Consumers are increasingly accustomed to resolving all manner of bank transaction digitally. Collections shops, however, have remained surprisingly analog, relying on outdated techniques that no longer meet consumer expectations. In a 2019 survey, McKinsey found that phone calls and letters continue to be the most common means of outreach to delinquent consumers.
Digital channels remain extremely underutilized, despite resulting in the highest rates of repayment. In fact, some of the most underutilized tools—mobile push and online banking notifications—illicit the highest rates of repayment!
Financial institutions have been slow to change on this front. In fact, we’ve heard from many clients that serious improvements to collections were only prioritized once it was clear the pandemic would have a historic effect on the economy. This led our team to wonder how consumers experienced payment assistance programs spurred by the pandemic, during a time when many financial institutions are only beginning to update how they help consumers who can’t pay.
Data gathered through our COVID-19 Financial Health Check revealed that 40% of all consumers have opted into payment assistance programs. This is not a small number– a consumer experience 40% of your consumers go through is a core part of your business. Among these consumers, 75% opted in because they needed the help, while the remainder opted in despite not needing financial relief. We asked consumers to tell us what accounts gave them help. Respondents could select multiple accounts if they received help with multiple bills.
As seen in the table below, the most common type of assistance received was for credit card bills. If we look only at vulnerable consumers– those with the most fragile financial situations– the most common type of payment assistance received is for utilities. For vulnerable consumers, rates of aid for credit cards, mortgages, and other kinds of bills is lower than the overall population. This may reflect vulnerable consumers’ lower likelihood to own these products.
We followed up with a question that asked: “How satisfied were you with your experience obtaining payment assistance?” This question was asked generally, and not in regards to a specific payment assistance experience. In analysis, we looked at rates of satisfaction in aggregate for any consumers who opted into credit card assistance, for any consumer who opted into personal loan assistance, and so on. The results below show what percentage of consumers had negative experiences obtaining help.
A few things stand out.
First, rates of dissatisfaction appear to be different across product types. Rates of dissatisfaction among those asking for help with their car loans were nearly three times higher than those for credit cards, for instance. One might argue this is due to the nature of loans. Payment assistance for loans may require complex arrangements that change the terms of the loan and length of the repayment period. Consumers may have a hard time understanding changes on their account.
However, personal loans and mortgages, subject to similar rules, seem to have performed much better than car loans. Why were car loan providers rated so low? Similarly, why was asking for payment assistance with personal loans the most negative of all experiences? 8% of consumers reported being very dissatisfied with the process, nearly the same amount who reported being dissatisfied asking for help with their rent (a process that ostensibly requires interfacing directly with your landlord, and can thus be very stressful.)
Some might argue the results above are not a reflection of product-specific experiences, but rather, that they are a reflection of the consumers’ situation. Consumers short on cash may be more grateful for the help they receive, however it comes to them, and thus may rank any assistance favorably. I believe if this were true, we might have expected rates of dissatisfaction with utilities—the most common type of payment arrangement among vulnerable consumers—to be much lower. How different organizations treat consumers appears to make a difference.
Perhaps the most interesting finding to me is that credit cards seem to have fared remarkably well. Consumers seem generally happy with their experience asking for help from their credit card companies. I wonder if this is due to how broadly credit card companies promoted arrangements during the pandemic. Perhaps credit card arrangements were relatively easy for consumers to complete online. By contrast, the payment assistance experience with many utilities was substantially more burdensome, typically requiring additional forms be filled out.
It seems utilities and auto lenders have something to learn from credit cards. Improving collections operations need not be an all-or-nothing proposition. There are simple steps organizations can take to make the collections experience less embarrassing and stressful for consumers, and more aligned with their digital habits. Our software BackOnTrack is an example of an easy-to-implement widget that imbues your existing collections workflow with a human touch. Invitations to BackOnTrack can also funnel greater numbers of consumers into the digital collections experience, where rates of resolution are much higher.
We believe consumers’ experience with payment arrangements and collections matters. Especially for the most vulnerable consumers, experiences in recovery can determine which bills get prioritized and which get forgotten. If you’d like to find out what BackOnTrack can do for your collections organization, make sure to reach out for a no-obligation demo or a presentation from our data science team.