Advice to debt collectors in pandemic times: Watch your language
Banks have braced for the initial wave of struggling borrowers in response to the coronavirus pandemic, but there is a second and potentially bigger wave ahead when it’s time for collections.
According to McKinsey, up to one-third of jobs in the U.S. are “vulnerable,” meaning subject to potential furlough, layoffs or rendered unproductive as a result of the pandemic.
Temporary loan forbearance and deferral programs have created some runway for banks to prepare for such a critical moment. But when these relief programs end, a new era of customer engagement and collections efforts must take shape.
During this time, well-managed collections can effectively unlock a “growth” lever, while acquisition and cross-selling slow to a crawl. Past crises have shown that banks with strong customer relationships that express empathy and flexibility with their customers will weather the storm better than ones that don’t.
That all starts with the language used to communicate with customers — language that is both mindful and data driven.
First, financial institutions need to identify at-risk customers quickly and intervene early (if they have not done so already).
The swiftness of the coronavirus impact on the economy has left many customers in shock and trying to get a handle on their new financial situations. Banks that identify at-risk customers quickly, and use a multichannel approach to communications will keep these customers engaged and responsive during times of financial hardship.
This will allow banks to maintain these relationships well after the crisis is over. The key here is to enhance and protect customer experience to reduce charge offs and losses at the institution.
The pace of the collections crisis and call-center burden on creditors will come fast and furiously. Banks and creditors need to move beyond the “we’re here for you” phase and put in place systematic, data-driven customer engagement capabilities within the pre-collections and early collections journeys.
Look for simple signals in data — such as changes in deposit flow and credit activity, or geographic location and industry employed — to create predictive segmentation.
Regulatory guidance recently issued in response to the pandemic provides significant leeway in offering loan modifications early, and reaching at-risk customers before they miss a payment. This is a critical window of engagement. Early intervention also provides more runway for a creditor to establish a preferential ranking in the order of creditors seeking payment.
Second, one of the biggest short-term challenges banks face is how to adopt a more mindful, context-sensitive and a tone-adjusted approach to branded communications — while still receiving customer payments and managing losses. Mindful messaging balances empathy with performance.
The language used during this time is crucial and doesn’t need to be left to guesswork when it can be informed through data and artificial intelligence to balance effective messaging with empathy and sensitivity. Most messaging is written by a copywriter using pattern recognition and intuition. But natural language generation, a form of AI, can augment this experience, creating deeper human connections than a copywriter can alone.
If every creditor is using similar, generic language the message will never get through to desensitized customers. Prioritizing key pieces of information, and giving clear, precise next steps to customers will help them know what to do and when they need to do it.
For example, using AI-based language insights, phrases like “we’re committed to giving you extra peace of mind” is more effective when communicating with customers in the pre-collections journey. Conversely, banks should refrain from using any language that conveys undue urgency or references the “news,” which should be left to actual updates about the pandemic.
Third, don’t put your call centers on the backburner.
Call-center employees are on the front lines of the customer experience and are critical in building, maintaining and repairing customer relationships.
Unfortunately, many call centers are seeing triple-digit surges in demand, even as some have made the herculean effort of shifting large groups of agents to work remotely.
As many banks are adopting digital banking now at greater speeds to meet the influx of customer demands, long hold times are creating poor experiences. What call-center employees say and how they say it can go a long way in creating or destroying customer loyalty and value.
To augment those efforts, many inbound calls should be directed to self-serve channels, which create significant cost savings and free up agents to manage more difficult cases.
The most innovative banks are already arming their call centers with smart routing to match specific customers to specific agents, and using AI-tested language to improve the performance of interactive voice-response prompts as well as call-center scripts.
This increases call deflection rates and drives adoption of self-service channels.
Lastly, preserving customer trust should be every bank’s priority so when customers return to stronger financial footing, they know where to go for their next long-term loan or investment. Also, customers who feel a greater sense of loyalty now may be more willing to keep up with their payments, even if they need to do it in smaller increments over a longer period of time.
As this recovery takes shape, it’s critical for banks to develop a clear understanding of consumer insights, new segmentation and a new baseline of acquisition, cross-sell and retention at scale.
However, as the current crisis ebbs and flows banks need to take it a step further to ensure their messages align to how customer expectations are shifting. The cost of getting this wrong means significant customer churn, increased delinquencies and sinking reputations (again).
Banks can successfully mitigate the incoming collections crisis and call-center surge by engaging early, identifying the most at-risk customers and pivoting to empathetic, mindful messaging by using AI and data-driven customer engagement. During a crisis of this magnitude, machines might actually be the ones to help banks be more human.