The COVID-19 pandemic caused a massive worldwide reset and hit the debt collections industry particularly hard. A sharp increase in the number of vulnerable customers due to job losses combined with the challenge of how to do business in an entirely new way was a "one-two" gut-punch to those in credit and debt management positions.
In a recent online panel discussion with leading experts, we discussed the ongoing challenges and how COVID-19 has disrupted the collections industry for good - meaning both a permanent change in how businesses operate and better customer engagement and business practices brought on by new technologies.
In this post, four credit and collection experts share their thoughts and personal pandemic experiences. We'll discuss the phases the collection industry went through, from the initial scramble to changing customer needs to a challenging new normal.
The Initial Scramble: Business Continuity
The initial months of the pandemic dealt a major blow to businesses across the globe in every industry. The need for social distancing required offices to close. Travel on aeroplanes, buses and trains came to a screeching halt. Employees had to retreat to their homes, with many being furloughed or laid off in the process.
The rise in unemployment created an even more difficult challenge for those in the credit and collections industry. A massive increase in vulnerable customers was inevitable. At the same time, collections agencies had to completely change the way they operated, and do it with fewer employees as most companies were forced to downsize.
“We were just trying to figure out how to keep the business going,” Jim Appleby, Managing Director at Arrow Global said during the panel discussion. “We were literally loading PCs into the boots of people’s cars.”
Once collection agencies and call centres figured out how their employees could work from home, the next step was to figure out how to respond to the specific needs of their customers, which had changed dramatically overnight. Like the companies themselves, customers were also in survival mode. A new period of re-innovation needed to happen within the collections industry as a whole.
A New Approach: Digital Engagement & Automation
“At the start, we were only dealing with the most immediate problems,” Gary Moffat, Customer Debt Operations Manager at British Gas stated. “We almost moved away from strategic thinking while adapting.”
After the initial shock, business continuity and flexible work models became increasingly important. So did the need to focus on automation and an overall digital transformation.
“Over 50% of our customers could be classified as vulnerable in some way,” Gary noted. “We had to figure out how to use data and automation in order to identify those vulnerabilities and drive more effective engagement.”
The rising importance of the customer and the need for lenders and collectors to find a better, more empathetic way to communicate with them was a driving force in adapting new technologies, such as AI-enhanced chatbots and SMS messaging apps.
Mark Oppermann, Co-Founder & Head of Sales & Marketing at Webio reiterated the need for digital customer engagement
and outreach during the panel discussion. “Technology has changed. The pandemic made it necessary to implement new technologies that make it easier for your customers to engage with you.”
While younger audiences have preferred this type of communication channel for some time, the pandemic forced older consumers to become more tech-savvy, and now they too are comfortable using messaging and chat apps.
In its Digital Strategy in a Time of Crisis
report, McKinsey offered this advice. ”As the COVID-19 crisis forces your customers, employees, and supply chains into digital channels and new ways of working, now is the time to ask yourself, ‘What are the bold digital actions we’ve hesitated to pursue in the past, even as we’ve known they would eventually be required?’ Strange as it may seem, right now, in a moment of crisis, is precisely the time to boldly advance your digital agenda.”
The New Normal: Adapt or Die
While many credit and collection businesses were able to successfully find their footing in 2020, this year has been all about developing a flexible and adaptable business model going forward. The old ways of doing business no longer work.
“Non-voice-channels will become the new normal and companies will need to continue to invest in customer data,” Jim of Arrow Global stated.
Customers need to communicate with businesses on their own terms. More and more, this is being done through digital channels such as messaging and chat apps, in addition to the telephone. This is a win-win for the collections industry if these businesses choose to implement this type of technology. More digital engagement leads to happier customers, an increase in payments, and a reduction in overall costs, as there is less need for additional call centre employees.
Going forward, businesses will have to display a continued willingness to adapt along with preparedness, as new and deadlier strains of the coronavirus pop up all over the world. Plus, many credit management and debt collections industry experts foresee a debt tsunami coming in 2022, as government subsidies end and business repayment loans start to become due. Having a plan in place to offer flexible and longer-term payment strategies along with implementing new digital communication technologies will be vital to business survival.
The challenges keep coming, and the companies that are forecasting those challenges and planning for them now are the ones that will not only survive, but thrive.
“You have to adapt in order to transform,” Amon Ghaiumy, Co-Founder & CEO at Ophelos commented. “The best organizations have been successful at adapting quickly. And COVID has been a huge driver for transformation.”
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