Customer Experience in Debt Collections

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Customer experience is a key enabler for customer loyalty. This aspect is no different when it comes to the banking and financial services industry. The rise of FinTech and digital lenders compelled traditional banks and non-banking lenders to include customer experience as a key priority. As per a McKinsey research¹, leaders in the banking industry delivered 55% higher total shareholder returns versus organizations with comparatively low CX performance. Over the past couple of years, personalization, digitization, and integrated experiences have emerged as the core themes for transformation.

Transforming and enhancing the customer experience is now at the forefront, as a differentiator and tool for customer retention. A PwC-Equifax Survey² revealed that 29% of credit managers and executives highlighted digital transformation as a core focus area while 25% were focusing on customer experience. The banking and financial services industry is working to bring the customer experience in debt collections at par with other industries where players are synonymous with customer experience – Google, Amazon, and Netflix.

Viewing collections from the customer experience lens

Customer experience starts strong while onboarding a client, but is it still strong enough throughout the whole loan lifecycle? Collections have long since been viewed as backend and manual operations, where the processes are designed predominantly from the lender’s need and perspective. Customer experience isn’t given its due. For example, the preferred mode of contact with borrowers to get them to repay is a barrage of phone calls and messages, which is a very one-sided focus and may lead to general unpleasantness about the whole experience.

Today, we must look at it differently. We need to be proactive with customer experience as that becomes the denominator of whether the customer will remain loyal in the future or necessarily default on loans for a variety of reasons – right from just forgetting or not having enough money in the account to having technical issues due to system processes. We need to assess each case on its own and address it constructively, rather than going back to the age-old mantra of bulk treatment applied repetitively.

Approaching the customers in a more consultative manner makes them more comfortable. A problem-solving approach makes it easier for the customers to identify the issues, which are leading them to default. Accordingly, making them understand the situation, and implications and recommending some options goes a long way. Also, for system related issues, implementing mitigatory steps to avoid a recurrence helps.

When there are multiple options available for borrowers to choose from availing loans, it all comes down to customer experience and the collections phase can’t be ignored. It is very difficult to build strong customer loyalty, which at times takes years. However, it can also be lost with as little as a few irritating phone calls.

Different approaches to defaulters

Loan defaults hurt borrowers as they impact their credit ratings and hamper their ability to get loans in the future. Unintended defaults can also be embarrassing for customers, and they may want to avoid such situations.

There are many ways in which lenders can help their customers through this.

Educating them about building a healthy credit profile goes a long way.
Explaining that gaps / dips in the credit profile will impact future financial decisions and have long-term implications.
Nudging pre-due customers in advance around upcoming payments is tremendously helpful and appreciated. Studies have shown that customers appreciate this as they can check and iron out any issues to avoid inadvertent loan defaults. A digital notification on the channel and time of their choice is a low-cost and very effective way of communication.
Studies have shown that customers prefer personalized digital communications. With options to send multi-lingual communications without any human intervention on WhatsApp, Voicebots, SMS, IVR, and calls, there are a wide variety of channels to choose from.
Personalization and facilitation of easy digital repayments include instantly generating payment links with personalized information such as the loan number and loan amount and embedding it in communications apart from facilitating a seamless payment experience thereafter.

As we zoom ahead in the highly evolved digital and analytical era, providing a unique and personalized customer experience must be at forefront of collection strategies – right from the preference of communication channels to tailored messaging and providing ease of digital loan repayments to reminders in advance. The customer-centric attitude and consultative approach can make a huge difference in setting a differentiator in the crowded marketplace.

Credgenics is enabling lenders to reimagine their debt collections and transform the customer experience by harnessing the power of advanced technologies through its market leading, SaaS-based platform, that covers the end-to-end collections lifecycle.