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We all know that inflation has reached its greatest level in 40 years; what now?

This has an effect on your customer’s cost of living, such as electricity and fuel bills, food, childcare, and so on. The situation is expected to worsen as a result of post-pandemic recovery and the war in Ukraine.

Businesses are affected as well, with increased salaries, supplier expenses, communication costs, and energy costs. Even the Royal Mail has raised its prices by about 12% in the aftermath of the pandemic.

According to Lloyds Bank, the majority of its customers have less than £500 in their savings accounts. The CEO went on to say that credit card spending was on the rise, with the fastest increase in 17 years.

Energy costs are a major concern for consumers since the average UK household’s gas and electric bills are predicted to quadruple from £1500 to £3000 per year. This represents a £700 increase from April of this year, with an additional £800 increase scheduled for October. This is a huge milestone in our industry.

Preparation is already underway:

The UK government is providing assistance for growing energy costs, however, this does not entirely cover the actual increase.

Many firms are starting to plan for this. In June of this year, the major UK telecommunications firms (BT, Openreach, Virgin Media, O2, Vodafone, Three, Sky, and TalkTalk) committed to proactively identify and help vulnerable consumers, assisting them in transferring to cheaper packages or agreeing to manageable payment plans.

PayPlan – the recent cost of living crisis summit.

PayPlan has been providing debt counselling and support for nearly 30 years and has seen tremendous demand. With almost 112k new clients supported, 2021 was their busiest year on record. They predicted that this trend would continue in 2022, with a 32% year-on-year growth for the same period in 2021. PayPlan expects an extra 30% growth in its services in the third and fourth quarters of 2022.

Perspectives from the industry

We at Saaascom met with numerous clients and industry experts to learn how they are preparing for the months ahead and would like to offer their perspectives on the following:

Purchase of Debt

They predict that the volume of assets sold would expand and that a shift in product mix might occur, with broad consequences for mortgages, utilities, and newly recognised goods like purchase now pay later, as well as financial services, which still lack regulatory coverage and maturity.

While debt acquisition prices have risen above forecasts in the recent year, an increase in volume and activity may cause prices to fall, allowing buyers to be more selective.

Furthermore, purchasing panels are often more concentrated now, given that members must comply with modern regulatory criteria and provide downstream assurance to originators, essentially an extension of their brand.

Right Party Contact (RPC)

RPCs in utilities have increased through outbound and inbound contact, however, RPCs in other sectors (such as banking) have remained consistent until 2022.

Payment Plans

Several collection agencies believe that while the outlook ‘appears’ stable today because they are setting up big volumes of repayment plans, they expect a significant increase in payment plan breakages in Q3 and Q4.

Make use of digital solutions.

All survey participants agreed that technology and digital services will be critical to increasing efficiencies during the next 18 months.

Self-Service – Few organisation websites allow you to share an affordability evaluation, with treatment tools available for longer-term payment plans or other support alternatives. Customers are frequently directed to call customer support in these situations, which can drive them to disengage.

Artificial intelligence (AI) – Uses technology to improve the consumer experience. Allowing AI to ID&V your customer before assigning them to an agent, as well as enabling chatbot support for frequently requested inquiries or call to actions, such as a change of circumstances, can free up agent resources. You can use AI to detect vulnerability in email, live chat, or two-way SMS discussions, and then provide a pre-defined workflow and agent escalation procedure to guarantee vulnerable consumers are treated with care.

Because more in-depth financial analyses may result in longer average handle times over the next 18 months, you can utilise AI to support and increase efficiencies and aid call centre availability.

Low-cost messaging – Royal Mail’s costs have risen by 12% since 2019. Those polled are now seeking for new ways to interact with customers. Secure digital letters, for example, are 80% less expensive, faster to deliver, and provide read receipt data, whilst SMS and Emails are great for lost contact, broken arrangements, or payment offers. They also prioritise ensuring that their contact strategy is comparable to their counterparts; features such as two-way conversational messaging are quickly becoming a significant business tool in Collections & Arrears.

Industry Response

What industry insiders are saying.

From business entrepreneurs, strategy managers, economists and a debt counselling charity.

“Everyone agreed that there will always be a need for agents; not all customers can or are willing to engage by other means.”

“Whilst agents will be needed; more accounts does not mean more people. Increasing automation, integration between systems and digital journey experiences will be fundamental to offering customers more choices to engage.”

“Digital forbearance solutions, integrated into your contact strategy and configurable per your client’s needs could well be the difference between weak and strong P&L.”

“The industry, apart from a few exceptions, has been slow to move with digital technology. How many businesses have a clear vision of where they are heading and how to get there?”

“I think technology is the direction of travel we see across finance, and I expect much more happening on this side than more agents being recruited.”

“There are always going to be those people that need that help face to face in a different way, but obviously, you’ve got a whole new generation of people where they buy now and pay later. Maybe their first foray into debt at a very young age, but they’re going to be so much more tech literate that they’re going to access advice and help that way, but we’ve always got to have some sort of safety net for those that are isolated”. (Jonathan Shaw Christians against Poverty).