TransUnion is the new trading name of Callcredit in the UK. The usual high levels of service and products will continue as normal whilst we update the brand over the coming months.

Collections – improving the customer’s experience

29 January 2018

In today’s challenging economic environment, with inflation at a five-year high and stagnating wages, UK household incomes are under increasing strain. At the same time consumer debt has risen to £200bn – the highest level since the financial crisis. Combined, this creates a worrying state of affairs for lenders who, according to the Bank of England, could end up with £30bn in losses if unemployment levels or the (still) historically low interest rates, despite the recent increase, were to continue to rise.

The impact of people defaulting on their loans resulting in bad debt can be significant for both institutions and consumers. To better understand consumers’ financial outlook and attitudes towards credit, debt and their relationship with lenders, we surveyed over 2,000 individuals based in the UK.

The consumer’s perspective

Worryingly, one in five (21%) people we interviewed admitted that they have to rely more on credit for the essentials. In addition, 41% say that their ability to repay this hasn’t increased in line with higher credit limits they have been offered. Consequently, some consumers are finding themselves in a position where they are unable to keep up on the repayments of their debt. In fact, more than one in three (36%) have had a debt passed on to a collections agency at one point in their lives.

One of the most surprising and noteworthy findings of the research is that 30% of consumers see default as being the fault of the lender rather than the borrower. With this in mind, how can lenders ensure that their customers receive the help they need and best customer experience possible when they run into financial difficulty?

The importance of truly understanding your customer

Shaping fairer, more flexible support for customers based on a comprehensive understanding of their true financial situation is important because it shows that as an organisation, you understand you’re dealing with a real person that may be experiencing financial difficulty.

Because there can be a myriad of reasons why people default on their payment, it’s crucial to look at every situation from the individual’s point of view. The key to this is creating a 360° view of them and their finances; using verified data – delivered accurately in real-time. This will paint the precise picture of overall indebtedness, financial commitments, dependants and previous credit history, to enable you to assess a customer’s financial vulnerability and decide the appropriate customer journey with much more clarity.

Because prevention is better than cure, working with experts to do pre-default modelling on this data can also help you spot customers who might need assistance early on – not just those whose who have already fallen into financial distress.

Better contact strategies 

In addition, to enable better collection conversations, being able to effectively contact your customers is key and providing a single customer view will allow you to understand any cross over between accounts and customers. As people in high transiency areas often need to be monitored more closely and contacted by mobile or digital rather than other channels, considering transient data is also important.

Putting the customer first

Precisely understanding your customer’s situation and establishing these relationships will not just help lenders be FCA compliant, but will also provide a better solution. By actively treating every customer as a unique individual, lenders can help ensure that they receive the best possible lending experience – even if they do run into financial difficulty.