Early-life collections – How to optimise your approach

As the demand for debt advice continues to break records, the pressure is mounting on Financial Services organisations to provide holistic, proactive support for those in difficulty.

It’s no longer acceptable to wait for customers to fall into arrears, then only offer a generic, ‘off-the-shelf' type payment plan, or to solely rely on Debt Management Companies for support.

Firms must ensure they have the right treatment strategies in place to support their customers, be proactive in their engagement and early-life intervention, and take care to consider all vulnerable circumstances customers may find themselves in.

In our second Operational Insight for Financial Services, we explore the drivers of effective collections support, and propose actions that companies can take to optimise their approach to early intervention.

What drives success at early intervention?

The importance of early intervention cannot be understated. Proactive, early engagement provides an opportunity to offer financial support to customers before they fall into arrears.

For example, think about a failed Direct Debit - having processes to identify trigger events will create opportunities to seek an immediate resolution, and prevent a delinquency issue from arising.

As explored below, several elements in your collections operation will determine how successful you are in supporting customers, during pre-arrears or early-life collections.

You should consider:

Do we have clearly defined strategies for supporting customers who find themselves in financial difficulty?

• Are they proactive, or reactive?
• Are they accessible by our customers across all contact channels?
• Does this include early-intervention/pre-arrears support?
• Do we know what the indicators of potential financial difficulty are

Are our support processes simple, repeatable and easy to follow

• Are they accessible for all, and considerate of customer vulnerabilities?
• Can they be adapted to consider individual customer needs?
• Do they align to the principles of Treating Customers Fairly (TCF)?

Is our collections team equipped to deliver optimal collections conversations?

• Are agents empowered to deliver the right outcomes in difficult situations?
• Do they have the skills to recognise these situations early?

Enhancing your pre-delinquency strategy

Building an effective pre-delinquency strategy is crucial for addressing some of the potential challenges recognised above.

For optimal outcomes at early intervention, consider the following actions:

• Carry out a data health check – Are you making the most out of the data you hold? By identifying gaps and improving the quality and availability of data, you can strengthen the segmentation and risk profiling of your customers. Adopting a risk-based approach will allow you to engage with more customers at an early stage, preventing them from entering the collections journey.
• Develop your risk management strategy – Understanding your customers risk profile will allow you to decide on the most effective way to manage them. This may be through scorecards and setting terms, or earlier interventions as discussed in actions 3 and 4. But what’s really important here is ownership, regular monitoring, and your ability to adapt to changes in the customer’s situation. This will ensure you have the visibility required to provide tailored support to your customers, helping them to avoid falling into debt where possible.
• Review your pre-delinquency policy and processes – Ensuring you have robust policies and processes is key when embedding an effective pre-delinquency strategy. This means creating the operational capacity and system capability where needed, allowing you to be more pro-active with customer needs. Your priorities should include capturing the right information from customers, sending out accurate and timely bills, and having clear processes to identify trigger events that could lead to delinquency.
• Enhance your customer engagement strategy – Using a segmented approach to customer engagement can allow you to adjust frequency, tone and channel of messaging, based on the behaviours of particular groups. For example, you may have less engagement with low-risk customers, allowing them to self-heal. And for higher risk customers, you may look to engage with them sooner, still maintaining a friendly approach. In these situations, it’s important that the customer feels supported by the identification of issues, confirmation of products and services, and the opportunity to discuss payment options, without the call becoming a debt recovery conversation.

Looking for more?

If you’re unsure about your level of confidence in early collections support, our debt experts can help.

We have deep experience in enhancing debt strategies, with automation, systems and specialist treatments, as well as delivering transformational change to fundamentally improve long-term servicing performance.

For more information on how we can help, contact Josh Marlow.