American Banker hosted a webinar on April 5, 2021: Deliver Empathy at Scale: How Banks Are Rethinking Digital Customer Journeys. The webinar was sponsored by Smart Communications and featured insights from Marc DeCastro, Research Director for IDC Financial Insights.
The presentation centered around empathy in the customer experience, and what products are relevant and appropriate. Reading that, you may wonder, “yeah, but what does empathy mean given all that?” A fair question, as the dictionary definition of empathy is: “the action of understanding, being aware of, being sensitive to, and vicariously experiencing the feelings, thoughts, and experience of another.” A good definition, but what exactly does that have to do with banking experience?
Analytical framework for empathy
DeCastro, being an analytical sort, breaks it down with a business purpose in mind. Take a look at this Venn diagram for empathy:
Context really starts the process. A customer has different jobs-to-be-done, and it’s important to understand what they are and they and their background. For a savings account, perhaps the customer wants to establish a dedicated account for a major financial goal, which is a useful nudge principle. If you’re a bank, that sounds like the sort of context you’d love to know about. Customer fulfills a job-to-be-done, and the bank gains valuable savings deposits and a deeper customer relationship.
Action is the next step. If a bank knows the context of the customer’s need, it’s time to provide solutions! Action turns context into something tangible. Conversations are great, but nothing beats getting something done. Which brings us to…
Outcome is the denouement for an initial need. The customer had a job-to-be-done, which their financial institution learned through engagement. Based on that understanding, action was taken. And now? We have a satisfied, multi-savings accounts customer who will be with the bank for many years.
This is how empathy should work. But does it?
Customers aren’t really satisfied with bank offerings
Now for the bad news. In the webinar, DeCastro relayed that customers aren’t getting relevant and personalized offers from their banks. In fact, the rate of satisfaction has actually been dropping the past few years:
Consider this for a moment. Technology has an inexorable drive forward to increase the personalization of…well, everything. Talk to Jeff Bezos at Amazon about that. In the context of banks, getting more personalized and relevant offers is a key strategy for topline growth. Despite these two imperatives, things are actually getting worse from consumers’ perspectives.
If empathy is channeled with these results for revenue-generating initiatives at banks, is there any hope for collections? Actually, yes.
Can collections do empathy (at scale)?
You know the advantage collections has over its internal banking group brethren? A singular outcome on which to focus.
Here’s what I mean. I recently was surveying certificate of deposit options on my bank’s mobile app. I’m interested in earning interest on money I have to spend in a few months. I looked at the CD options, seeking maturities matching my timing. I reviewed the interest rates available (ooof, 3 bps APR?). Now contrast my savings need with the example above where a person is interested in separate savings accounts. That person is seeking a way to mentally segregate cash for a specific purpose.
Those are two different outcomes for a seemingly related purpose: savings. Different contexts and actions are required for empathy-driven personalized and relevant offers.
Collections, on the other hand, has a single objective: Get the credit account current. The simplicity of that outcome reduces the complexity of an empathetic approach. Fewer moving parts to work on. For collections to employ an empathetic approach, the primary focus in on the first two parts of the IDC framework: context, actions.
Context: Perhaps more critical than it is with selling products, context matters significantly in collections. Something has happened causing the customer to miss a payment. Without that knowledge, it’s hard to figure out how to help. Unfortunately, the primary engagement for newly delinquent customers is a series of emails, texts, calls, and letters informing the customer they need to pay. Obviously, simply informing people they owe money gets some results. But there’s another good reason for the one-way communication to delinquent customers: Having collections staff reach out to every delinquent customer would be cost-prohibitive.
Context at scale is hard. Yet you can’t have empathy without understanding.
Actions: Why does understanding context matter? Let me pose a couple hypotheticals to demonstrate its importance.
- Context: Customer has been busy and forgot their payment. Action: The bank offers to convert their delinquent credit card balance into an installment loan and then close out their account.
- Context: Customer has lost job due to major medical issue, suffering long term cash issues. Action: The bank offers a $25 credit to enroll in autopay.
Those are extreme examples to highlight the need for context. Actions matter for successful customer outcomes, and the appropriate action can only be provided with informed context.
Returning to Marc DeCastro’s empathy framework, collections groups have an opportunity to take the lead amongst their peers inside the bank. Not only due to structural advantages (that singular outcome), but finding the right next best action in collections is good business in terms of reducing charge-offs.
Click here to find out how Scorenomics BackOnTrack® analytics can help you learn your delinquent customers’ contexts at scale and determine the next best action.
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