How UK banks can achieve empathetic post-COVID debt collections

We’re slowly starting to emerge on the other side of the COVID-19 pandemic and one of the first hurdles that must be overcome before we can hit the long road to recovery is the mountain of debt that has accrued in its wake. In the UK, the pandemic saw a significant increase in “problem debts,” with Citizens Advice finding that there could be at least 1.5 million households at serious risk of defaulting on their debts as a result of the pandemic.

Many of the UK’s leading banks have already committed to training new debt collections staff to make up for the raft of new debts that will need to be chased up and dealt with over the next few months. Over 750 workers have been hired to manage this wave of potential defaults, with NatWest and HSBC alone taking on 150 and 200 fresh faces respectively. But it’s not just more staff that is required; it’s more understanding and empathetic staff.

This is an unprecedentedly bleak time for many and in such times, it’s imperative that UK banks not only put on a brave front and invest in the right areas but do so in an empathetic and approachable way. Because we’ve all taken a hit over the last 12 months and customers are bound to be in a precarious and delicate position when it comes to their debts.

This means not only making new hires but ensuring those new hires and existing employees are trained to empathise with the situation that multiple thousands of households find themselves in post-COVID. This can be done with more empathetic banking solutions.

Know your customers

With the added financial strain and stress of COVID debts, an initiative has been created to ensure that the fallout of the 2008 crisis doesn’t happen again. Not only did this crisis cost the banks and their customers untold millions but it also catalysed a negative repetitional shift that many banks are still trying to shift 13 years later.

Of course, the bounce back loan scheme helped millions of businesses in the short term but it’s estimated that, when also taking into account credit problems and fraud, losses could be as high as 60%. The Public Accounts Committee also warned recently that taxpayers could be losing tens of billions through the various COVID support schemes.

With so many losses and defaults potentially on the cards, the debt collection tactics banks use are going to have to reflect this new normal. But given the traditionally negative view of the debt collection sector, these tactics are not just going to need to be more aggressive and more efficient but they will also need to take into account the vulnerabilities and stresses of our post-COVID society.

The EXUS Financial Suite could be the empathetic debt collections solution you’re looking for.

Saving businesses

With roughly £75 billion of emergency state-backed loans due to be paid back by businesses, it’s not only individuals that banks need to learn to be a little more delicate with. Of course, most of these loans are guaranteed by the government, which limits the potential financial strain for the banks themselves, however, many bankers feel that those costs will lead to overall losses if they can’t collect before the government is forced to step in.

Then there are the disputes to sort out. According to Reuters, while cases of fraud are minimal, there have been hundreds of social media arguments and letters expressing unhappiness flying back and forth between lenders and borrowers. With good reason too, as some customers have actually had the full £50,000 loan demanded back in just a couple of weeks or have been told they made mistakes during the application process and were never actually eligible in the first place.

This kind of nasty abrupt treatment is certainly not helping the already compromised reputation of UK banks and with hundreds of bank branches having been closed in recent years, there are fewer banks around to cope with this monumental task. For the banks that remain, they must learn to look past the algorithms and develop lasting relationships with their debtors. And that’s where empathy bootcamps come in.

Empathy bootcamp

Once the governmental support tap is switched off for good, there are going to be thousands of individuals and businesses struggling to deal with the financial fallout. This is going to require a significant investment in debt management solutions, of course, but the right kind of debt management.

NatWest, for example, has been using cutting-edge behavioural science techniques to help them better understand and empathise with their customers. This kind of customer service-specific empathy is what psychologists refer to as “situational empathy” and can be taught like a technique but is certainly not a simple fix.

At HSBC, meanwhile, staff have been trained not only how to handle customers with softer hands but to redirect them to specialist teams and third-party resources if the bank themselves are unable to help.

Of course, for these larger retail banks, hiring hundreds of staff and investing thousands (or perhaps even millions) of pounds into new training schemes is a mere drop in the ocean. For smaller lenders, however, there might be an infinitely more affordable and practical solution to the empathy problem.

A digital solution to the empathy problem

Banks are going to continue to face direct scrutiny over their collections practices and rather than treading carefully around customers, perhaps they should instead be giving them the kind of services they desire and investing in the tech that allows them to do this.

A customer-first debt collections solution, such as the EXUS Financial Suite (EFS), is ideally placed to help banks interact with their potentially distressed debtors. Not only does it allow banks to utilise analytical data and use customer insights to be more proactive but it gives those same customers the tools they need such as 24/7 self-service that allows them to pay their debts on their own terms without feeling as if they’re being pressured or hassled.

If you want to learn more about the EFS and how it can help banks collect debts in a more empathetic way, contact us today.