14th December 2015
Data, technology, and the future of collections
CCR Magazine brought together a group of industry experts to a round-table debate, sponsored by Link Financial Outsourcing, to discuss the future of collections, with a focus on data and technology.
Participants from the event included:
Andrew Hughes, Head of Credit Management, Severn Trent
Andy LaPointe, Public Affairs Manager, QuickQuid (AL)
Anthony Sharp, Proprietor, Anthony Sharp Associates
Chris Ball, Head of Collections and Recoveries, Nationwide Building Society (CB)
Connie Smith, Head of Collections, HSBC
Frank Horvath, Managing Director, Link Financial Outsourcing (FH)
Ian Potter, Collections Operations Lead, AVIVA
Jan Smith, External Affairs Director, Callcredit (JS)
Joe Gash, Head Of Collections, Shop Direct Financial Services
John Preston, Head of Billing, collections, risk and assurance, Tesco Mobile (JP)
Karl Wise, Group Operations Strategy & Commercial Director, Virgin Money (KW)
Lucy Swannell, Senior Recoveries Manager, NewDay (LS)
Pradip Raval, Global Chief Financial Officer, KGB (PR)
Richard Wilson, Chief Credit Officer, OneSavings Bank & Kent Reliance (RW)
Saima Hansraj, Compliance Manager, Lending Standards Board (SH)
Stuart Sykes, Group Head Customer Operations & Debt Recovery, MyJar (SS)
Do you have the appropriate data that you need to guide and improve your collections processes?
JS: There is always room for more data; the better data and
analytics you have, the better decisions you can make. One of our challenges, as an industry, is that we would always like access to data from wider sources, such as government data. There are also some interesting new sources, like big data, which are being used to help consumers with thinner credit files and a lot of that is proving as predictive as traditional credit data.
SS: We use a lot of front-end scoring, from when we make a
lending decision, and put that into our back-end collections for
decisions on issues like propensity to pay. That gives us an ability to target better.
CB: I do not think that you ever have enough data. Data is like
management information, however much you have, you always want more, because you get a certain level of insight which allows you to think that it would be good to be able to drill down even further. I do think we have sufficient data, but it is traditional risk data, which is very good, but it is interesting to look at what is the best data for us in a customer-outcomes environment, which is about how we can make sure that the plans that we set are affordable and sustainable for customers. For example, instead of having a manual income-and-expenditure (I&E) statement, is there data that can be used to validate it? So I think that Collections’ data requirements are changing and will continue to do so.
RW: I do not think that it is a question of the usefulness of the data that we have – we all have high quality data – it is how people’s spending dynamics are changing. The social-media point is interesting: will it change the dynamics of how we use credit scoring?
Are some of the ways that we have traditionally measured scoring right for outcomes and propensity in the future?
PR: There is also a question of whether the information providers are themselves receiving data in a timely manner, from borrowers and lenders, because one of the issues that we are currently wrestling with is how we get information, from our debt collection agencies and debt management companies, so that we know what the current situation is with our customers.
JS: We worked with clients for a long time to develop our product because all the indications coming from the regulator were that they would require real-time data sharing. It was mentioned in all their CONC consultations. We now provide it to the short-term sector and have had interest from retail and monoline credit providers, but the Financial Conduct Authority (FCA) appears to be taking a monitoring position over the coming months so there is less of a focus.
For lenders, where you have a product that requires a monthly
payment, you would not necessarily need a daily update. Technologically, new entrants have systems which are more recent and can work with the daily updates, for older legacy systems it can be a five or 10-year IT project just to change it.
AL: Over the past 18 months, I have seen the Financial Conduct Authority go from being very hawkish on universal real-time data, to now backing off. The issue no longer seems a priority.
RW: It is also a question of cost – committing to a regular daily feed is not without cost, so lenders and collectors will decide whether they need a daily feed or whether something less regular is fine for
FH: Perhaps this is one of the reasons why more companies are starting to use social media data – it is free and can provide a different view of the customer. Whilst Link does not use social-media data, there are some companies that will take their standard information from a reference agency, that they need in order to do their fraud, identity and basic underwriting checks, but for the additional information, they will pull data from social-media sources.
Are consumers now more aware of the need to give their creditors and collectors information?
LS: I think that some customers assume that companies have access to more information than we actually do. For example, there have been customers who believed that we had access to their health records and, therefore, they did not recognise the need to inform us of any related changes in circumstances that may impact their financial situation.
So, there is still a need for some education on the types of information companies, in the sector, actually have access to but, overall, customers are much more understanding of the need to provide detailed information on their income and outgoings.
SH: The challenge for firms that pre-populate I&Es with information from various internal or external data sources, for example credit reference agency data, is whether that information is still accurate. Whilst this does not negate the need for a proper conversation with the customer to assist in the validation of that information, it can work as a useful starting point for discussions. It is a question of trust – customers know they need to disclose their financials but they also want to know what it will be used for. It is important that creditors explain this clearly, whilst also reassuring the customer that any information gleaned will be used to assist their own understanding of the customer’s circumstance, with a view to setting an arrangement that is both affordable and sustainable for the customer.
CB: The conversation with a customer would be a lot easier if you can have it with some information that is pre-filled because you can say ‘look, we think that you are spending this’ or ‘last time we spoke you were spending this amount’ rather than having to go through every I&E from scratch. The problem is that the customers who are in this situation can be having this same conversation 10 or 12 times with different lenders, and we need to do something about that because that is not the best customer outcome or experience.
Are consumers more aware of their rights in regards to data protection today?
RW: The people who want to engage will engage with you and will go through the process and fill out the form. It is a question of those who will not do so – how do we get those borrowers to engage?
SS: The technology that we have today does help with this. I can see that an e-mail has been received, exactly when it has been opened, and whether they clicked on the link to look at the I&E. Everything is in my hands and I can tailor my strategy, maybe sending a text a certain number of days later saying ‘we saw that you opened the e-mail and the payment is now due’.
What are the key pieces of technology that are playing an increasing part in the industry?
PR: We want to provide our customers with multiple communication channels – whichever way they want us to communicate with them. We find that people change their habits, so today perhaps e-mails are convenient for them, while tomorrow, for whatever reason, they might only want us to use the text medium. We will communicate with them using any form that they want.
JP: We have the challenge that, of course, the way that we communicate with all our customers is through their mobile phone and then, when they are in debt, one of the earliest things that we do is switch it off. We do go through processes whereby we allow people to receive inbound calls, but the ultimate sanction is to cut them off and then you have lost that technology.
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