The impact of rising household debt in the UK

Topic: Finance & DCAs

According to an ONS study, household debt in the UK has risen 11% to an average £9,400 in the last 2 years alone. This is believed to be due to an increase in credit card debt and personal loans. 

While some levels of debt are expected and, to an extent, encouraged in a strong economy, the problem arises when the debtors struggle to meet the minimum payment. This has a knock on effect to the local and national economy.

Anil Stocker, CEO of MarketInvoice takes this one step further and believes that “late payment is the silent killer of modern business.” Chasing these late payments impacts the bottom line of a business and not just in a cashflow capacity. The time taken to chase even small sums of money can be substantial.

The impact of late payments on SMEs

Invoicing specialists Tungsten Network conducted research which focused on the impact of late payments on SMEs. The result? “About 23% said that late payments put them at risk of closure.” This then has a circular effect. If small businesses are constantly receiving payments late or indeed not at all, the business is put in a very vulnerable position. In the most extreme case, the business may need to close, making their entire workforce redundant.  

In turn, those unemployed people may then struggle to pay their own household debts on-time. This then contributes to a more unstable economy and more businesses failing, due to insurmountable levels of debt owed. 

The cost of chasing small debts often outweighs the unpaid debt

It is interesting to note that it is not just the larger sums of debt that people avoid paying. Examples include the final month’s water bill on a rented house, which the occupants have since vacated. People are becoming increasingly savvy around the rising costs of chasing debts and as such, are often avoiding payment. The comparatively high cost associated with chasing small debts, such as an unpaid water bill, can mean that the repayment demand is frequently abandoned, because the cost of chasing the debt is more than the debt owed. 

Unfortunately, while there is no avoiding the cost of sending a letter or employing a team to make phone calls to debtors, there are more cost effective channels that businesses can use to collect small debts. Esendex’s Mobile Journeys’ product proved the perfect option for npower to collect their small debts in an efficient, unintrusive and effective manner.

How npower received 82% of payments in full

Esendex worked with npower to create a solution that uses a combination of effective customer-facing communication channels, such as SMS and Mobile Journeys. 

The best channel and most effective message for each individual customer was identified, based on available contact details and amount owed.

The customer was then given several self-serve payment options, including a dedicated mobile payment portal.

Text messages are more discreet than a telephone call, and can be responded to at the recipient’s convenience; this sensitivity, coupled with the high open rate of SMS, and the ease in which the debtor could make a payment, was key to the success of the project. 

The result? 

“Esendex has managed to construct and successfully deliver a cost effective solution that allows significant value to be found in pursuing small debt amounts.” 


If you would like to hear more about how Esendex can help to collect small household debts in an efficient and cost effective way, email [email protected] or call 0345 356 5758.

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