Tackling Persistent Debt

Tackling Persistent Debt

Mark Sussex

Head of International at illion Digital Tech Solutions

Views 845

Tackling Persistent Debt

10.10.2019 01:00 pm

FCA Regulations

A cardholder is considered in persistent debt if payments against interest, charges and fees exceed repayments over an 18-month period. The credit card rules introduced by the FCA last year require providers to identify which of their customers are in persistent debt and then take a series of escalating steps to help them.

At 18-months, customers will be contacted, encouraged to change their repayment behaviour and offered any relevant debt advice. At 27 months, those same customers must be a sent a reminder. Once a consumer has been in persistent debt for 36 months, their provider will have to offer them a way to repay their balance in a reasonable period. These are minimum requirements set by the FCA, but financial services providers can also implement their own communications strategies that advance on the rules.

Senior managers within banks and financial service providers are responsible for ensuring that these FCA requirements are met. Instead of starting from scratch, they should draw inspiration from how collections in the financial services industry have been revolutionised by digital communications over the past ten years. It might not be in your own bank, but there are many lessons to learn from the industry as a whole. For many years, collections departments were known for predominately using of old-fashioned calls and letters to encourage overdue payments, but some providers now offer their customers entirely self-service, digital payment and collection channels that have dramatically reduced costs and improved the brand journey.

We recently helped the UK arm of a global retail bank save 1,485 call centre hours in a month and saw an 18% increase in non-conversation self-cures as a direct result of digital payment and customer experience services in collections. For this bank, and many others, one of the biggest changes in collections has been that communication with customers is happening at a much earlier stage, before implications become critical. This has reduced the operational cost of each payment and relationship.


The Wrong-Term View

Credit card providers may have been suspected of using customers in long-term debt as cash cows. While this reputation may be unfair, now is the chance to change public perception. Organisations now have the opportunity to treat their consumers in a way that encourages long-term loyalty and builds enduring trust. This could pay off much further into the future because the customer lifecycle in banking can potentially last from birth to retirement.

Consumers expect self-service and digital communications with their financial service providers, and those in persistent debt are no different. According to recent research, 71% of all banking interactions are now digital or online.

Taking a ‘prevention not cure’ approach with better early and frictionless communication and payment experiences can only nurture customer relationships. We would encourage credit card providers to view these regulations as a chance to build something remarkable, rather than simply completing a tick-in-the-box exercise.


A new approach

Consumers want greater transparency and the ability to take control of their own debt, all within a positive environment. Currently, customers in persistent debt are simply paying off the minimum each month and the provider has little chance to build loyalty or engage with them. By providing them personalised ways to pay their bills in a way that suits and benefits them, plus enable them to self-serve and be communicated to via the channel of their choice can greatly enhance the customer relationship.


So, how should financial services organisations tackle the change in technologies, processes and culture required to achieve this?


  • Offer a number of self-service, digital channels to address cost-efficiency concerns around customer communication.
  • To assess a customer’s situation, a self-service income and expenditure tool will increase the speed and accuracy of affordability assessments.
  • Deploy the best technology-driven processes to improve customer service and reduce costs. Run a series of small pilots with small groups of customers or call centre agents to identify and test the effectiveness of new services. 
  • Focus on analysing customer behaviour to respond better to preferences around payment dates, service methods and billing. 
  • Personalised payments and communications, such as the use of tokenised payment details and one-time payment links, decrease friction and increase customer satisfaction.
  • Communicate earlier: rather than repeatedly dialling out from a call centre to speak to customers and encourage them to self-serve through digital channels when it’s convenient for them.  Services like ‘Pay by SMS’, preferred card registration, web bill payments and IVR are more efficient and effective.


None the above requires a complex and costly digital transformation project that is too large to implement.  Gradual digital adoption of these digital services is a low-risk way to implement new processes.

Income and expenditure assessments are a critically important part of helping consumers to change their repayment behaviour and set payment plans. The challenge for providers is that implementing I&E can be a time-consuming and expensive process. Many collections departments within banks, utilities providers and telcos have transformed their I&E processes by using digital forms that customers can access from all devices. This empowers the consumer to play an equal part in the process, giving them time and space to find the information they need to complete the form. It also significantly reduces call centre time and creates a more positive process for the customer.


Credit card providers want to be responsible lenders and successfully meet the FCA’s rules. Going above and beyond the minimum requirements could dramatically reduce costs and churn. Delivering a positive brand journey today could transform today’s consumer in persistent debt into a rewarding, lifelong customer.


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