The Impact of Covid-19 on Debt Collection Strategies and Techniques
In recent years there have been significant developments in debt collection strategies and techniques. The expansion of digital and technological transformation has provided many businesses with a deeper understanding of the effectiveness of historic debt collection strategies. This seismic shift in insight and understanding has been further impacted by significant external pressure for change to existing debt collection techniques from both regulatory and market forces.
Then came Covid-19 – bringing social and economic change of a magnitude still to be fully understood – and those changes which might have taken years, will happen tomorrow.
Outlined below are 4 of the key debt collection industry trends, driven by the Covid-19 pandemic, that we look set see in 2021.
1. Greater digital transformation
Debt collection is an industry that has embraced technology with digital transformation of the credit and collections process, and the data analytics it enables, providing a deeper understanding of the effectiveness of debt collection strategies. This continual data collection and analysis enables businesses to make data-based decisions to drive process improvements – such as which debtors to contact, in what way and at what time, to ensure the most positive outcome.
In 2021, it is widely predicted that this uptake will continue to escalate as the challenging economic climate makes maintaining cash flow a corporate necessity. Businesses that had placed order-to-cash transformation as part of their longer-term digital plan will make it an immediate priority, and this increased investment in digital order-to-cash solutions is likely to drive both further innovation within the sector and reductions to the cost to implement. This could see the market dramatically open up as these credit and collections SaaS solutions, which have to date remained mostly within reach of larger corporations and debt collection agencies, could become an affordable proposition for SME’s.
2. Greater automation
Tied to the forecast growth in digital transformation is greater automation within the order-to-cash process. Manual Dunnings letters and emails, and time spent churning through excel spreadsheets will be a thing of the past as machine learning will enable the automation of repetitive tasks and allow the human workforce to focus on the areas where they can really add value.
3. Greater customer segmentation
A major learning from the data insight provided by digital transformation is that debt collection is not a one size fits all solution. Digital transformation provides, at the touch of a button, the ability to easily segment customers into risk profiles and create bespoke, debt collection strategies that the data analytics indicate will be most effective for each individual group. The process automation enabled by digital transformation will make potentially allow infinite personalisation of process, depending on and/or scenarios which will equate to a reformation from the one-size fits all Dunnings process which many businesses still use to manage their collections process.
4. Changing consumer relationship landscape
In addition to now having the data insight to adapt existing processes to improve the efficiency of any collection activity, the debt recovery business is also under increasing external pressure to change from regulatory and market forces.
The FCA Treating Customers Fairly (TCF) initiative has made delivering support through all areas of the customer journey a legislative recommendation if not imperative – even when debts go unpaid. Meanwhile, there is increasing understanding that, across all industries, future market share will be as much won on customer experience as on product and price. With the advent of social media making customer complaints, quicker, easier and more impactful, it is ever more critical that all customers interactions are positive – even at the thin edge of wedge when a customer default on payments.
Conclusion
With an uncertain socio-economic landscape, an evolving marketplace that is driven more and more by customer experience, and increasingly regulation it is impossible that how we approach debt collection in the future would not, and indeed should not, change.
We now have the knowledge and insight to understand that the majority of people do not accumulate unmanageable debt out of choice, and that when they do would far rather settle it if they are given the opportunity and means, than accept the other alternatives. It is therefore only logical that the debt collection industry looks to adjust existing techniques to help customer resolve their debt position rather than just collect on it.
Ashley Barratt – CEO, Barratt Smith Brown
If you need help within your credit-control or collections function, contact business@thebsbsco.com now for a free, no obligation quote.