We’re releasing our new research into the issues facing people in unmanageable debt in the midst of an economic crisis triggered by Covid-19, which is tipping many people into financial difficulty through no fault of their own.
More than half (58%) of the 556 people we surveyed for “Fairness in Collections” said that this was the first time that repaying debt had been difficult for them. And their situation may get worse before it gets better: about the same number (53%) told us that the payment holidays they took earlier this year during the lockdown were not enough to help them with their debt.
One of our key findings was that consumers want providers to use information about their spending to help them to avoid unmanageable debt. And the heads of collections at the nine organisations that we also talked to echo these sentiments: they said that they were prioritising the use of technology to make collections interactions better for their customers.
For example, when we asked people whether they thought their bank should monitor their accounts and alert them in advance if they were at risk of going into debt, 64% said yes. This kind of proactive, preventative measure is a very effective way of reducing debt for consumers and collection costs for organisations, so there’s a strong case for companies to get customers’ permission and invest in the technology and data analytics to be able to take it in the future. In practice, this could mean alerting an account holder when they’re spending more than usual or signposting them to debt advice providers before their situation becomes a problem.
Using technology to get to know customers better was a strong theme among the organisations that we surveyed, which includes mobile phone operators, banks and utility companies. For example, Thames Water told our researchers: “In terms of our priorities over the short term, we're looking at enhancing our customer segmentation –working with external parties and getting third-party data in. That means we can make better decisions.”
The nature of employment itself is changing, so we asked collections heads what that meant for them and how they might respond. For example, when Covid-19 hit, there were 4.7 million people in the UK working in the gig economy. In addition, the number of employees on zero hour contracts has risen rapidly over the past decade (up from 168,000 in 2010 to 1.05 million in 2020). Their wages can fluctuate significantly from week to week, making it difficult for them to plan their finances.
And providers are taking note. For example, a leading telecoms provider told us that the traditional fixed payment date, which requires customers to pay their bill at the same time every month, is changing to a more flexible model to accommodate those who have an unpredictable income. The key to getting this right is understanding customers and their circumstances better and having the technology to put these data-driven insights to work.
Nearly all the companies that we spoke to told us that they would like to see more digital innovation on their platforms so that they could serve their customers more efficiently. They’re also increasing their digital communications, to improve the customer experience and to reduce the pressure on their customer service agents. And although two thirds (67%) of consumers said they preferred to talk to an agent, almost half (46%) said that, when the creditor makes initial contact, they would prefer to be contacted via email. Only 21% said they would prefer to be contacted by telephone. Almost a quarter (23%) said they would prefer to engage through self-service digital platforms.
These findings suggest that companies should be growing the number of channels through which they are engaging with their customers, to increase choice and convenience for them and to also help customers who may feel too ashamed to speak to an agent on the phone.
Our report shows that organisations are looking towards a blend of human and automated interactions that will put empathy, proactivity and data analysis at the centre of their conversation with customers. And it also shows that most customers are ready for a more data-led approach that combines tailored, proactive support with the convenience and efficiency of self-service portals.
By combining customer insights, expert human help and digital communication channels, organisations can help their customers to tackle debt more easily, making them more satisfied and loyal in the process.