Whatever uncertainties we face as society settles down into ‘the new normal’, an amount of financial disruption is a given. How we work, how we spend and how we do business has shifted dramatically in the face of the Coronavirus pandemic. Individual attitudes and behaviours related to debt have changed too, for example the significant number of people who have taken advantage of forbearance measures from their creditors to help them manage their financial situation.
At Lowell, we regularly explore consumer attitudes to debt, and how this affects payment behaviour. It’s an essential part of the service we offer - this knowledge is key to providing a service that works for both your company and the people whose debt we now manage.
Recently, we conducted some research via The Leadership Factor’s consumer panel about consumers’ attitudes to debt in light of the Coronavirus pandemic. When taken into context alongside third-party research from Walnut and our own customer survey, it provides useful insight into current consumer attitudes and how these might affect your customer strategy.
Below, we’ve highlighted some of the most interesting statistics from the research and taken a deeper dive into what they mean regarding attitudes towards creditors and future money management.
The early stages: debt and customer experience
The Leadership Factor’s research found that 31% of people reported that should they fall into debt, they would make their creditor company their first port of call. This was the most popular response - a significant statistic indeed considering it ranked higher than talking to friends, family and independent organisations like the Citizens’ Advice Bureau.
It appears that a significant proportion of indebted customers still want to engage. Given their willingness to get in touch unprompted, early intervention and a positive customer experience could make all the difference, for both you and your customers. Making sure that engagement with customers remain respectful, empathetic and helpful whilst they are going through a difficult situation, could prove beneficial if and when they return to better financial health.
Attitudes to debt and money management during COVID-19
The Leadership Factor research also found that 52% of respondents felt the virus hadn’t changed their attitude to debt. However, almost 30% of respondents did agree that they were now more aware of how they should manage their finances and nearly 20% felt more concerned about being financially vulnerable.
Interestingly over twice as many people reported feeling more supported by their creditors during COVID-19 than less supported (14% vs 6%), probably driven by the wide range of support that has been provided, including forbearance measures. This positive sentiment could provide an effective platform for developing long term, empathetic relationships with customers, as some of these supportive measures start to diminish.
Interestingly customers’ expectations of how they should be supported going forward are also likely to be reflective of their experiences during the pandemic and organisations need to avoid reverting to potentially outdated and poorly executed customer engagement strategies.
It’s widely acknowledged that as the aftermath of the COVID-19 pandemic becomes more apparent, there will be many more consumers finding themselves unable to pay bills that previously weren’t an issue for them. How you react to this could be the difference between keeping these customers feeling positive about your organisation or losing their goodwill when they eventually complete their financial rehabilitation.
Does a specialist debt collection company deliver a better customer experience?
Our recent customer survey suggests that a significant majority not only understood their debt was now with Lowell (69%), but also rated Lowell’s management of their debt higher than their original creditor company’s (76%). The sentiments expressed in the customer verbatims focused on our ability to spend the necessary time to make sure we understood their particular situation and our flexibility agreeing the right payment plan for them.
These findings suggest that using specialist debt collection companies is an effective way to continue providing indebted customers with a supportive experience, whilst reducing collections related resources, budget and infrastructure and potentially retaining or even improving brand perception.
Whilst collections activity is just one part of a complex network of operations for you, it’s our core competence. We have the expertise and time to provide a customer-led experience that might prove too challenging or distracting to a time and budget-pressured in-house collections department.
How do customers prioritise debt?
The research from Walnut highlights how people choose which of their debt to pay back first. By a significant margin, debtors prioritise their largest debts and those with the highest interest rates over smaller debts. This was true for both first and second-choice answers (31% and 17% for first-choice answers respectively, 17% and 23% for second choice). When an account is sold to Lowell all interest is crystallised at the point of sale and the customer is therefore in a clearer position on how best to manage their on-going commitments. We believe this is the right way to help customers: with no additional interest we can ensure the customer gets a fresh start and we can agree an appropriate plan for their current situation.
Only 5% of customers stated that the receipt of warning letters was the main reason in deciding which debt to pay off first. It appears that traditional collections methods like sending multiple letters and emails aren’t an effective way to encourage people to prioritise your debt over others. At Lowell, we’re addressing this challenge by re-engineering and streamlining our customer contact strategies and investing heavily in developing an effective digital platform. There is an additional challenge for a creditor in balancing the cost of chasing small amounts of debt with the likely success rate. As many of our customers have multiple debts, across a range of creditors, we create tailored repayment plans that achieve prioritised settlement goals.
So, what does this mean for collections?
Consumer expectations will be heavily influenced by the experience that they’ve just been through. Their feedback on how they have been supported is generally positive but organisations will need to ensure that they retain this supportive experience long into the future.
Current collection processes and engagement strategies are quickly becoming outdated and organisations will need to adapt or risk being left behind. Collections is a competitive arena with customers typically being indebted to multiple organisations so customer experience is critical. Insight-led, omni-channel customer engagements will become the norm over the next few years and there will be a growing emphasis on digital platforms and interaction.
Our recent survey shows that 81% of customers understand that their debt has been sold to Lowell, with 69% understanding why Lowell has been chosen to look after them. There is, therefore, an opportunity to make debt handovers a positive experience for the customer. However, it is important to bear in mind that the customer journey starts with our clients so it’s very important that we have the detailed understanding and appreciation of every customer’s journey as we start to support them. By working closely with our clients we can gain and apply this insight and deliver better outcomes for every stakeholder.
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