Digital debt collections: How to win back customer confidence

Financial regulators are focusing on customers being treated fairly. So how organisations carry out their debt collections is now crucial.

With interest rate increases on the horizon and a growing focus of regulators on customers being treated fairly in all areas of financial services; how organisations carry out their debt collection will become more and more important.

Many UK organisations have debt collection and recovery processes that do not use the full range of strategies that a comprehensive digital approach can deliver. Debt is still regarded as a significant stigma – it’s embarrassing for customers to receive a call and have to explain themselves to a stranger on the phone. Customers are very comfortable self-servicing through web sites and mobile apps. 

 By employing an effective digital debt collection solutions strategy, all lenders can help deliver a better customer experience and do this more efficiently with an improved return on their cost to collect. Our experience at IE is that putting control over repayments back in customers’ hands by making the process self-service and real-time across all digital channels delivers better returns and a better customer experience.

 Digital debt collection platforms enable lenders’ customers to repay the debt at their own rate, setting up direct debits that suit them, and offering the capacity for the customer to make a ‘promise to pay’ by a certain date. By taking the human element out of the debt collection process lenders can give their customers the sense of control they feel they lack in controlling their borrowings, and instil confidence in their customers that will encourage them to return the next time they need to borrow.

 With the Financial Conduct Authority (FCA) planning to cap payday loan rates and the extent to which the overdue balance can grow to twice the original loan as well as the cap on default charges, payday lenders are going to have to embrace more cost effective channels to address defaults and those in arrears.

 It’s not just payday lenders that need to refine their debt collection practices. Banks, near prime credit cards, store card creditors, credit unions and any other debt collection agencies will find that digital self-service is more remunerative than sending letters and chasing debtors with calls. These are the debt collection processes of the past and it’s not how customers should be dealt with in the digital age. Lenders now need to ensure their debt collection process reflects their own values, by providing customers with simplicity, transparency and control.