Collecting payments has been a longstanding headache in the financial sector. The time to switch to a digital, mobile-focused strategy is now. Find out how SMS fits into this, and also the opportunities that SMS brings to the financial sector.
At the end of 2017 personal debt had risen in the UK to the highest level since before the credit crunch, reaching £239bn – with credit cards accounting for more than £70bn of the total.
With the Bank of England’s warning to UK financial institutions that they face £30 billion in losses on credit cards, personal loans and car finance if interest rates rise – the time to implement a more effective, engaging debt collection strategy is now. Bluntly, it could very well be a case of do or die if financial service providers fail to act.
How can you take advantage of smartphone ownership?
For those that haven’t started the journey, they can look to uncollected debt levels as an impetus for having better conversations with their customers. At the end of 2018 personal debts had risen in the UK to the highest level since before the credit crunch, reaching £239bn – with credit cards accounting for more than £70bn of the total.
What are the options that SMS provides to the financial sector?
The continued increase in smartphone numbers provides financial institutions with the opportunity to address these challenges. With 85% of the UK’s population now owning a smartphone, financial services providers have greater levels of digital access to their customers than ever before.
While email is cheap and good for marketing communications, it’s too readily ignored and insecure for effective debt collection. For certain applications, SMS with its 95% open rate is unequalled as a communication channel, and debt collection is one area where it excels.
By using a channel which is discreet, mobile focused and convenient, the customer is more likely to engage with the request, and make a payment. Customers’ identities can also be verified by asking a series of security questions, which must be answered before sensitive conversations can start.
While this process can be managed through standard two-way SMS conversations, products like SMS Chat are particularly effective for financial institution service desks, as they can deliver significant cost savings to both the customer and the debt collection agency.
As well as eliminating the need for agents to make outbound calls or send postal messages, multiple conversations can be managed by a single agent simultaneously.
Implementing a product like SMS Chat should provide significant benefits in both engagement rates and debt recouped. A couple of examples from Esendex’s customers illustrate this:
- Of the customers who respond to their initial reminder through SMS Chat, an average of 74% of customers made a payment or set up a repayment plan.
- On average Esendex customers who employ the SMS Chat system for boosting their debt collections strategies see enough debt recouped through the system to pay for the cost of the implementation in 4 weeks.
Getting started with text-based debt collection
If you’re at all uncertain about your legal basis for sending debt collection reminders under the GDPR legislation, it’s worth using ICO’s interactive guide to help you clarify your status. Typically, collecting debt will fall under the fulfillment of a contract or legitimate interests, and so consent to send the recipient messages is not required.
SMS is effective as a simple prompt to make payment, but really comes into its own as a conversational channel. To explore this in a low cost, low intensity way, it’s worth investing in a virtual mobile number. This allows you to receive messages into an inbox (which can be your email address and/or via our online platform).
If you find that the volume of responses is difficult to manage (which you might argue is a good problem to have!), then SMS Chat would be an obvious next step.
To find out more about how other financial services providers have successfully used SMS to collect debt, please get in touch with our team on 0345 356 5758 or email [email protected].