An arrears crisis is unfolding before our eyes says Alex Bentley, XpertRule CRO
The number of customers going into arrears – that is, falling behind on their loans, council tax and energy bills — is spiking badly.
Fuelled by the cost of living crisis, the number of people in arrears has increased to one in four in some areas, with mortgage arrears up to an eight-year high, and the charity Citizens Advice recently reporting a 17% rise in people asking for help with their energy bills.
But the wretched state of the economy isn’t the only thing at fault.
Early arrears treatment strategies are lacking and costs are rising
It’s not enough to implement arrears support after the fact. Proactively spotting and helping customers before they fall into difficulty is the gold standard but the responsibility for this falls on individual collections handlers and their skills and experience.
Sadly, much of this support is inadequate, with handlers often equipped with little more than template guidance or payment plans that fail to recognise the nuance of vulnerable customers and their circumstances – and often implemented after the fact, rather than proactively.
Central banks are calling for more support for those in early arrears. A recent Central Bank review of mortgage arrears among banks found staff knowledge at times to be poor, as were communications, resulting in wrong or unclear information being given to borrowers. The review also identified cases where there was a failure to recognise clear indications of a borrower's financial problems and where complaints were not appropriately addressed.
Meanwhile the operational costs of handling arrears, as well as the consequences of poor handling, are steep and rising. Costs of administering collections or arrears processes are rising in line with demand, while failure to comply with “Treating Customers Fairly” regulation can incur fines as well as reputational damage. Not only that, lenders must hold higher levels of capital reserves to manage an increasing level of bad debt.
Driving nuanced early intervention with Decision Intelligence
With customers facing mounting financial strain, lenders should be striving to offer support before arrears occur. But early identification of at-risk customers can be a grey area, with vulnerability not always obvious to spot.
Decision Intelligence excels in making these complex, grey-area decisions at scale.
Our Decision Intelligence platform, viabl.ai, can capture the best practice decision-flow for investigating specific customer issues and identifying vulnerable customers – even in the most nuanced cases.
Integrating with external data sources where relevant, viabl.ai augments this best practice with auditable decision mining to predict the optimal treatment strategy in each case, based on profiling the information captured and held on the customer with a data-set of previous cases.
This decision-logic can be executed on the agent desktop, guiding the agent through the question-set and augmenting this understanding with data-driven decision analytics, or as a fully automated self-service interactive chat session, which enables outbound handling as well as inbound.
All while maintaining the human element: the indispensable expertise and sensitivity of collection handlers, who will be equipped with the right tools to offer relevant support and maintain a close and empathetic relationship with customers.
And that’s not to mention the operational costs Decision Intelligence saves for lenders: with lower average handling times, a reduction in bad debt and reduced regulatory risk or reputational damage, banks and energy companies can support customers at scale while boosting their own bottom line.
Get in touch with us to discuss how viabl.ai can help your handlers and their customers get ahead of arrears.