The energy price cap increased from 1st April, leaving leaders in UK energy and utilities worried for a cost of living crisis, with some analysts labelling the situation a ‘Social Emergency’. The UK is already in the midst of a utilities debt crisis, with monies owed at unprecedented levels. With recent events in Ukraine and increasing inflation exacerbating the issue, the reduction in disposable income for many families will inevitably result in even more consumers falling into financial difficulty.
The challenge facing the utilities sector is how to carefully manage this situation across the whole debt and vulnerability lifecycle - from identifying those at risk of falling into debt, to supporting those already defaulting - all whilst improving the debt balance on their books.
Our recent survey pointed to several key challenges
Sopra Steria surveyed 100 technology decision makers involved in their organisation’s debt management activities. We wanted to understand some of the obstacles they were facing in managing consumer debt levels. Noticeably, 85% of respondents believed there is significant room for improvement in how they use analytics in the collections lifecycle. Just over two thirds (67%) believe they only have moderately effective processes and methods available to help them understand different debtor personas.
The results of the survey also point to poor data quality and a lack of access to important data throughout the collections process. This lack of reliable and robust data is preventing many organisations from being able to effectively undertake debt management decisions. In many cases the debt management process is fundamentally broken:
- data held on each individual is incomplete or out of date.
- data is stored in a legacy system which agents can’t access.
- data is heavily reliant on human inputs and susceptible to user errors.
This lack of quality data and associated insights is also preventing utilities leaders from forming a 360 degree view of their consumers, and hampering their ability to identify and support ‘at risk’ consumers.
Utilities organisations are already tackling these challenges with the support of government, charities and technologists, but there is still a way to go.
Here I outline four key ways that utilities organisations should prepare for increasing consumer debt:
1. Using data to understand your consumers
The results from our survey clearly show that robust data management is being used as an afterthought in many cases, or in a siloed fashion only at specific stages of the debt management process. This siloed approach combined with poor data quality, management and access means many organisations are setting themselves up to fail as soon as a customer signs a credit agreement.
To overcome these challenges, organisations need to take the time to fully understand the different customer data sources available to them. For example, behavioural data on how a customer interacts with your organisation at different touchpoints will give your collections teams insight and knowledge into how they are likely to behave in future. As a starting point do you know how often a customer phones your helpdesk, visits your website, or has a face-to-face interaction with one of your staff?
By collecting this kind of behavioural information along with external data from when the customer first registers their billing address, you can start to build a 360-degree view including:
- an individual customer’s approach to debt.
- their relationship with your organisation.
- previous payment habits.
The Analytics team can then use this information to build different debtor personas and segments, allowing your staff to proactively make decisions about the types of personalised payment options they could offer a debtor.
We always recommend running a workshop putting yourself in different debtors’ situations to create debtor personas:
- What are their repayment method preferences?
- How would they like to communicate?
- When do they need support?
2. Predictive modelling and personalisation
The use of rich customer data combined with the right algorithms, better models and enhanced processes can enable intelligent predictions. Such predictive modelling will allow for much greater accuracy, providing details on who is likely to default on a debt, and when in the collections lifecycle. Using this intel will allow for utilities providers to create successful contact strategies and secure payment from the customer.
The Covid pandemic has caused an unparalleled shift in consumer behaviour over the past two years. The sudden, almost overnight shift to remote working adopted by most organisations has resulted in more and more of us staying at home for significantly longer periods. The consequence is many of us have become unaccustomed to venturing out. Shopping is done online, work is done at the dining table, all resulting in more consumption of gas, water and electricity in the home.
Coupled with the rising price of energy and inflation, there’s a real need to understand consumers in debt. In particular, it’s critical to get a solid understanding of which consumers can’t pay - and protecting them - and effectively managing those who won’t pay.
Fair treatment of debtors throughout the collections lifecycle is crucial to your organisation’s success. The reason why many debt collection processes fail or end up in expensive litigation and enforcement, is because debtors often feel mistreated. They may ignore the constant chasing or lose respect for the creditor, all making them less likely to pay.
3. Self-service and improved communications
Debt is a highly sensitive and embarrassing topic for many. The majority of debtors won’t admit they have a problem and prefer not to talk about it. In the vast majority of cases many would prefer digital communication, self-serving where possible.
For example, our experience shows that those organisations who approach digitally-aware debtors through email or text rather than by phone call can improve the level of payments received earlier in the collections lifecycle. This is one area all organisations should start with today to improve their collections process.
Analytics holds the key to improving customer segmentation and giving insights into where bespoke contact strategies will work based on different debtor personas. By using analytics capabilities you can identify those customers who can and want to ‘self-help’. Customers will feel more in control of their outstanding debts and feel they have a better relationship with the organisation.
‘Digital first’ customers actually don’t mind being contacted via email, text message or an alert when they log into the collections portal – they actually prefer it! They relish the speed and efficiency of a digital channel, rather than an agent giving them a call or a physical piece of post landing on their doorstep. To make digital collections a reality, customer journeys need to be designed with integrated touchpoints which offer a customer the opportunity to pay on their terms via the channels they use and are comfortable with.
4. Integrated supply chain
To prevent bad debt, reduce operational costs, and make sure debtors are cared for at every stage of the collections lifecycle the ‘right’ structured collections process is needed - underpinned by data and analytics.
The process needs to be carefully aligned with a service management model. Such a model should include not only the management and monitoring of in-house collections activities, but also those activities where the debt supply chain is heavily reliant on third parties.
Working with a Systems Integrator you can leverage sophisticated technologies such as Big Data, AI and IoT to provide real time insights into consumer behaviour and preferences. Using that insight, utilities providers can create personalised customer journeys. A personalised journey enables the adoption of the most appropriate communication channels for that consumer, customising each communication for each consumer.
Only by examining the whole debt supply chain from initial credit agreement to litigation and enforcement will utility organisations be able to identify where supplementary services, processes and technologies can be used for further improvement.
Next Steps
At Sopra Steria we believe it’s time for change. Energy and utilities organisations who take the time to revisit their existing vulnerability and debt management methods will be better placed in today’s turbulent and rapidly changing environment. By identifying gaps in data, technology, systems, skilled staff and debtor care, you will be creating a solid foundation for the utilities of the future.