The high cost of the previous model

‍For decades, collections was a numbers game.

The accepted logic was simple: dial more numbers, send more letters, and apply more pressure. In this high-volume, outbound model, empathy was often viewed as a costly luxury - something that slowed agents down and got in the way of the ‘real business’.

That old-world view is now a commercial and reputational risk.

We are operating in the era of the FCA’s Consumer Duty and digital-first consumers. The high-friction, low-empathy model is an out-of-date, expensive, inefficient liability.

It is time to flip the script.

Empathy is a core ROI-driver. An empathy-led strategy is not just more compliant: it is more profitable. It leads directly to higher engagement, better long-term outcomes, and a dramatically lower cost-to-collect.

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The 'friction tax' on your profitability

Collections teams are under immense pressure, often hamstrung by legacy systems designed for a different era.

The challenge isn't a lack of effort; it is a mismatch between traditional methods and modern consumer behaviour. This mismatch creates a "friction tax" – a silent cost that erodes profitability in three specific ways:

1. It disengages customers

A one-size-fits-all demand letter hits a wall with modern consumers. When a communication is disconnected from their reality, their reaction is rarely to pay - it is to ignore you.

A customer who is vulnerable or confused will simply stop answering the phone. In collections, negative friction equals lower recovery. You cannot collect from a customer who refuses to speak to you.

2. It is operationally expensive

Disengagement forces a high-cost response. Because the customer ignored the first letter, your system triggers a second. Then it moves them to a dialler queue.

Now, you are paying for postage and agent time to chase someone who has tuned you out. You are spending money not to get paid. It is a spiral of diminishing returns where cost-to-collect skyrockets while recovery rates stagnate.

3. It is a compliance time bomb

The FCA’s Consumer Duty focuses on avoiding foreseeable harm.

An inflexible collections model that overlooks a customer's specific situation is a regulatory breach waiting to happen. If you treat a vulnerable customer inappropriately because your system failed to identify them, you risk reputational damage and a potential 7-figure fine. The cost of non-compliance is the biggest hidden cost of all.

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Redefining empathy from a soft skill to a smart strategy

We must address a misconception. In a commercial context, empathy is not about waiving debt or just “being nice”.

Empathy is convenience. 

It understands that your customer is stressed by phone calls and works 9-5. An empathetic response isn't forcing them to call you; it is offering a 24/7 self-serve portal. This allows them to resolve their account at 10pm on a Sunday, in private.

Empathy is choice.

It understands that a £100 demand is unrealistic for someone with £20 disposable income. Empathy uses data to offer sustainable plans, letting the customer choose what they can afford. This gives them ownership and dignity.

Empathy is personalisation.

It uses live data to spot difficulties (eg. job loss) and proactively offers Breathing Space or a link to debt advice, rather than an automated demand.

How empathy delivers commercial ROI

When you prioritise empathy in this way, it impacts the bottom line in three measurable ways.

1. It drives higher customer engagement

Trust is the currency of collections.

Consider the difference between a red-text demand letter and a soft-touch SMS reading: "We're here to help. You can manage your account options here." The latter is non-judgmental, reduces anxiety, and encourages a click.

The 'IKEA Effect' in Collections: People place a disproportionately high value on things they help create. When a customer logs into a portal and builds their own payment plan, they are psychologically invested. They own the solution.

The ROI: Engagement rates on digital, empathetic channels dwarf traditional methods. By removing the fear factor, you increase the volume of customers willing to interact.

2. It promotes sustainable outcomes

The goal of collections is not just a payment, it’s a sustainable resolution.

The old strategy: An agent pressures a customer into a £100/mo plan they can't afford. They pay month one, but default in month two. You are back to square one, carrying bad debt.

The empathetic strategy: An Income & Expenditure (I&E) assessment helps the customer arrive at a sustainable £20/mo plan.

The ROI: You secure £240 over 12 months, versus £100 (and a re-default) over one. Your roll-rates decrease, and your "promise-to-pay" rate becomes a metric you can trust.

3. It lowers operational costs

This is the priority argument for Operations Directors.

‍Empathy is efficient.

• Reduces agent costs: An empathetic digital journey allows 40-60% of customers to self-resolve without speaking to an agent. Your expensive call centre can stop acting as payment processors and focus on complex cases.
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• Reduces team churn: Agent burnout is a drain on resources. An empathetic model empowers agents to actually help people, raising job satisfaction and lowering churn.

• Reduces compliance costs: A fully auditable, digital-first journey is your best defence in an audit. It proves consistency.

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Conclusion: Empathy is your competitive advantage

It is time to stop seeing empathy as a drag on performance.

Empathy is the most efficient way to lower operational costs, the most effective way to ensure compliance, and the most profitable way to secure sustainable recoveries.

The future of collections belongs to lenders who understand that the best customer outcome is also the best commercial outcome.

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Ready to see the return?

Let us show you how a modern, empathy-led collections platform can deliver this return for your business.