Over the last few years, the process of collecting debt in the UK has changed with new trends emerging and taking root.
The changes are largely driven by regulations, consumer behaviour, and changes in the economy. In this article, we look at the latest trends in debt collection.
1. Computerised Debt Collection Process
Debt collection in the UK has gone digital. Advanced debt-collection software is now used to improve operational efficiency and achieve things that were not possible before.
For instance, in the old traditional process segmenting defaulters was tedious and time-consuming and done manually. Now, segmenting customers can be achieved programmatically.
Defaulting customers can be profiled to find the best windows during the month to collect payments. And their bank transactions within a set period can be automatically analysed to understand their cash flow and their ability to pay back their debt.
2. Automated Reminder Systems
Previously the approach adopted by lenders was “visit and collect” or “call and collect” where banks, debt collection agencies, and other financial institutions send their agents to individuals’ homes or companies to get them to pay.
The trend now is sending friendly reminders to customers in the form of texts, voice SMS, and email. The process is completely automated and managed by a software application.
3. Electronic Payments
When financial institutions that gave loans to customers send their agents to individuals’ homes, the purpose was to get the customer to pay by any method, usually in cash or cheque.
The trend now is borrowers paying electronically through their debit or credit cards or simply doing an electronic money transfer via their mobile app.
With electronic payment, there is no need for the physical presence of an agent, and customers can pay autonomously without any fuss.
4. Personalised Debt Collection
The old way of debt collection was more or less a one-size-fits-all approach. With the integration of digital systems into the process, customers now get a more personalised service that helps them to pay back their debt.
Debt collection software applications can analyse customers’ data on an individual basis, create a personalised payment plan, and follow up accordingly.
In the past, customers had little say in the debt collection process.
Consumer complaints about poor treatment by debt collection agencies have led to regulations. The regulations created a new trend in the debt collection process – innovative customer service that involves the customer in creating repayment schemes that are fair and affordable.
Borrowers can now create their own repayment plan and pay off their debt without talking to anyone.
6. Use of Analytics
Another trend gaining momentum is the use of data analytics in debt collection in the UK.
Many financial institutions and debt collection agencies in the UK now use software applications that enable them to glean data from various sources and analyse the data to detect problems early, predict consumer behaviours, and create an effective plan of action.
The trends in debt collection, as you can see, is technological. This is no surprise, taking into consideration advancements and applications of technology in every facet of our modern life.