How to collect more payments from customers in the auto finance sector

Topic:

Loans for new cars have seen a sharp increase in recent times. According to the Finance and Lending Association (FLA), 91% of new private cars were purchased on finance in the 12 months preceding April 2019. In addition, the value of the UK car finance market now totals over £37.4 billion (Source).

Due to the sheer volume of customers buying cars in this way, coupled with the fact that an average payment of £390 (source) will be taken every month, lenders need cost-effective, automated payment prompting when needed.

Payment prompting benefits both the lender and the debtor, with 53% of UK consumers in arrears stating that their service provider didn’t do enough to help them avoid getting into arrears in the first place, and 33% of respondents saying their reason for late payment was simply that they forgot to make a payment (source).

As a result, many lenders will need to reassess their communication strategies to maximise their collection potential.

What are the problems with the ways auto finance lenders currently collect their payments?

Agent-based calling is ineffective and expensive

Nearly 90% of calls from businesses will now go ignored by customers, with the inconvenience of call time and duration being cited as the two main reasons behind this (source).

If you do connect with a customer, there is a reasonable chance that the customer will be left feeling that you don’t value their business, and just want their money (60% of customers in arrears feel unvalued by their service provider, with car finance companies ranked the worst for deploying poor practice techniques in their debt recovery procedures – source).

The areas in which car finance companies perform worst compared to other sectors (i.e. utilities, credit cards etc.) are being “overly aggressive” and making it “hard or confusing to know how to make a payment” (source).

With these stats in mind, it’s become obvious that auto lenders need to provide platforms that allow customers to serve themselves, and at a time and place that suits them best.

Post is expensive and hard to track

From a cost perspective, if an auto finance provider were to send 1,000 payment reminders through the post, that would cost around £500 (including admin, stationery, mailing costs). Compare this to a digital alternative reminder method like SMS, and we get a much lower figure of £38 (Source).

Post is also less engaging than digital alternatives with a 75% open rate and a 5.1% conversion rate, compared to 95% and 32% respectively for a digital channel like SMS (source). 

Response times are poor, with an average of 17 days to complete a response, compared with an average of 90 seconds for an SMS (source).

Illustrated example of Esendex's Mobile Collections strategy for autofinance

Further, when you consider that industry best practice is the offer of an affordable payment plan (source), trying to negotiate this with a customer via mail is less efficient and effective than the real-time responses you can achieve through digital communication channels such as live chat, SMS and email.

Finally, there’s no way to know if your postal reminder has been delivered unless you opt for often prohibitively expensive tracked mail services. Digital channels usually provide analytical tools where all of the above issues can be measured and used to strategise the next move on a customer by customer basis.

Introducing a better way to collect auto finance payments – Mobile Collections

Combining the open rate of SMS with a personalised, rich messaging experience is an emerging debt collection strategy that’s achieving extraordinary results.

The customer receives a personalised SMS with a URL linking them to a fully branded payment environment. After completing an identity verification stage, the customer will be presented with a series of options where they can either make a payment, set up a repayment plan, make a promise to pay, or select from a series of additional options to speak with an agent via a channel of their choice.

We call this process Mobile Collections.

Mobile Collections offer a completely automated way to collect payments for auto finance providers. By providing self-serve, flexible payment tools, auto finance providers will be able to increase the chances of collecting more debt and save in-house resource by automating previously manual processes.

As an average when using Mobile Collections for automotive finance sector, we’ve seen a click-through rate of 75% (Mobile Collections URL selected from the initial SMS), with 55.5% of customers who clicked through going on to make a payment.

What are the next steps?

Every customer is different and as such, we’d really like to speak to you to better understand your challenges and exactly how we think Mobile Collections could help.

To find out how, please get in contact with our team today by calling 0345 356 5758 or emailing sales@esendex.com

Author Avatar
Luke McConnell

As an Account Manager at Esendex, I'm here to help businesses improve existing processes within customer communications, by reducing costs and manual effort, while improving the customer experience. It's hugely fulfilling seeing clients implement change and seeing the positive, tangible impact this has on their operations.