Collecting payments is a critical aspect of any business that extends credit to its customers. Pursuing payments can be a daunting, time-consuming, and frustrating process, particularly if businesses don’t clearly understand of their customers’ expectations. However, effective debt collection is vital to the financial health of your business, and it’s crucial to develop strategies that work.
One of the most important factors in successful debt collection is effective communication. The way you communicate with your debtors can make all the difference in your ability to recover debts. The key to success is to use preferred communication channels that are most effective for your customers.
In today’s digital age, there are more communication channels available than ever before. It’s essential to use a variety of channels to reach your customers effectively, based on their preferred channels. These channels can include phone calls, emails, text messages, and even social media platforms like Facebook and X.
The Customer Perspective
The world of business is constantly evolving, and one of the most important aspects of any successful enterprise is providing excellent customer service. With this in mind, Microsoft recently conducted a comprehensive survey to gain a better understanding of the global customer service landscape.
This comprehensive 2020 study provides valuable insights into the preferences and expectations of customers across the globe. With participants from Europe, the US, and Asia, the survey offers a broad perspective on what customers look for in a brand and what they value the most. However communication preferences are quite different when it comes to debt collection. Explore the insights provided by McKinsey below.
Importance of customer service
The most significant finding of the survey is that customer service matters – a lot. An overwhelming 90% of respondents across all regions emphasised the importance of customer service when choosing a brand and fostering loyalty. This highlights just how crucial it is for businesses to invest in providing exceptional customer service if they want to succeed in today’s highly competitive marketplace.
Preferred Communication Channels in general
The survey also highlighted the communication channels that customers prefer to use when seeking support. As expected, telephone and email remain the most popular options, with 71% and 64% of respondents respectively stating that they prefer these channels. However, it is interesting to note that self-service options, such as online knowledge bases and FAQs, are becoming increasingly popular, with 53% of customers preferring this channel.
Live chat is also gaining traction, with 48% of customers opting for this mode of communication. Support tickets (22%), mobile apps(16%), social media(15%), and SMS are less popular (15%).
Diverse Communication Channels are preferred for Debt Collection
Understanding customer communication preferences is crucial when it comes to debt collection. In a 2019 study conducted by McKinsey, 434 credit card customers were surveyed and the results showed that email and text messages were the most preferred channels for communication. This emphasises the importance of using digital communication channels when attempting to collect debts.
Furthermore, the study highlights that using digital channels for debt recovery results in significantly higher success rates than traditional channels. For example, the success rate of in-app notifications was an impressive 92%. This means that customers are more likely to respond to notifications sent through an app rather than through traditional mail or phone calls. Push notifications were also found to be quite successful, with a success rate of 88%, SMS followed it with 77%.
For efficient debt collection, it is crucial to use digital communication channels. It can be an email, in-app notifications, push notifications, or a text messages. These channels have higher success rates and are favoured by customers.
Listening to Your Customers
Listening to customers is a vital aspect of building a successful business and debt collection.
According to a 2019 survey conducted by Statista, a leading market research firm, 59% of customers across the globe prefer brands that respond to their questions or complaints via chat. This percentage is significantly higher than the 47% recorded in the United States. It is indicating that customers in other parts of the world place a greater emphasis on brands that prioritise their needs.
However, listening to customers is not just about addressing their complaints and queries. It is also about being proactive in anticipating their needs and preferences. By gathering and analysing customer data, businesses can identify patterns and trends
Enhancing Debt Collection
It’s not enough to simply use different communication channels.The bank needs to tailor its use of them to its customers’ preferences. For example, some customers may prefer to receive a phone call, while others may prefer an email or text message. By understanding customers’ preferences, that can increase the likelihood of successful debt collection.
Another important aspect of effective debt collection is timing. It’s crucial to reach out to the customers at the right time. For example, if a customer is experiencing financial difficulties, it may be more challenging to collect a debt. However, if an agent reaches out to them when they have a little more financial stability, they may be more successful in recovering the debt.
Chatbots and debt collection
In the modern era, banks have a valuable tool at their disposal: chatbots.
In fact, chatbots have been available for years and are increasingly useful as they continuously learn and enhance. However, they are still underused in the debt collection industry.
The crucial role of chatbots in debt collection
Chatbots’ key advantages are their accessibility and efficiency. Unlike traditional communication channels, such as phone calls or emails, chatbots are available 24/7. It can provide debtors with quick and easy access to information and assistance.
This is particularly important for customers who prefer to communicate via digital channels, as chatbots can offer a convenient and efficient way to resolve their queries and concerns.
- Accessible and efficient
Chatbots provide debtors with quick and easy access to information and assistance, meeting the demand for preferred communication channels. - Personalised interaction
They can interact with debtors in a personalised and prompt way. It creates a sense of being valued and listened to by customers. - Timely Responses
They are available 24/7, ensuring that debtors can get answers and support when they need it most. - Streamlined Communication
Chatbots can streamline communication by sending reminders, updates on account status, and payment options through the debtor’s preferred channel.
Optimal connection with the customer can result effective collection
Effectively managing debt collection requires a clear understanding of customer preferences. The research all highlights the value of prioritising customers’ preferred communication channels. The adoption of chatbots and a customer-centric approach by banks can lead to increased engagement, improved debt collection efficiency, and better responsiveness to debtor needs.
This transformation not only enhances debt recovery rates but also fosters more positive customer relationships. Addressing challenges such as misaligned communication channels, impersonal messages, subpar customer experiences, personalised interactions and streamlined communication channels offers a viable solution. This approach not only benefits clients but also enhances a bank’s reputation and customer satisfaction. That is ultimately driving success in debt collection efforts.
If you’re interested in discovering how to improve your debt collection strategies with a client-centric approach, we invite you to explore our latest whitepaper. Or if your business is requires tailored assistance, we encourage you to initiate a meeting with one of our expert professionals.