As another frosty winter approaches, many consumers’ minds will be turning to more pressing matters than Christmas turkey or presents: simply heating their homes and staying warm. The issue isn’t a minor one: More than two million households are now in debt to their energy supplier, collectively owing over £318m. Worse still, the same research found that a third of these households are unable to repay this debt.
For utilities companies, non-payment can be a murky issue. Given the indispensable nature of these services, turning off the supply is an absolute last resort, or in the case of water suppliers, simply not an option. With very little recourse against non-payment, ensuring that bills are being paid on time and in full is one of the sector’s biggest challenges.
Instead, innovative methods must be applied to the problem, with customers given as much help as possible to pay. Read on for our debt collections solutions for the utilities sector.
Why are people not paying?
The first step in navigating the contentious issue of non-payment is understanding the challenges facing consumers. Each month, consumers face a flood of different bills, and as a supplier, ensuring that your bill is given prioritisation is critical. However, our own research has found that consumers tend to pay mortgage and rent first, with gas or power second, and council tax coming in third. Surprisingly, water debt was pushed way down the list, with only 6% believing that this counted as an important bill. This presents a genuine problem for the sector, especially as water debt alone has jumped to £300m in just four years – an issue that has directly led to increased consumer costs, with a further £21 being added to everyone’s yearly water bill.
This is an issue that runs across the utility sector, with 11% of consumers failing to pay water bills on time, and a further 9% falling behind on gas and electricity payments.
Utilities’ companies are in a tricky situation. As a provider of what’s considered a life necessity, they are limited in the action they can bring for non-payment. For domestic consumers, water companies are unable to turn off or restrict access to water in any instance. Similarly, for electricity and gas, suppliers must start court proceedings before the supply can be disconnected. Instead, utilities companies are forced to rely on warning letters and debt recovery services – two tactics that, as the above stats show, are no longer as effective as they might once have been.
Digital solutions to manage debt recovery
Aiming to address the wider issue of debt, the UK treasury has launched a consultation into a six-week window that would offer consumers in severe debt ‘breathing space’ to get their finances in order. The window would put interest charges on hold as they sought advice, and worked with charities and debt groups to put together a suitable repayment plan.
However, while the above scheme would go some way to combatting debt, it’s far from confirmed. And whether it happens or not, it’s increasingly clear that digital technologies have a huge part to play in the collections process. Consumers are crying out for online alternatives, with an overwhelming 73% preferring to log in to an online account to work out their own payment plan and monitor usage and outgoings. Key to this process is placing control in the hands of the consumer. Enabling consumers to view everything online, providing information on how to reduce utility bills, online budgeting tools and perhaps even offering deals and products that better suit them, increases visibility and ensures better money management. This not only saves on call centre costs, but removes the barrier to confusing information or embarrassing phone calls.
This is an issue that’s set to get so much worse, with a study by the Financial Conduct Authority revealing that half of UK adults are financially vulnerable – with 4.1 million finding themselves in difficulty after failing to pay domestic bills or having missed credit payments.
Moving processes online and creating a digital customer journey would provide an important first step in addressing these concerns. By giving control back to the consumer and allowing them a flexible, non-confrontational space in which to create a workable repayments plan is a win-win for all parties.