Digital Collections: helping your customers back into the black, on their terms

Undoubtedly, a digitally focused collections strategy has increased the likelihood of customer repayment, whilst decreasing reliance on more costly traditional methods and easing regulatory pressures.
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Over the past few years, customers have shown a keen interest in using digital channels for their day-to-day banking. They have grown to interact on their own terms at their preferred time. On the other hand, as credit delinquencies rise and traditional collections strategies become less effective, collections departments need to adapt to modern requirements.

In the last 10 years, there have been relatively low levels of credit write-downs & losses; however, this appears to be changing. According to the Bank of England, there was a 22.9% rise in consumer default rates in Q4 2019 up from 12.7% in Q4 2018, along with continued expansion in household debt at around £0.9bn/month.

The collections departments are either unable to cope with the influx or are becoming too expensive. The majority of engagement (~60%) with customers is made through traditional channels such as phone, letter and VM. These channels are increasingly ineffective because customers have become adept at call screening and regulatory pressures have significantly limited contact frequency.

Digital is only considered a secondary channel, accounting for around 33% of customer interactions. However, it must be taken into consideration that digital channels have a much broader contact scope with email, text messages, push notifications and online banking. Each varied medium provides a different touch-point(s).

Delinquent customers have shown a preference for digital contact. Digital channels are at least more than twice as effective as the traditional ones. For the same reason, 60-70% of customers made a payment when contacted through digital channels.

Undoubtedly, a digitally focused collections strategy has increased the likelihood of customer repayment, whilst decreasing reliance on more costly traditional methods and easing regulatory pressures.

This article was written by Alexander Dobres, Client Director – Collections Solutions. If you’d like to know more, please call him on +44 (0)751 592 3477 or email adobres@iedigital.com

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