By: Jan Kühn, Director at INOVO
In August 2019, President Cyril Ramaphosa signed the National Credit Amendment Bill into law. Also known as the ‘debt relief bill’, the new legislation seeks to protect low-income earners from spiralling debt. While the pros and cons of this bill are hotly debated, there is no doubt that the debt situation in South Africa is dire: in its last quarterly bulletin, the South African Reserve Bank (SARB) announced that household debt as a percentage of disposable income was 72.7% (at the end of 2018). In other words, almost 75% of available funds within SA households is currently spent on debt. For South African businesses and creditors, the debt relief bill will certainly change the playing field – with standing debt books set to reduce in size. Arguably, the role of tactical debt collection, and particularly the involvement of forward-thinking contact centres, will become more important to business survival and sustainability than ever before.
Given the difficult economic environment and the survivalist nature of South African consumer behaviour today, we believe that contact centres and businesses have to adapt their strategies. Here are three ways in which businesses can ensure debt collection success (and healthy returns on their investments) going forward…
1 — Instil a proactive culture
As with the old adage of ‘prevention is better than cure’, contact centres have to become proactive (rather than reactive) in the face of the legislative changes. From an economic perspective, collection costs are far more than prevention, so it is imperative that leaders and managers ensure that contact centres embrace an operational culture of proactive outreach. When examining global trends within debt collection and contact centre strategies, it is clear that this forward-thinking and more dynamic approach is being recognised as key to business sustainability and contact centre success.
In practice, this means that contact centres have to become adept at harnessing various multimedia channels to send out early reminders – while also remaining in touch with customers as they negotiate their individual debt cycles. It is helpful to keep in mind that in most scenarios, consumers don’t intentionally neglect to pay their bills – they just need to be reminded at the right time.
2 — Gain insight into personal circumstances
Building on this theme, reaching out to consumers with reminders ‘at the right time’ requires contact centres to gain insight into the unique circumstances of every individual. For example, within the difficult (and very personal) realm of debt collection, one of the most important factors is when people get paid, i.e. do they receive their salaries at month end; or the first day of the month; or do they get paid weekly, biweekly or bimonthly, etc.
Once contact centres have a view of when customers are likely to get paid, they can time their reminders to reach customers at a more opportune moment (when they are more likely to have funds available to service their debt). In this way, contact centres can also be proactive, as they are likely competing for attention with many other creditors.
3 — Make it simple & easy to pay
Given the fact that paying bills is mostly a grudge, contact centres should leverage technology to make it as quick, easy and as seamless as possible to settle accounts. To begin with, provide customers with easy-to-read statements so that they can understand their account and feel both informed and respected. From there, the statement should contain a secure link or mechanism via which the customer can pay the bill quickly and easily – without having to negotiate a new platform or system. Put simply, the easier you make it for consumers to pay you back, the higher the chances of debt recovery.
With this in mind, contact centres should also leverage their understanding of customers’ circumstances (as discussed in point 2) to find ways to restructure their debt if they cannot pay immediately. By learning about the things that prevent customers from paying, contact centres will not only demonstrate respect and understanding, but they can also develop payment structures that serve the needs of both parties. Rather negotiate and be innovative (and flexible) to provide solutions that meet the unique needs of debt-laden consumers.