The economic impact of COVID-19 has been surreal – months of lockdown and partial lockdown has created a black hole in everyone’s finances, be they a government, a business or consumer.
I recently discussed the four key changes in collections we have seen at FICO in an interview with Global Risk Community. Here are those changes.
1. Digital Collections
Previously I could probably count on one hand the number of clients globally that really do drive digital collections to the next level. I'm talking about those that have app-first information and consistently use all the self-service channels that they've got; those making use of things like open banking and those with all these avenues open — across all their channels from website and app, through SMS, two-way texts and video messaging.
So, what's happened through COVID, is the enormous demand that's been put on operational areas. We have seen bank customers that are receiving a month's worth of calls in a day and struggling to react as they were being inundated, whilst simultaneously their operations teams were not even allowed into their offices!
Banks had to set their staff up to work from home — staff that had never done this before. The banks and some other financial services or creditors had to understand how they were going to work with their individual operators. From a cultural point of view, that's difficult to manage, and so we see a sector that had to rapidly move more into digital collection and we're now understanding more about this demand and how it can work.
This rapid change is starting to evolve the sector for the better and we have adapted too. FICO has created a great partnership with an Open Banking provider called OpenWrks - they're a market leader in the UK. Now we can really focus on the utilization of Open Banking with an app called My Budget, which drives an affordability assessment for the customer - via open banking - that is fully integrated across FICO's credit suite.
So, between the collector and the customer, they get a fantastic journey in a fraction of time (between five to ten minutes against the previous 45 minute phone call), creating not only a significant saving for the credit issuer, but also a much simpler and more accurate journey for the customer.
2. Building Agility
The rapid change to operations has really put board-level focus on collections. I would say upwards of 80 percent of the organizations we work with had huge legacy platforms, and these legacy platforms aren't available to change quickly enough.
There is a smaller percentage who are really focused on cloud-based solutions that allow very simple changes to be done by the business and the business team. Within that platform, those organizations that have made those changes are at the forefront of being able to handle not only what their customers need, but also are capable to make those changes rapidly to meet customer demand.
3. Focus on Consumers
While consumer focus has always been important, now more than ever, consumers are at the forefront of the collector’s mind, so they can make the right decision, to drive the right outcome for that individual.
What's fantastic about that is it's great to be able to champion our sector. Sometimes people think debt collectors are the bad guys, but that is changing. You can now see the focus on the customer through collections and how collectors drive brilliant outcomes to ensure that the customer is getting the right satisfaction and the right service.
For some of our customers, the Net Promoter Score is one of the key drivers in collections. This is an excellent challenge for any business that professes to focus on the customer. Challenge your collections department to be number one in NPS — because then you are genuinely driving an emotional connection with the customer and helping them through their unfortunate situation.
4. Collections Analytics
Some debt collection agencies are fantastic at analytics. But most utilities, telcos and financial services firms have stuck with the three-speed risk models that everyone's had for the last 25 years. But this is where we are seeing big changes now.
Through analytics and through COVID-19, we're starting to see a big switch to using mathematical optimisation. This is because operations just can’t handle the current volume, even if they have got the digital collections in place. They have to be able to identify the customers who are going to be at risk moving through collections in the next few months, and those who aren't.
They also need to understand that the customers coming through from COVID-19 aren't “standard” collections customers — many of them have probably never been in arrears before. We saw this back in 2008 during the global financial crisis. These are good customers who have just fallen on hard times due to unbelievable circumstances. This compelling event has moved them into collections, so having the analytical models to be able to segment these customers and take different actions on them is absolutely imperative for the credit issuer to ensure that they drive the right outcome for the customer.
Want more? Check out the full discussion here, or watch the video below.
Also, check out these previous blog posts on debt collection in the pandemic:
- 8 Success Tips for Debt Collection in the Pandemic
- Debt Collection and COVID-19: A Phased Approach
- Debt Collection and COVID-19: What Past Crises Can Teach Us
- Payment Holidays: New Tool for Managing the Surge
- COVID-19 and Debt Collection: What’s Happening in Europe
- Is Your Collection Operation Stepping Up to the Pandemic Challenge?