How loan providers can tackle their collection issues via the use of mobile-focused technologies

Topic: Finance & DCAs, Lenders

Personal loan providers face some tricky challenges over the course of the next twelve months when it comes to how they collect payments from customers. As a direct result of the Covid-19 pandemic it’s now estimated that the chances of a customer defaulting on payments is now 2.5 times more likely than it was before the start of the pandemic.

Things don’t look like they’re going to get easier anytime soon either, with the cost of living crisis meaning that 2.5 million households in the UK have failed to pay either a mortgage, rent, loans, or credit card bill in 2022. This means that on average the amount of households entering financial distress is rising by an alarming 800,000 per month.

With those figures in mind, lenders have to start assessing the ways that they collect payments from customers to ensure that it’s being done in the most efficient way for them, but also in the most empathetic and convenient way for the customer. This means looking to modern technology to solve these challenges.

But before we get into what those strategies might be, let’s dive a little deeper into the challenges that lenders need to navigate.

The impact of the cost of living crisis on lenders.

With more than 800,000 households entering financial hardship every month because of the cost of living increase, empathetic strategies are going to be key for the many who are experiencing hardship through no fault of their own. It’s predicted that with the CPI (Consumer Prices Index) now standing at well over 5% – and growing, around a quarter of households will need to borrow more to survive the next few months.

The continuing impact of Covid-19 on lenders.

With the UK’s furlough scheme ending at the end of 2021, more and more people are having to borrow funds as a direct result of the Covid-19 pandemic. In November 2021 alone, total net lending to individuals and housing associations grew by £4.7 billion, or £156 million a day, over October’s revised figures and an even larger increase to September.

This continued increase in borrowing will inevitably place increased pressures on in-house admin/collection team’s resources, and if the challenges they face are not met, roadblocks for customers who do want to make payments will be created(E.g. increased phone wait times), and in turn, lower payment rates should be expected.

What are Mobile Collections, and how are they better?

A mobile collections strategy offers a solution to these challenges. Each customer receives a personalised SMS with a link to a fully branded, mobile-optimised environment where every activity that could be carried out with an agent, can be handled by the customer

After completing an identity verification stage, customers can either make a payment, set up a repayment plan (including direct debits), carry out income and expenditure assessments (including optional access to customer’s finances via open banking), make a promise to pay, or start a text-based chat with an agent over a channel of the customer’s choice.

All data used by a mobile collections solution is fed from your existing CRM system, and then once the customer has done their part, that data is fed back into the same CRM system.

The idea of this process is that by providing customers with the same services they’ve always used, but in a self-serve environment that can be accessed at any time or place, lenders will collect more funds and save in-house resources.

What results can local governments expect to see when using Mobile Collections?

After using Mobile Collections for a 12 month period one of our partners saw the following results:

  • Total SMS sent with links to Mobile Collections environment: 51023
  • Messages successfully delivered: 45711 (90%)
  • Customers who received the SMS and opened the MC: 14582 (32%)
  • Customers who opened the MC and made a payment: 6502 (45%)
  • Total Collected amount: £837,926
  • 13% of all residents who received an SMS reminder went on to make a payment

How do local authorities get started with Mobile Collections?

One thing we’ve learned is that each loan provider we speak to is different, and as such we’d love to talk to you to better understand your unique challenges. Whether it be to move away from legacy systems (like post and calls) or to evolve an existing SMS based collection strategy, our aim is to reduce friction from not only the customer’s point of view, but also yours.

If you’d like to find out how a Mobile Collections solution could help you, please contact our industry experts today on 0345 356 5758 or email us at sales@esendex.com.

Author Avatar
Warren Delay

Hi, I'm Warren, and I'm the Product Marketing Manager here at Esendex, specialising in product positioning / requirement. I also have an extensive knowledge of product management, and love working at the cutting edge of new tech!