With the challenges in the debt management space these days, it sometimes seems like you need superpowers to succeed. But before you start looking for a radioactive spider or a handy gamma-ray machine, check out FICO’s tongue-in-cheek new infographic, The Customer-Centric Collector Rises. (Yes, I realize I just mixed my Marvel and DC metaphors, comics fans.)
The superpower we’re talking about is the ability to understand how to motivate a customer to pay, using the right message and the right channel. Rather than brute force, the customer-centric collector uses their understanding of the customer to get great results.
This ability comes just in time, as overdue debt grows, traditional tactics falter, customers complain and regulators turn up the heat. As our infographic notes, some 35 percent of US adults with a credit file have debt in collections. About 20 percent of delinquent debt is collected, down from 30 percent a few decades ago. And some collectors’ tough tactics generated 200,000 complaints to federal agencies last year, which is one reason why the Consumer Financial Protection Bureau has stepped in to protect consumers.
Across the pond in my home country, things are just as challenging. Nearly 9 million people in the UK – 18 percent of the country’s adult population – are over-indebted. Around £20 billion of debt each year is passed to the UK’s main debt collection agencies. Of this, about £3 billion, or 15 percent, is recovered. The UK’s Ombudsman saw a record number of complaints in the 12 months ending April 2014. 40 percent relate to homeowners struggling to make payments.
No wonder collectors are looking for new strategies. And one of the most successful is using automated contact systems such as FICO Risk Intervention Manager that let people pay by text message, set up payment plans online and respond to recorded voices, rather than interacting with live collectors.
According to FICO research, 30 percent fewer people feel the need to speak to a collector when an automated phone call or text has a friendlier message and tone. 11 percent more debtors will make a payment immediately when contacted by friendly, automated systems, and 80 percent more are prepared to set up a direct debit plan.
The days of dunning “deadbeats” may be on the wane. For more information on customer-centric collections, see FICO’s eBook on "Taking Your Collections Performance to the Top" at www.fico.com/be-a-superhero.