CUSTOMER CENTRIC APPROACH LIKELY TO BOOST DEBT COLLECTIONS AS RISING CONSUMER DEBT PRESSURES BANKS TO REVIEW DEBT COLLECTION STRATEGIES
21 November 2005
Leading academic discusses the emergence of the new debt collector and the psychology behind today's consumer debt culture
London, UK, 21 November - With outstanding consumer credit in the UK expected to rise to £250 billion in 2006, there is growing pressure on banks to review their debt collection strategies. A customer centric debt collection approach could increase the percentage of debt being repaid, enhance a bank's brand image, improve its customer retention and minimise lost revenues according to a report launched today. The report, written by leading academic of economic psychology, Professor Alan Lewis (University of Bath) and commissioned by Agilisys, paints a picture of the new, successful debt collector as a softly spoken adviser who is well versed in sales techniques and assertive without being aggressive, and underscores the negative impact of today's consumer culture.
Debt collection has always had an image problem (Vinnie Jones in the role of debt collector comes to mind) and banks have often been accused of heavy handedness. Professor Alan Lewis says "Two factors influence the strategy banks deploy in order to get their money repaid: the type of debt and the customer's profile. When customers miss a payment or two over a relatively short period of time, the actions of banks can have a great impact by helping the customers to manage their debt. Secondly, today's consumer expectations and materialistic values mean there is a growing sense of financial myopia and research shows that this attitude is more prevalent among the young."
Bearing in mind the dual factors of the type of debt and the type of consumer, an effective debt collection approach is one where the debtor is treated early before becoming too "ill". When consulting the customer who has missed one or two payments, a personal phone call whereby the customer service adviser poses a question instead of a demand and offers the customer a solution is likely to be much better received.
Professor Alan Lewis says "When observing Agilisys advisers at work, agents that have the higher success rates are those who take a collaborative approach and there is never any sign of them chastising customers even in the mildest way. The reactions of customers tend to fall within three categories: incredulity, mild guilt and evasiveness. Customers in the first two categories tend to pay up quickly while the success rate for evasive customers is low so methods should be sought to engage the evasive ones."
Professor Alan Lewis adds "Telephone surveys, focus groups and in-depth interviews have shown that some 20% of the adult population are financially phobic. 'Financial phobes' tend not to think about their personal finances and are less inclined to monitor their expenditure. The two consumers in their 20s that I spoke to were typical 'financial phobes'. One did not receive any letters from her bank reminding her of her delinquency as they'd gone missing and the other received a threatening legalistic letter. Both respondents did not want to think about balancing their books until their banks pushed them into action. Three easy steps can help consumers resolve their financial difficulties. Firstly, consumers need to assume responsibility for their actions. The second step is for consumers to prioritise spending and the final step is to develop an effective money management strategy. Recognising if the customer is a 'financial phobe' and adapting the call approach is likely to improve an adviser's success in getting the debt repaid."
Charles Mindenhall, Agilisys CEO says "Despite a fall in credit card spending in August by £146 million, consumer credit outstanding is still set to increase year on year. As a result of this increase, banks, building societies, supermarkets and organisations that issue credit cards need to evaluate the effectiveness of their debt collection. If banks get it right, they stand to minimise lost revenues and ensure long and profitable relationships with customers."
For further information:
Becky Kiely/Helen Chung
Tel: +44 (0) 20 7608 2500
Email: agilisys@hotwirepr.com
About Agilisys Ltd
Agilisys is a leading technology and business process services provider for the UK public and private sectors, dedicated to helping our clients transform their customer services through innovation, flexibility and partnership. We design, build and operate technology-enabled business solutions and have earned a strong reputation across many sectors, particularly within local government, travel and tourism, and retail financial services. Agilisys has over 1,000 employees in the UK, Ireland and India. www.agilisys.co.uk