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How compassionate collections helps customers and operations

Mitch Mitchell and Maurice Berbel, Connectez-vous pour vous abonner au blog

The COVID-19 pandemic is not only affecting the health of individuals but their individual financial health and the financial strength of communities, small businesses, and entire industry segments.

The so-called gig economy has hit a wall. Restaurants are shuttering, bars are closed, the streets are deserted. That trip to the hairdresser cancelled. The cute seaside hotel room postponed. The theatre tickets useless.

There are going to be a lot of people who will not be able to pay their bills. Unemployment has already started to surge, significantly exceeding peaks seen during the 2008 recession. Delinquencies are already rising. Some will recover, some may not. Bankruptcies, especially amongst small businesses, will grow significantly.

But there are steps banks can take right now to help individuals, small businesses, and communities remain solvent, while also preventing their operations from becoming overwhelmed with customer calls and creating service and collections backlogs for months or even years to come.

Flattening the operational curve

There are parallels to be drawn between battling the virus and managing the financial impact on customers. Many banks are already seeing a surge in customers needing additional help, like help with payments. Those customers most affected and most at risk of delinquency and bankruptcy are those with “pre-existing” financial vulnerability: those living paycheck to paycheck, too many credit cards, balances too high, and too few savings. These are the customers who will be most at risk of falling behind and will need help.

These customers should be triaged quickly to allow those who can be helped with a short-term fix to get the help they need and “move on” – a few triage questions and then a few simple payment options, including full payment holidays with interest forbearance. This is the bank equivalent of “flattening the curve,” allowing resources to now focus on those customers who may need more significant investment in time and process to stabilize their position. There will be a significant increase in customers declaring bankruptcy, for both induvial and small business, and a significant group of customers for whom the “standard” payment options may not be enough. These are the banking equivalent of those customers needing intensive care, and we must protect our resources to be able to help these customers too without creating huge backlogs and crippling our operations. There may be tough decisions about which customers banks should invest their resources on and which customers the bank cannot afford to retain.

Regulations have already started to emerge to influence banks’ behaviors

As directed by an Interagency Statement released on March 22, banks are being encouraged to “work prudently” with borrowers and offer loan modifications, such as deferrals and extensions to assist customers who have been affected by COVID-19. Multiple agencies have already suspended all collections activity. A new bill before the Senate, if accepted, would make all collections work illegal during times of crisis.

Banks must take a fresh approach and implement new compassionate collections strategies, with a range of customer-focused payment options

Ideally, we need to proactively identify customers most at risk and make proactive offers of help.

So how do you proactively identify and help customers to not only receive your offers but contact you or use your self-service offering? We’ve outlined an approach below that uses powerful data analytics and segmentation strategies that are agile, targeted, and allow businesses to respond quickly and continuously improve outcomes:

  1. Aggregate and consume a rich data pool to identify those customers willing to pay but not able to do so.
  2. Segment customers into highest probability of cure solutions.
  3. Create compelling offers for customers that are compliant, customer-centric, and protect their long-term relationships with the bank.
  4. Deliver proactive offers in customers’ channels of choice with focused messages to empower them to act.
  5. Build intelligent, transparent processes that can prioritize and manage the work as well as maintaining control of volumes and service levels.

The payment options made available should depend on the customer’s circumstances. But there will be value in offering a significant number of customers simple yet powerful options, such as payment holidays for three months or interest-free payments for six months – with only a limited number of eligibility checks – to allow for more detailed data gathering for more complex cases. Such proactive offers of help to see us through the next few months could be extremely valuable to help customers retain some financial stability and prevent collections operations from becoming crippled with documentation gathering and lengthy calls.

Reviewing forbearance and bankruptcy processes and identifying areas of automation and process streamlining would also be prudent to prepare for the probability of increasing volumes.

Business as usual is not going to work for collections operations in the coming months

There is an opportunity to really practice compassionate collections, to be alongside our customers for this difficult and scary time. We must share the burden, otherwise the cost to too many of our customers will be too high.

Learn more:

Balises

Défi: Excellence opérationnelle Groupe de produits: Automatisation intelligente Industry: Services financiers Thème: Excellence opérationnelle

À propos de l'auteur

In her role as a Senior Director of Sales Consulting, Michelle (Mitch) Mitchell applies more than 25 years of experience in risk management and operational optimization to help global financial services and telecommunications organizations streamline operations, grow revenue, and provide outstanding customer engagement.

Maurice Berbel, a Principal in Banking Advisory Services at Ernst & Young, brings to his projects more than two decades of experience in financial services, with a specialization in servicing and default management for mortgage banking and consumer lending operations.

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