As challenger banks continue to increase their market share and with economic uncertainty looming, many will be making plans to develop the debt management function of their businesses. Having concentrated on the development of apps and customer acquisition, some attention will now need to be diverted towards the needs of customers in arrears and ensuring revenue is not adversely affected by inefficient debt collection processes.
New banks start with a distinct advantage, they are not held back by incumbent debt management systems from the pre-digital age or by ingrained notions of how indebted customers should journey through the collections process. Technologically and ethically there is a good cultural fit between new banking and fintech companies and this gives challengers the edge when it comes to scaling their collections capacity.
Considerations- resources, knowledge and time
Internal development resources are likely to be fully engaged with expansion into new areas of banking and providing new products (including credit) as well as scaling up to accommodate new customers and territories. As this is the clear priority, it may not be feasible to redirect the necessary resource from the development team to build an enterprise-wide collections solution.
As Anne Boden envisaged, the most valuable collaboration for new banks will be with ‘nimble specialists’, and when it comes to debt collection, the experience and knowledge of external suppliers is going to be key. This is where the cultural fit becomes important; digitally-acquired customers have exceptionally high expectations when it comes to customer service and this includes what is available to them if they fall into arrears. They want to be taken quickly to the most appropriate action and have the personalised options that allow them to take control of their situation and resolve it sustainably.
The three R’s- reputation, ratings and regulation
FCA regulation ensuring customers in vulnerable circumstances are identified and treated fairly has caused a stir in the collections space over the last few years. The sector has listened to advice from front line agencies so that a mature understanding of vulnerability in all its forms can be embedded in the latest systems.
Getting this right is crucial for maintaining the enviable customer satisfaction ratings that new banks enjoy, as it gets incrementally more challenging as customers come into contact with collections operations and as financial uncertainty begins to bite. The transparency and clarity customers value has to carry through into debt management provision if reputation and ratings are to be sustained even under the most stressful circumstances.
An alternative..” that’s totally transparent, treats people fairly, and caters to the way we all actually live our lives.” Tom Blomfield, Monzo
Great minds think alike
Challengers and fintech organisations have always shared core values– the desire to bring experience to bear on outdated processes for the benefit of the customer; the practical and pragmatic approach to decision making and problem-solving, and the industry knowledge and experience with which to make it all happen.
Debt management is a specialised, highly regulated and sensitive area of the business where challengers can significantly differentiate their approach from competitors saddled with limited thinking and archaic legacy systems. These processes need to be in place sooner rather than later for revenue flow to be maintained and for customers to receive the service they expect.