DIGITAL DEBT COLLECTION Would debtors really prefer it?

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By Wasilwa Miriongi

I met a cherished client that has given me so much business, but as a credit professional, I have always had a bad feeling about how credit issues are handled in his company; so I decided to render unsolicited advice on a number of credit issues.

One area that came out clearly in our discussion is digitalization of the entire data and credit processes albeit the fact that he seemed so reluctant when mentioning the installation of a suitable software that could address a number of challenges faced by their staff; it was also an opportunity to receive a list of defaulters. We did not go far in discussing digitalization as he gave the reason that IT would not create any major changes in the system but his staff will.

Granted, but from the commencement some debtor’s details I received were not accurate; so we had to go back and forth forcing them to do fresh reconciliations. But I am helping where I can. This has given me an impetus to be open to new ideas; it seems it is now a good time to address a rising trend in my industry: digital debt collection.

If you look at our country, there is digitalization of anything money; from mobile banking to Mpesa paybill numbers, life hasn’t been easy when it comes to accessing money and making payments, if any of you has ever gone to our neighboring countries you will see how slow it is to make just a mere payment or access money.

Going back to the list of clients that I was given by my customers, by use of email, the next day all of them had collection letters in their email detailing the amount with details of where they can make the necessary payment. As we advocate, the use of the digital channel for collections is still relatively new and the associated payment portals
until recently have been relatively simple and basic. There are advanced self-serve portals which have been seamlessly integrated with digital contact capabilities such as one and two-way SMS texting with automated intelligent response features. The combination of these more advanced digital contact and engagement capabilities is extremely compelling. They give the debtor their preferred contact channel, and the self-control they need while giving the collections unit increased the efficiency and effectiveness they are seeking.

If you do a significant consumer research, you will, realize that there is a large section of consumers that prefer a digital interaction without the need to speak with a collector to resolve their past due obligations. The consumer has evolved to the digital channel of acquiring their financial services and being serviced on line. Financial institutions and mobile phone service providers have also been upgrading their collections processes to account for this change and remove friction from the collections process with virtual negotiation as well as a true mobile/digital experience.

There exist buyer supplier collaboration platforms which simplify the dialogue between either to just a few clicks. Buyers could review invoices, raise claims and pay or make promises to pay them on online portals nowadays.

It is important as we implement digitalization to understand the industry and its direction is extremely important. Many enforcement providers now pay less, use less able enforcement agents with most/ greater investment being used towards telephone operators and office staff. This doesn’t increase collections or improve customer service and is not in the spirit of the changes made to legislation. The Legislation was in part changed to eradicate poor enforcement agents but to also help increase the reputations, knowledge, experience and overall service from agents attending to customers. Is what you are suggesting encouraging this further?

Plus you have to take into consideration digital channels like SMS chat, where they are still engaging with humans to discuss their situation, just not via a traditional phone call. It is 2017 and the way customers want to engage with business has changed, the Smartphone has opened up many more options for engagement and that is why it is vital for businesses to get the right balance of what they offer customers at each point of any customer journey.

Ease of use

There is no gainsaying in the fact that one of the biggest arguments for taking the process online is that it makes it quicker than ever to accept payment, at a time that suits the debtor. Transfers are also near instantaneous in most cases, eliminating the trouble associated with older processes like using cheques.

It is also true that alternative and online payments are on the rise like in our country every year we originate a different payment system, like now we have Pesalink for ease of funds. It isn’t just demand that’s increasing either – the rate of growth itself is rising too, suggesting the pace of change is still accelerating.

However, with this growth comes an increased risk of exclusion. For example, older people may not be used to computers – let alone internet banking. Equally, those whose debt cycle has restricted their ability to get online would find this difficult to access. These are people we can’t ignore. But answering the question, will debtors prefer if? I would gladly answer Why not?

The issue of friction and friendliness

One major problem I see in making many digital business processes available is that there seems little discussion on the possibility of hacking, and the new mandatory declaration laws which are being enforced in all countries these days. Unfortunately, criminals are not getting any dumber and their increasing use of sophisticated items is worrying. This risk is somewhat exacerbated by the doubleedged sword of web communications. On the positive side, the online environment could have very real and immediate benefits, removing the potential for direct, face-to-face conflict or violence. That is a great benefit for our agents who can sometimes face dangerous situations.

The flip side is that many debtors won’t be able to explain, face-to-face or via phone, the very real issues they may be
dealing with. Many need to arrange repayment plans that fit in with their situation, which could include reduced or paused payments.

Digital systems will struggle to find the flexibility to accommodate such requests. And what happens to those who are unable to get online? We simply must continue to be accessible to these people in person and on the phone.

Leads to callous cost savings?

Balancing these opposing needs leads me to consider whether some companies may simply be ushering in digital debt collection to streamline the process. I’m all for cutting the cost of recouping unpaid sums, but there are risks to pushing this approach too hard.

Ours is an industry that must already tread carefully to avoid extra reputational damage. If we exclude or appear unwilling to engage with debtors with mitigating circumstances, we risk appearing unreasonable. Worse still, we may create further problems for those struggling against a debt cycle. That’s not something we can take lightly.

In a nutshell, the main game changer recently has been email communication, there are systems that allow one to chase via email, it is not done in the traditional mass spam way so the emails don’t go into junk folders. All said and done it is all about getting the balance right and presenting the right options to the customer. There are going to be people who are good payers and therefore do not need to speak to an agent to keep up to date with a payment plan and therefore a digital system is best for both parties, however for those who prefer the human element or genuinely need to discuss their situation with
a collector then there needs to be the options to engage with in a non-digital way. Every digital collections strategy will always ensure that it does not excluding anyone on any channel, but providing them with the options that best suit them, and should they need to move specific accounts down non-digital routes.

If you do a significant consumer research, you will, realize that there is a large section of consumers that prefer a digital interaction without the need to speak with a collector to resolve their past due obligations. The consumer has evolved to the digital channel of acquiring their financial services and being serviced on line. Financial institutions and mobile phone service providers have also been upgrading their collections processes to account for this change and remove friction from the collections process with virtual negotiation as well as a true mobile/ digital experience.

wmiriongi@gmail.com
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