Payment Holidays: New Tool for Managing the Surge

Around the world, governments and financial services providers are announcing payment holidays that help customers who have a cash crunch due to the pandemic. The latest of these is a scheme approved by the German Bundestag which became effective today. From April 1, 2020, it will be possible to have loan payments held for the next three months, and to only pay back the deferred installments at the end of the term. This provides short-term relief for customers who can’t make their normal payments due to illness, loss of work, loss of income or time off caring for others.

This is good news for consumers, but it presents banks, finance companies, telcos and other firms with enormous challenges. Many of our clients are reporting as much as a month’s worth of inbound customer requests for payment relief in a single day. At the same time, some call centers have less than 50 percent capacity due to illness or the need to deal with sick family members. This means customers that need to opt in for a payment holiday can’t get through to someone to set it up.

We at FICO have responded to this urgent need. We have created a set of digital scenarios that can help lenders, telecommunications providers and other firms meet this urgent need in an automated way. The scenarios, set up in FICO® Customer Communications Services, enable firms to quickly and easily set up new payment schedules that help customers seeking immediate relief.

With this solution, you can set up CCS contacts the customers by priority: first customers with a high probability of needing a payment holiday, then those with a risk of default or customers whose loans expire in the near future.

The outbound contact takes place fully automatically via SMS or telephone and leads the customer through a dialog menu, in the course of which any deferral is clarified and adopted. In exceptional cases, the customer will be passed on to an employee for complete clarification.

See an example of an inbound call script in action in the short video below:

CCS authenticates the customer, determines the extent to which the customer is affected by COVID-19 and offers options as to what proportion of the installments due in the next three months. The solution can even accept callbacks from customers who have already been contacted in the further course of communication, which also relieves the call centers. Both the texts in the dialog menu and the conduct of the conversation can be individually adapted to the needs of the client.

Checklist for Customer Communication

In addition to this solution, here are some tips for customer communications:

Clarify the situation: In the context of loan and credit payment deferrals, you should inquire to what extent a customer is affected by COVID-19 (for example, reduced hours, self-employed,  interruption of business). This query should be standardized and with selection options, not free text entries — otherwise, agents may face a mountain of individual answers that have to be laboriously evaluated.

Check tools: Review your 'customer engagement toolbox', specifically your interactive and web portal / app channels to ensure they display all the current deferral options in connection with COVID-19.

Coordinate communication: Review all texts in automated communication and in the guidelines for call center employees to make sure they are appropriate in the current situation. If the necessary sensitivity is lacking, this can lead to reputation damage.

While taking short-term measures, such as managing the tide of payment relief requests, it is also important to plan ahead.

• Ensure repayment options are flexible and don’t inadvertently create a higher cost of credit than necessary for the customer. This could come back to cause reputational damage to any organisation that appears to be profiting from stressed customers.
• Keep an eye on the costs in the call center - one minute of live agent contact costs an average of one euro.
• Consider the impact of deferred payments on portfolio value or commission payments.

For more tips on collections practices today, read these recent posts by my colleagues here at FICO:

Debt Collection and COVID-19: What Past Crises Can Teach Us

COVID-19 and Debt Collection: What’s Happening in Europe