Published: Friday August 15, 2014
1. Customer Control
Companies can increase their collection rates by allowing customers to choose their preferred method of communication. For the majority of people debt is a source of stress, embarrassment and shame - something only exacerbated by having to speak to creditors or collections companies about it directly. By receiving communications through a medium they feel comfortable with, customers can feel more in control of the collections process and, as an added benefit, are far more likely to respond and thus pay their debts. Treating Customers fairly (TCF) is at the heart of FCA regulation, and by taking their customers' preferences into account businesses can ensure that it is an integral part of their operations.
By making the payment process more convenient, companies can collect more debts at a much faster rate. For a customer to respond to a debt collection letter, they have to proactively contact the company in question - usually by letter or telephone. Not only does this require effort on their behalf, it can also be intimidating and stressful to make direct contact with creditors and collectors. Digital communications can link customers directly to online payment portals, allowing them to pay some or all of their debts in a fraction of the time it would otherwise take. Furthermore, they can do so without the need for any personal interaction. Two-way communications can be easily exchanged in minutes; the average response time for SMS messages, for example, is a mere 90 seconds*.
3. Operational Costs
The process of sending out postal mail is a lengthy and costly one, costing companies a great deal of resources with no promise of a result. Shelter recently released statistics revealing that 18% of their clients don't open post if they believe it to be a bill or late payment reminder, whilst 14% throw these letters directly into the bin without opening them*. For those who call their clients, staff hours are spent making a great deal of calls which aren't answered, or are dropped. Digital communications can be fully automated; ensuring staff can use their time in the most profitable way possible, and are far cheaper than postal communications to send. Don't forget: lower operational costs mean higher margins.
4. The Debt Cycle
Making initial contact with customers can be a very drawn out process, meaning that a great deal of time can pass before any payment is made. For customers, a longer collections process means mounting fees; increasing debts they may have already been unable to pay in the first place. Digital communications can dramatically speed up the collections process, increasing the number of mediums available for initial contact as well as increasing efficiency for the collections themselves. Customers are thus not faced with ever-mounting fees, and can reduce the amount of time it takes them to pay off their debts. According to debt charity StepChange, 86% of individuals suffering from debt stress experience moderate or severe mental health issues*. Helping to prevent individuals from being trapped by debt can greatly assist their mental health and wellbeing, and is a huge component of TCF.
5. Going Green
49% of the total mail sent in the UK is transactional, which, assuming each letter is of average weight, equals 10,878 tonnes of paper each year- or 261,072 trees*. By moving towards digital communications, the collections industry can dramatically reduce the amount of paper required in their operations. This is a particularly important point when one considers how few debt collection letters actually elicit a response, or even reach the correct recipient in the first place.
For more information on how GBG can help you to implement digital communications as part of your collections process, please contact - firstname.lastname@example.org.
*Sources: CTIA.org, Shelter YouGov survey Nov 2013, Stepchange 'Debt in mind. The impact of debt on mental health', Claudia Thompson, Recycled Papers: The Essential Guide (Cambridge, MA: MIT Press, 1992).