Our Head of Collections and Recoveries Solutions, Perry de Jager, recently posted an article on LinkedIn, which received some great feedback from the industry.
The word “collections” has bothered me for a considerable time …… but let’s not run ahead.
In order to answer this question: Has “Collections” become obsolete, we need to first look at the types of customers we get within our defaulting portfolios.
In general, we have:
• Defaulting customers who we want to retain as customers, and
• Defaulting customers who we don’t want to retain…
Retain: Defaulting customers who we want to retain, typically fall into 2 categories namely
• Willing and able customers and
• Willing but unable customers.
Willingness to pay is a behavioural element, which could change dependent on the organisation’s interactions with the customer. Ability (to pay) is a circumstantial element, which could be of a short or long term.
Not retain: Defaulting customers who we don’t want to retain, typically also fall into 2 categories namely
• Unwilling but able customers and
• Unwilling and unable customers.
Unwillingness is a behaviour that could have been there from the start or as a result of the organisation’s interaction with the customer.
Note that we don’t deal with the aspect of changing an unwilling to a willing customer in this blog.
When we look at these two main categories “retain” and “not-retain” we can clearly identify how we deal with these customers:
• The customers we want to retain, we in essence want to rehabilitate in order for them to continue utilising our products or services. Rehabilitation will either be self-correcting (willing and able customers), where the customer makes the appropriate arrangement and payment, or by organisational intervention (willing but unable) where the organisation provides rehabilitation options in order to cure the defaulting account over time.
• For the customers we don’t want to retain, our goal should be to recover what is owed (or as much as possible). Recovery could be through internal or external means, dependent on the cost-to-recover and speciality requirements like legal processing (unwilling but able customers)
For purposes of this blog we focus on those customers we want to retain.
We agree that our end goal is to rehabilitate a customer (or account) in order for the customer to remain an active customer of the organisation and utilise the products or services of the organisation. Rehabilitation can be achieved through self-correcting by the customer or intervention by the organisation.
The organisational goal is therefore to rehabilitate these customers.
Rehabilitation is a positive action, and inflicts positive behaviour from the receiver (the customer).
“Collections” has negative insinuation (perceived by many), and as such can inciting negative behaviour from the receiver, the customer – potentially shifting a willing payer to an unwilling payer
It is therefore my opinion, that if our goal is positive rehabilitation should we not refer to ourselves also in the positive?
– “Good morning Mr. Jones, my name is Peter and I am calling you from XXX Bank’s rehabilitation department”
– Sms: “Dear Mr. Jones, we note that your account has gone into default. Please make payment of Rxxxx or contact our rehabilitation department for assistance in getting your account up to date”
If our agents were “rehabilitation” officers or “rehabilitation” agents, would that not change their behaviour to one focused more towards aiding than punishing?
The psychological connotation (emotional and imaginative association surrounding a word) with the word “collections” is negative, and it is my opinion that the word “collections” has become obsolete (specifically within the financial and debt collection industries), if our aim is to rehabilitate.
Let’s refer to it as “rehabilitation” and instil positivity with our customers and staff (note that referral to rehabilitation, depicts the need to change the term to something positive. It may be that “rehabilitation” is not seen in your region as positive, and therefore you need to align the term used to a positive term).