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How Software help Consumers take Control of their Debt

The past 18 months have had a profound impact on people’s finances. The pandemic has led to layoffs and mass uncertainty. Natural disasters have left many scrambling to find somewhere to live, which has had an obvious impact on their personal finances. Financial instability has become widespread.

Collections departments must therefore use smart software that enables past-due customers to take control over their finances. This is especially important given that:

  • European banks are facing rising non-performing loans, meaning they have to operate as efficiently and productively as possible
  • Across the euro area, employment and total hours worked declined at the sharpest rates on record. As a result, consumers are rightly worried about their personal finances
  • Even before the pandemic, one in three European households were unprepared to meet an unexpected financial shock. The impact of the pandemic and various natural disasters has likely increased this figure

This post will examine the primary reasons that people are in debt before outlining how being in debt makes consumers feel—and act. Finally, it will suggest that the right collections approach can help people make their way out of debt in a positive, controlled manner, giving consumers control over their financial situation.

Why do so many people fall into debt?

Throughout their lives, people will run into a wide range of personal challenges—many of which will require unexpected, and unplanned for, spending. As a result, people need to borrow money.

  • Major life changes

Sudden major life changes will have a considerable impact on people’s personal budgets. If you lose your stable job out of nowhere then you will quickly have to find another one—or risk falling behind your bills. Unfortunately, finding a job can be a difficult and lengthy process, especially during the Covid-19 pandemic when most companies are also suffering from financial difficulties.

Likewise, prolonged periods of illness (whether physical or mental) can also lead people into financial crises. Freelancers/self-employed individuals will suffer particularly hard from any long periods when they cannot work. And when your health is suffering, everything else pales in comparison. This might lead people to regularly ignore or lose sight of some of their bills.

Then there’s the big one: having children. If families that usually rely on two salaries suddenly have to feed another mouth while one person isn’t working, that will obviously impact their finances. If you are a single parent then this financial burden will be even greater.

  • Major societal changes

We all like to believe that we’re in charge of our own lives—and to a great extent, we are. Unfortunately, however, we sometimes have to deal with forces outside of our control.

The Covid-19 pandemic is one such example. In the last year and a half, many companies have shut down, employees have lost their jobs, and many loved ones have fallen ill. The global economy and markets plummeted (if only momentarily) and all of a sudden, people’s personal finances were thrown into disarray.

Or take the recent floods in Europe, for instance. Many homeowners were struck completely by surprise and didn’t even have insurance—meaning not only were they now homeless, but they also had to somehow find the cash for much-needed repairs.

Of course, things like Governmental recovery funds, communal fundraisers and loans do help people through these difficult times. But they only go so far. So long as the pandemic and other natural disasters still have an impact, people will continue to be affected by their personal debt.

How debt makes people feel

Generally speaking, there’s a negative perception surrounding debt. Some people think that only those who are out of control fall into debt. The reality, however, is that sometimes debt is unavoidable. Despite this, it can have a profound impact on people’s emotions, and their sense of self-worth.

Those in debt will often feel:

  • Embarrassed: They don’t want to talk about their debt to anybody else (including debt collection agents). In many cases, they might bury their head in the sand and ignore the problem.
  • Out of control: People like to feel in control—especially when it comes to money matters. However, debt does just the opposite, which can lead to a concept called reactance (where consumers refuse to pay in order to feel a sense of control over their finances).
  • Anxious: The uncertainty of not knowing how they are going to pay back what they owe makes people anxious and with more bills coming in, it makes things even worse.
  • Depressed: For some consumers, being in debt can feel like a hopeless situation—especially if they have been in debt for a while. In turn, this might lead to depression.
  • Anger: And, of course, consumers might feel angry: about their financial situation, about various events that were out of their control, and over their lack of agency.

How enterprise collections management software helps customers gain control over their financial situation

Collections departments should help their customers regain control. If they do, they’ll make the entire collections process easier and more welcomed—which will increase repayment rates and the overall ROI.

But how exactly can they do this? What sort of capabilities should their enterprise collections management software possess?

1. Self-service functionality

By letting past-due customers repay their debt via dedicated landing pages, customers can handle the process of repayment all by themselves without having to speak to an agent. Self-service functionality prevents customers from encountering embarrassing or annoying situations when communicating with collections employees. This will make them feel more comfortable, and ultimately, more in control of their situation.

2. Flexibility

The debt collection and recovery process should be a dialogue, not an imposition of terms. The best collections management software offers flexibility. It allows past-due customers to choose their preferable payment provider and to schedule an instalment plan themselves with the amount of payments that suits them.

3. Artificial Intelligence (AI)

AI helps collections departments detect if customers need assistance in advance. A good collections software provides collections agents with insight to see which of their repayment landing pages are performing well or badly. For example, if the attempted payment rate is high but the successful payment rate is low, it’s a signal that there might be errors that are harming their customer experience and their repayment rates.

4. Case Management

Case Management offers a complete overview of every customer’s contact information, payment history, instalment plans, and interactions with collections employees to date. Collections agents can easily notice if a particular customer needs help with creating a repayment plan or is going through a period of financial difficulties (and so needs a little more help/time to pay back what they owe). Collections agents also can track customers’ payment history to examine if certain customers are in trouble and require extra attention.

Enhance the collections process by giving your customers control

Times have been tough recently. While the worst of the pandemic is (hopefully) behind us, its impact on consumers’ finances will last for a long while yet. This means it’s more important than ever before for collections departments to take customers’ personal situations into consideration during the collections process.

By leveraging the right collections software with self-service functionality, payment option flexibility, AI and case management overview, customers will feel comfortable handling their debt themselves. They will feel more in control, and as a result, will be more likely to pay what they owe in full, on time. Agents can dedicate their precious time and focus on high-risk customers that need the most attention, while letting other customers take control of their own repayments.

To learn more about how receeve puts control back in past-due customers’ hands, book a demo today.

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