, or that they have exceeded their credit limit. This is a highly effective real-time channel. 97% of text messages are opened with 5 seconds of receipt, according to Ofcom.
2. Interactive SMS: Two-way conversations by SMS to first alert the consumer and then agree on a new repayment plan or cancel a promotion and offer something new and then manage that account more closely. There are other options here too. As part of the message for an offer increase via SMS, you can have a two-way SMS message and the consumer accepts early rather than wait three-plus days for the notification period to end. This would be useful for the new customers, who starting next year will have to contact the issuer to accept anyway, unlike existing customers. People are much more likely to reply to an SMS.
3. Mobile push notifications: Effective and real-time. As with SMS above, you could have education messages for persistent minimum payers saying how long it would take to pay off balances, similar to statement messages. For those in persistent debt, messages could be tailored around debt counselling or encouraging contact to see what else could be on offer, e.g., better payment plans or a different product.
4. Voice Call: An outbound phone call to alert the consumer about the offer/promotion expiry or credit card limit excess. SMS, in our experience, is far more effective and cost-efficient, but voice is an option should a conversation be required to resolve a complex issue. We are working with one bank that used voice only for months, and by adding an interactive SMS feature enjoyed a 20% increase in response rates and payment compared to voice only, which shows the power of using channels together.
5. Interactive Voice Recognition call: Automated voice interaction to alert the consumer and engender some positive action via a new plan. This is a good option to automate your alerts process and run pre-defined dialogues, as it obviates the need for call centre staff to make non-revenue earning calls.
6. E-documents transfer over mobile. FICO clients are using this functionality today to send, receive and sign agreements on the consumer’s mobile phone. This method is growing in popularity and can be used for new promotions or offers. There is an electronic and manual method:
- Electronic: Where there is a disclosure statement in place and customers agree to electronic signatures being binding, then customers can sign on their mobile phone using name, postcode or date of birth.
- Manual: The consumer prints the document, signs, scans and uploads it via the mobile phone.
8. Social media. Though surveys suggest consumers do not want lenders to use this channel, it is certainly something lenders are exploring cautiously.
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