How collections can cope with UK household financial stress

We are amidst an unprecedented global event, and nobody can be 100% sure where the chips will land when the wheel stops spinning. Credit use might have dipped during the pandemic, as governmental support schemes kicked in to soften the blow, but as those schemes have started to phase out, credit use is starting to rise once again.

Lowell’s data reveals that average credit use among the firm’s 9.5 million customers climbed from 46.1% to 51.6% in the last quarter, and this was before the Bank of England’s shock decision to not raise interest rates last week. Money markets had predicted an interest rate rise from 0.1% to at least 0.25% by the end of the year, but it wasn’t to be.

The BOE’s decision attracted widespread criticism from those who feel its inaction will lead to soaring inflation. Indeed, the bank themselves admitted that inflation could be seen at as much as 5% by end of April. Governor Andrew Bailey did say that interest rate increases “will be needed in the coming months to bring inflation down” but refused to offer any specifics.

Even more worryingly, the bank cut its growth forecasts and predicted a rise in unemployment following the end of the government’s furlough scheme. Factor in the rise in people claiming social benefits (21% in London) and the general fact that British citizens are not managing their finances as well as they once were, and it seems like things are going to get a lot worse before they eventually get better.

For debt collections teams, this poses several challenges. But what can they do in response to these latest financial and economic hurdles to keep customers calm as stress continues to rise in UK households?

The EXUS Financial Suite is the ideal all-in-one debt collections solution for UK businesses.

Strong strategy

A solid underlying strategy is always vital, but in such stressful and uncertain times, the clarity and strength of that strategy are crucial. A good strategy is one that understands and makes allowances for the complete debt lifecycle and can adapt and change to meet fluctuating economic conditions.

A significant part of this is, of course, ensuring that the proper IT infrastructure is in place to allow more modern digital debt collections solutions to function correctly. But even more than that, having a sound strategy means having the customer at the forefront of your mind when it comes to every decision.

There has been a lot of talk in debt collection circles about knowing your customer in recent years, but it’s not just about preventing fraud and money laundering. KYC is also about finding out what makes your customers tick through high-quality consumer data and adapting strategies to reflect that. Use your data to inform your strategy, and sooner or later, you’ll find the right balance.

Considerate communication

With so many households experiencing financial woes and a significant surge in mental health fears brought on by months of isolation and economic uncertainty, customers are going to be a little more fragile than they were before the pandemic. This is particularly important when it comes to debt collections teams and how they communicate with their customers.

Because debt isn’t an easy or comfortable thing to discuss in the best of times, these are by no means the best of times. Consider not only the language you’re using but the channels through which you’re making a connection. While some older customers might still appreciate a phone call, most millennials and Gen Z customers would prefer a medium that involves less “direct” engagement..

However, the good news is that the COVID-19 pandemic has made people more aware of their finances. Indeed, according to Forbes, over two-thirds of UK households agreed that the pandemic and its effect on the economy had made them more careful with their money. This means more people are making more intelligent decisions and hopefully not falling into arrears as frequently. But when they do, the lines of communication must be sincere, transparent, and considerate.

The EXUS Financial Suite is the ideal all-in-one debt collections solution for UK businesses

The best tech

Technology, at its heart, exists to serve people. In debt collections, the people involved are the debtors themselves and the collectors, and both sides of the divide need access to the tools that are going to make their lives easier. That’s where bespoke debt collection software solutions come into play.

For collections teams, keeping track of everything on an Excel spreadsheet might have been enough 10 years ago but we live in an increasingly connected world with people in it who demand immediate results and a certain level of service. The EXUS Financial Suite is designed to facilitate the best results at every stage of the debt journey, with automated decision-making engines that use industry-leading algorithms to analyze customer data and shift collections strategies to suit their needs and yours.

Any household currently suffering through a period of financial stress will welcome the streamlined and uniquely tailored approach that the EFS offers. It’s technology that puts the customer first while also reducing costs and also keeping the needs of the business sated. Ultimately, however, it’s a way of simplifying the whole process and where financial stress is involved, a complication is only ever going to make things seem worse.

If you’ve been inspired to simplify your debt collections strategies, get in touch with EXUS today