Help your customers: 5 ways to deal with debt

In this article we look at how the financial climate is creating an increasing “buy now, pay later” culture. With costs continuing to increase in all areas of their lives, people could become stuck in a debt cycle. How do they choose what bills to pay? What are the ways to deal with debt?

We’ll explore how organisations can guide their customers through these tough times and ensure they can still pay their way.

The “buy now pay later” culture

Helped by financial concerns buy now pay later (BNPL) deals have gained a new lease of life over the last couple of years. Fintech companies such as Klarna, Laybuy and Clearpay have made applying for credit easy while checking out at your favourite online store — with the ability to delay payments with zero interest just a couple of clicks away.

This increased BNPL usage is on top of a culture of credit card debt and car leasing, plunging consumers into a cycle of monthly payments, and higher overall living costs.

A credit culture can harm consumers. BNPL services in particular make it easy for shoppers to buy more than they can afford, and because the market is unregulated, critics worry that people are taking out credit they wouldn’t otherwise be able to get.

How companies can help their customers deal with debt

1. Prioritise engagement

If a customer has reached a difficult situation with their money, such as not being able to manage their bills, it’s vital to be proactive and engage with them. Many people do not realise the support that is available to them from service providers and can avoid engagement when they can’t pay what they owe.

By maintaining proactive engagement with customers in debt or who have the propensity to go into debt will benefit both parties in the long run. Ensuring this engagement is done with understanding and empathy to the customer’s situation will also help build respect and loyalty for your brand.

2. A new step before 3^rd party collections

ReachOut, a unique service from Sigma Connected, introduces a new step before debts are passed to a third party collection agency.

ReachOut addresses the challenges of low engagement and low awareness of available support. It offers customers, who are struggling to pay, a real lifeline of support, raising awareness of initiatives within your organisation and with external charities that are available to help them.

As a confidential and impartial service, one that isn’t there to (and can’t) collect debt, we can hold discussions with financially vulnerable customers and help re-engage them in a safe environment. This approach builds trust, helps people better manage debts, and improves outcomes for all parties.

In fact, 2 out of 3 people we contact go on to reconnect with the client organisation and work together to agree on a positive way to resolve their debt. If you’d like to find out more about Sigma Connected’s ReachOut, be sure to get in touch.

3. Use digital tools

Digital solutions provide those in debt with an easily accessible channel for financial advice and a clear picture of their current financial situation.

Credit score apps allow people to see their creditworthiness and what has affected it, they can then assess whether they need to reduce their current credit commitments or perhaps consolidate them into a single monthly payment.

Product comparison apps let people shop for products on different online stores, allowing them to see which shop is the cheapest to purchase from, helping them reduce their outgoings.

Energy switching apps, or websites like MoneySavingExpert.com’s Cheap Energy Club, also help people cut down on the amount they spend every month, by seeing if they could make savings by switching to a cheaper deal.

Similar tools exist for mortgages, allowing people to find out if remortgaging after their introductory offer has ended will reduce their monthly payments.

Remember that technology can only take you so far. To effectively support customers with money struggles, it’s crucial not to forget the importance of human-to-human interaction. Providing this type of contact allows you to increase customer satisfaction by providing a personalised experience.

4. Personalisation

People in debt are often left in the dark about the repayment options available to them. Providing them with personalised communication of the best ways to handle their repayments is more empathetic and a more effective way of recovering debt.

By personalising communication to your customers, they can pay faster and more consistently with tailored debt repayment plans based on their age and circumstances.

Analytics tools and data insight technology have become commonplace in almost every industry. Organisations should leverage these tools to provide a more personalised service to customers in debt.

Artificial intelligence and, machine learning tools in particular, can collect data from the transactions and activities of those in debt to help build a best practice model — a series of simple steps and realistic financial decisions to help them escape debt.

One advantage of these sorts of tools is that they can monitor activity in real-time and continually update their model accordingly. AI tools can help move those in debt in the right direction and ultimately speed up their repayments.

For example, if the software learns that your customer has reduced their outgoings on monthly bills, it could suggest diverting this extra money to debt reduction instead to help them get out of debt faster.

5. Invest in quality customer service

Regardless of the steps a company takes to help its customers out of debt, you will still need an effective customer service team. Thus, it’s vital to ensure you have advisors that are trained to deal with various financial situations, from advising vulnerable customers to empathetic debt collections.

Outsourcing your collections team can be a great way to have access to employees trained to deal with these situations without finding and hiring them yourself.

Support customers with Sigma Connected

With nearly 15 years’ experience in early arrears collections, Sigma Connected is perfectly placed to help your business meet your customers’ needs. We specialise in customer services, collections, complaint management and, in particular, problem debt engagement. We can take on opportunities that other larger outsourcers can’t, often starting small and growing with our client’s needs. We’re an agile business, so we can set up quickly, start delivering and scale up or down as needed.

Most importantly, we do things differently at Sigma Connected. We ensure we build a human connection with your customers delivering empathy and understanding whilst still ensuring we collect responsibly building loyalty to your brand.