Predict Churn and Delinquency to Improve Telco Customer Retention

As telco customers have faced economic pressures like inflation and unemployment and delinquency rates for loans and other monthly bills rise, communications service providers (CSPs) are more likely to experience higher involuntary churn rates than usual. Involuntary telco customer churn happens when a customer leaves either because they are unable to pay or because they are no longer able to access the telecom company’s services, such as due to a geographic move. As economic pressure has increased on customers, CSPs should anticipate that more historically good telco customers will face difficulties making payments.  

In response, telcos should have strategies in place to identify struggling customers and help them navigate through tough times.  Avoiding failure to pay and loss of service scenarios that result in churn while maintaining profitable long-term relationships should be a telco’s primary goal.

With a combination of prescriptive analytics, two-way communication and intelligent automation, CSPs can take a more targeted, personalized, and contextual approach to early-stage collections that helps predict when telco customers’  finances have deteriorated. Using a model that provides fair options and communicates securely through customers’ preferred channels, CSPs can turn potential churn losses into loyalty events.  Profitable telco customer relationships instead can be strengthened to realize their full lifetime value.

Delinquency Exceeds Pre-Pandemic Levels

CSPs face increased delinquency risks related to device financing and post-paid accounts in much the same way as auto lenders and credit card providers. For example, the US Federal Reserve announced in September 2024 that auto loan delinquency rates had “exceeded pre-pandemic levels” by nearly 60 basis points and that average monthly loan payments, which increased just 9% between 2017 and 2020, had increased 28% from 2020 through 2023.

Even if a telco customer is not paying more monthly charges for their services and devices than a year or two ago, this rising cost pressure faced across household budgets increases delinquency and non-payment risks. CSPs will need to take action to predict and  avoid a commensurate rise in unpaid invoices and involuntary churn, especially among customers who cannot pay but wish to pay their total charges and will in the future.

Responding to Prevent Churn

A telecom company can prevent valuable customers from churning most effectively by detecting and identifying when customers struggle to pay or are at risk; enabling two-way communications with customers in their preferred digital channels; and creating personalized customer experiences relating to collections that reduce non-payment risks and improve telco customer loyalty and retention.

Here are 5 key steps that CSPs can take to predict rising churn and delinquency rates and improve telco customer retention:

1 Analyze customer behavior

Analyzing day-to-day customer behaviors and how they change is a crucial part of predicting and responding to rising delinquency rates.

Billing, payment and usage data can all play important roles in identifying delinquencies. For example, payment behaviors tend to be very consistent – on time, late or paid partially or in full. When this pattern changes, such as customers asking for extensions they have not requested before, or taking more time to make payments, it may signal the customer is at-risk of delinquency.

Changes in usage data can also provide clues that delinquency is likely to occur. When the metrics show a customer is using services less than usual, such as streaming video, dropping value-added service subscriptions, or cancelling lines on the account, it may be predictive behavior for delinquency.

Similarly, if a customer changes payment methods, using different credit cards than usual to make payments, it could be a sign of delinquency. When customers change their payment methods from a debit or checking account to a credit card, this also may signal a customer is having or will soon have difficulty paying.

Listening, analyzing and responding to customer complaints is also valuable here. Whether it be contact made to agents, through self-serve portals, over email or text, or on social media, complaints give CSPs clear intelligence about customer behavior. Because of the large volume of unstructured data involved, machine learning (ML) and artificial intelligence (AI) can be most effective at detecting and categorizing different types of complaints and their relevance to scenarios like delinquencies to inform effective actions.

2 Leverage third-party data

Data sources external to the CSP can be very helpful in improving the ability to detect churn before it happens.

A CSP can receive trigger datasets from credit reporting bureaus that communicate when a customer has applied for, and thus requires, more credit. Inquiries for multiple credit card applications or different types of loans, such as short-term loans, can signal a customer’s deteriorating financial situation, or intent to change providers, either voluntarily seeking a better deal, or involuntarily because they know they will not be able to pay an upcoming bill.

Other third-party data sources, such as regional unemployment rate data and the Consumer Confidence index are also useful to provide context. Customers who show the initial signs of struggling to pay and live and work in areas where unemployment is higher may face job insecurity. Telecommunications providers may choose to reach out to these customers with offers and options that get ahead of their potential troubles.

3 Tailor messaging to the customer

Identifying when customers are struggling, which to help, and how much to help are the first steps. Tailored, contextual omnichannel communications come next.

It is crucial to tailor messaging very clearly to match customer scenarios and sub-segments. The simplest scenario is when a good customer suddenly fails to pay; the CSP can reach out and say “It looks like you missed a payment last month. Can we help?” The sooner the CSP can communicate personally and in context this way, and the earlier in the process the CSP can detect the customer struggling to pay, the more likely they are to replace negative collections interactions with opportunities to create customer loyalty and to continue collecting payments.

This same approach can be used to shepherd customers along and improve bill payments and collections across the board. Customers who pay on time and consistently every month won’t need much help to avoid delinquency, but they can be rewarded for good behavior. At the same time, good customers who pay in full, but tend to forget the due date, can be communicated with gently to remind them when it’s time to pay.

Two-way communication and ease of payment are very important here to accelerate collections. For example, payment can be facilitated with a link in a message that leads to a secure payment portal. That link, however, also needs to go to a process that’s easy for the customer – bypassing unnecessary logins and offering options like using the same payment method used previously.

It is important, however, not to overuse outreach and instead focus on identifying the best rate at which to communicate the right content to maximize positive customer responses thanks to proactive insights derived from analytics.  Leading omni-channel collection solutions also contain built-in federal and state-level regulatory compliance guardrails to ensure CSPs do not overuse outreach.

4 Use preferred communication channels

Whether in the onboarding process or by behavioral analysis, capturing which channels customers prefer and how and when they prefer to communicate takes churn management to the next level.

Behavioral analysis tends to show that customers prefer to use different communication and transaction channels for different purposes. These channels range from phone calls and emails to self-serve portals and apps. Understanding which channels customers prefer and for what purposes gives a CSP a distinct advantage in timing and contextual churn communications so that they feel personalized and facilitate loyalty.

Omni-channel communications are important here. Discussions and processes should pick up where they left off to ensure efficient customer experiences as customers communicate across channels. Churn and collections communications, in particular, deal with sensitive matters. It is better if a customer is not made to repeat themselves to achieve a positive resolution.

5 Offer payment plan choices

Offering struggling customers several options for making payments while sustaining their services is a new approach CSPs are using effectively to combat involuntary churn, foster loyalty, and help customers continue to pay. 

When a prediction shows a good customer will struggle to pay, rather than adding on delinquency fees which makes things worse, CSPs can offer the option to choose from one of several payment plans as an incentive to pay in full. For example, the customer may be able to choose between paying every week, paying in full next month, or paying a little extra every month – whatever works for the CSP and gives the customer choices other than paying in full or being deactivated. Making the customers' preferred payment method easy to access within this process is also important for customer satisfaction.

That said, customers respond differently to differences in offers and messaging tone. CSPs can analyze their own and third-party data again here to simulate what-if scenarios, find the best offer for each customer, and optimize each offer for risk. Running A-B tests that vary messaging by region, risk segment and tenure can help determine the most appropriate language and tone that is most effective at collecting payments and driving customer loyalty for different contextual scenarios and customer groups.

Data Can Turn Telco Churn Into Loyalty

Often a major challenge CSPs across the telecom industry face in bringing analytical and decision-making capabilities online comes in identifying and bringing together the necessary data. It can be unclear where needed data resides across an organization and who is responsible for it. FICO helps CSPs to solve this problem and to power a range of business capabilities, including churn management.

FICO Platform provides everything CSPs need to bring siloed enterprise and external data together to operationalize a holistic, contextualized view of their customers, their organization, and their operating environment.

CSPs today must consider real-time situational context across many data sources to deliver amazing customer experiences at every touchpoint. To succeed, this requires harnessing streaming signals with real-time and trustworthy decisions that put data into actions that address every customer’s unique needs. FICO Platform uniquely empowers CSPs to put data into motion to achieve significant positive business outcomes.

How FICO Can Help You Address Rising Delinquencies

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