As we draw closer to leaving the EU on March 29th and with no clear political decision yet on what the outcome may be, some crucial planning decisions lie ahead for collections managers.
Aside from the regulatory changes to everyday business procedures, it is logical to plan for the widely predicted economic downturn and the resulting impact on both levels of debt and the ability to repay. Forecasts from the Bank of England and the Governments own DExEU impact analysis assessments predict growth slowing by between 2% and 8% over a 15 year period. Following our departure, it is reasonable to expect that more consumers will find themselves under financial pressure if these predictions prove to be correct. This may mean more people relying on credit and more customers finding it hard to meet their monthly repayments.
Debt collection managers will already be thinking ahead about how their existing set up will cope with the anticipated increase in demand. There are three choices:
- Recruit. Grow your department’s personnel now before you become overextended and customer support levels suffer. This is an expensive option and one that takes time and resources. In the worst case scenario, it may be that the time for this option is already past. Excellent collections advisors don’t grow on trees and may be harder to acquire as any economic consequences take hold and demand grows. In the longer term, you may be left with additional capacity you no longer require, having invested training and resources for the expanded workforce.
- Outsource. Outsourcing makes sense if you want to avoid the costs of recruiting extra staff yourself. You won’t have to worry about fluctuating capacity needs and your existing department is not disrupted. However, outsourcing means losing control of how the customer in arrears is managed, it means leaving your reputation in the hands of a third party. Although convenient, outsourcing is expensive and will increase the cost to collect ratio unfavourably, during a downturn this is not a desirable prospect. Depending on the severity and length of the economic downturn, it is possible that DCAs may find themselves stretched to capacity, making quality DCA services harder to come by.
- Automate. If you prefer to keep control of your collections operation and to manage fluctuating demand in-house, digital automation is likely to be a strong consideration. Rapidly deployed and showing results in a matter of weeks, a digital self-service collections solution will enable customers to access an intelligent, flexible online tool to resolve their episode of debt. They can pay in full, offer a promise or fill out the Standard Financial Statement and make a sustainable arrangement agreeable to both parties.
‘Going digital’ does not mean accepting a limited, one-size-fits-all solution that throws too many customers back to the phones or a primitive payment system that fails to meet the latest requirements for identifying and treating customers in vulnerable circumstances fairly. Additionally, machine learning can be used to create targeted, appropriate customer journeys to ensure optimal treatment for each customer while sentiment analysis allows for real-time intervention where unacceptable levels of confusion or negative emotions come to light.
Digital systems built on a modern technology ‘stack’ are highly scalable and configurable and a low impact integration strategy means day to day operations are not disrupted. With no extravagant outlay, and delivered as a cloud-based ‘software-as-a-service’ digital can deliver a lower cost to collect without the additional capital and maintenance costs once associated with IT upgrades.
While political opinions on Brexit remain divided, the prospect of an economic squeeze on consumers is not widely disputed. Any downturn is likely to result in a rise of customers in arrears. With the clock running down, it may not be advisable to ‘wait and see’ for much longer without putting in place a cost-effective way to scale up your collections activity as and when you need to. As businesses are put under pressure across the board, no one wants to contemplate a costly proposal that unbalances your departmental budget and inflates your overheads. Digital self-service is the prudent alternative to recruitment and/or outsourcing at a time when economic uncertainty makes regulatory compliance, a competitive cost to serve and elastic capacity a necessity.