Introduction

“Cash is King”, as they say, and every business depends on it. Whether in a recession or a booming economy collecting payments and handling arrears is a perennial, costly business challenge for all organisations. Now more than ever, organisations need to focus on cash generation and cash preservation initiatives to help keep their business running through this downturn and beyond. Increasing collections and reducing arrears and write-offs is critical to the health and long life of a business today.

Previously organisations, like individuals, may have become accustomed to using the readily available credit in the market place to provide a buffer until the cash came in. In the present market, however, this is becoming increasingly difficult as banks now want to reduce the amount and number of loans and other credit available.

The consumer culture of today, coupled with recent economic conditions such as easy access to credit, stable employment rates and a strong housing market have resulted in an alarming number of people living way beyond their means. Personal debt in the UK as from the end of 2008 stood at £1,410 billion, making the average owed by every UK adult £30,420.

How can organisations make it easier for their customers to pay the money owed to them? How can one organisation cost-effectively and efficiently make their voice heard over and above all others? How can this be done while strengthening and not damaging the valuable customer-provider relationship? These questions and others will be answered in this white paper.

Psychology of debt and recovery

Numerous psychologists and experts have written about debt and how it affects individuals and society. Is debt an illness? Do people have a phobia of financial management? Is it self-inflicted? Or can we blame a materialistic society in which we are defined by what we have and own?

People have 101 reasons for forgetting to pay a bill or falling into arrears. Some circumstances are complicated – lost jobs, disadvantaged background, unexpected illness or injury; others are straightforward – forgetfulness, bad judgement or mistakenly paying double on one bill and not paying another. Different scenarios call for different collections methods and communications need to be tailored to the circumstances. Collections is not a ‘one-size-fitsall’ business.

It’s evident in the daily news, with companies going into administration and closing down at an alarming rate, how arrears and write-offs affect the health and the bottom-line of a business. And we often read of the impact of debt on an individual, how it can negatively affect relationships, stress levels and so on, but we rarely read about the collections agents and how they are affected by debt.

In a call centre one of the most stressful and unsatisfying areas to work in is consumer debt management. Daily, agents deal with upset, worried and sometimes-abusive customers and often the churn rate for employees in a collections team is higher than in any other area of the call centre. So, what could organisations do to improve their bottom line, help their customers and increase satisfaction within their collections team?

The argument for automated calls and speech self-service for debt collection

As part of an integrated, planned CRM approach, speech self-service and call automation can deliver ongoing results – results that organisations expect from an efficient consumer debt management team.

• Increased revenue
• Increased cash flow
• Decreased arrears
• Decreased write-offs
• Decreased risk
• Decreased costs
• Rapid ROI

How can self-service and automation help achieve these results?

Proactive, timely communication: treating a debt problem early on can reduce the number of delinquent customers

Sending a SMS reminder of an unpaid bill, or putting in an automated call to remind the customer that a payment is due is a gentle approach to debt management. Prevention of debt at the cost of a SMS or short automated voice message clearly makes sense. And implementing a smart campaign of multiple automated over-the-phone communications is a cost-effective approach to reducing arrears.

Increased personalisation: a communication that is aimed at the individual and not the masses will be more effective.

In the marketing and communications world it is well documented that personalised letters or emails deliver far more positive results than a generic message. This is no different in the medium of speech. With modern day CTI (Computer Telephony Integration) it is possible to provide automated transaction handling with all the intelligence of an organisation’s CRM systems, making personalised, tailored calls easier to implement.

Ability to interact: an automated system that can interact with the customer can deliver fast results.

Where a system can identify and verify the customer, it can also enable immediate payment. Likewise it can and should, according to best practice, give the option to be connected to a live agent. This ensures that no opportunity to collect a payment is wasted and completion rates are improved at a low cost.

Strengthened customer relationship: a well-designed speech self-service system works.

Customers at different stages of delinquency will have different needs from their provider and it is important to consider this with the automated communication campaign. Simple reminders at the early stages of debt are a welcome customer service for individuals who simply forget to pay. And having the option to promise to pay a debt by a certain time is a useful service for those waiting for the next pay cheque to clear. A considered approach from an organisation where an individual’s needs have been recognised leads to stronger customer loyalty.

Improved agent productivity and satisfaction: reducing a manual process and freeing up agent time.

With an automated system relieving agents of some of the repetitive, routine calls chasing and taking payment, agents time is freed up for the more complex calls where their skills are really put to use. In this situation not only will the system be able to make more calls out to indebted customers, but also agents should be more effective on the higher value collections challenges.

Increased control: in-house communications means control over the revenue and a protected brand.

When it comes to communications, no matter what the subject, outsourcing can be risky. Will a third party uphold the brand when broaching the tricky subject of arrears? Could the brand be damaged? Controlling the communications helps maintain a uniform brand. And, of course, an automated system is far cheaper than a third party collections agency and will work longer hours and expects no commission!

Additional generic benefits from implementing speech self-service solutions

In addition to the specific ways in which self-service can benefit organisations from the perspective of collections and arrears handling, there are numerous other general benefits which cannot be overlooked.

Cost savings

A recent major study of over 200 contact centres carried out by ContactBabel, (The UK Contact Centre Operational Review, 6th edition - 2008) has found that although only 6.5% of inbound calls are dealt with entirely through self-service rather than a live contact centre agent, the savings to the UK contact centre industry amount to over £1.6bn per year.

24x7 service

With an automated service an organisation can have telephone lines open 24x7. Depending on the selfservice solution, a customer could make a payment, check a balance, find out opening times, book a room and so on. Additionally if the service is outbound, reminders or requests can be sent by the organisation out of normal office hours at a time when the customer is more likely to respond.

Reduced queuing times

Many opportunities are lost when a caller abandons a call because they are either too frustrated or busy to wait on the line for an available agent. This can have a wider impact on a company’s brand and image, especially when the caller hears the immortal words “your call is important to us” followed by a lengthy callwaiting time. An automated system enables a caller to choose to use the automated system.

Feedback

Automated routines can easily be extended to ask for and collect customer feedback – meaning that organisations can quickly collect important data to provide continuous service improvement, and in a very cost effective way.

Rapid ROI

Speech self-service can now be implemented quickly and cost-effectively, and when the right business applications are chosen for automation, the return on investment can be achieved in months not years. In fact automated transactions can also be installed on the basis of ‘value pricing’ where the organisation simply agrees to pay the provider of the service out of the costs saved on each completed transaction. Additionally, often existing call centres already have 80% or more of the infrastructure required to deliver speech selfservice, so it is not as expensive as might initially have been thought. A quick infrastructure scan can identify the technology gaps that need to be filled.

A simple cost reduction illustration

Taking a company, which in a period of a year has 50,000 customers who are 4 months in arrears, the following simplified calculations help to illustrate the costs of debt collection.

During the 4 months each customer in arrears by 4 months receives 6 letters and 5 calls from an agent.

• 6 letters @ £0.50 per letter = £3.00
• 6 agent calls chasing payment @ £0.40 per call = £2.40
• 1 agent call taking payment @ £1.50 per call = £1.50
• TOTAL communications cost per customer in debt by 4 months = £6.90

Assuming the company has 50,000 customers in debt by 4 months in any one year, the communication costs are £345,000

If some of the communications were handled by an automated system the costs would change.

• 4 letters @ £0.50 per letter = £2.00
• 4 SMS chasing payment @ £0.05 per SMS = £0.20
• 4 automated calls chasing payment @ £0.12 per call = £0.48
• 1 agent call taking payment @ £1.50 per call = £1.50
• TOTAL communication costs per customer in debt by 4 months = £4.18

Assuming the same number of customers in debt by the same number of months, the communication costs come to £209,000.

This simple illustration gives a saving per customer of £2.72, which gives a total saving of £136,000. However if 60% of the calls taking payment were automated as well, the cost of those calls would decrease by a further 75% resulting in a total saving of £169,600.

Incidentally, if some of the letter communications were made by email even more savings could be made. This is where an automated system as part of an integrated collections programme can really benefit an organisation.

Solution considerations

More often than not the immediate perception of technology-led solutions is that there is too much technology to consider, it will take months to implement and years to recoup costs. This could not be further from the truth. Most organisations have 80% or more of the underlying technology and processes in place already, implementation is genuinely quick and payback is surprisingly fast – and in some cases immediate.

Telephone components

It is important to be aware of the telephony technology that is needed to implement an automated and agentassisted speech self-service solution.

• Automatic Call Distributors (ACD)
• Private Automatic Branch Exchange (PABX)
• Interactive Voice Response (IVR)
• Outbound Diallers (OD)
• Computer Telephone Integration (CTI)

In addition, Advanced Speech Recognition (ASR) is required to work with the Interactive Voice Response (IVR) system.

Backend system integration

As with any automated self-service solution, access is required to confidential customer information as well as transactional information, risk and habit modelling systems. Some organisations describe this as their customer relationship management system or CRM system. More often than not it is more than this. A CRM system, in its simplest form, is a large organised database containing customer and account information. Solutions that are used to deter fraud, for example, need access to real-time transactional systems so fraud can be eradicated at the point of a potential detection. Arrears handling however can use a non real-time batch data method to drive a self-service solution.

Hosted solutions

Managed hosted solutions are rapidly growing in popularity and should be considered, not least for speed of implementation and effectiveness. A surprising number of financial institutions are looking at hosted options, as these can be an effective and even quicker way to deliver cost savings. Managed Service Providers (MSP) can today provide securely hosted solutions where it is still possible for the customer organisation to control the process locally on their premises.

Above all else, however, the most urgent consideration for organisations to make is which applications to deploy first. The rule of thumb is to understand from where the quickest returns can be derived. Often this is down to the call types that generate the highest call volumes, but require little or no data system integration. Once this has been established, it is advisable to select open standards, portable technology that can be easily integrated into both existing and future backend systems and using, wherever appropriate, existing business rules. This is critical to the longevity of a solution.

Conclusion

Self-service makes sense. For organisations looking to streamline processes and use innovative, effective automated solutions, over-the-phone self-service is certainly worthwhile.

In all economic conditions the pressure is on to save on costs, increase revenues and reduce customer churn, but in today’s market the situation is more acutely felt. Introducing an automated self-service debt collection programme will produce rapid results when they are needed most. But it is worth remembering that debt collection is only the tip of the iceberg when it comes to over-the-phone self-service. Currently only 6.5% of calls are dealt with entirely through selfservice, but it is estimated that an average of 31% of inbound calls would suit self-service. This leaves 24.5% of calls still untapped for self-service opportunity and all the benefits that it can bring.

The opportunity to introduce smarter, faster, cost-effective self-service solutions is there to be had and with such rapid ROI is this technology one that organisations can afford to ignore?