In Debt for the First Time – How Your Business Needs to Treat the New Wave of Debtors

Ian Haddon, COO at ContactEngine

As interest rates are hiked by ratios not seen in decades, the fallout from slowing economies across the world is likely to hit middle income earners as much, or more, as those on lower incomes. While those at the poorest ends of society are well-versed in being able to make a little go a long way, those on middle incomes have less experience here.

In the UK, only the richest 10% of households are expected to add to their savings in the next 12 months. The group taking the biggest hit will be middle income earners. Currently 58% of this group have at least three months’ worth of essential expenses in savings, but within a year that is likely to fall to 48%. The middle class is existing on a knife edge.

This is a group that has done all the right things in their careers, but they have either been unable or unwilling to compromise on the lifestyles they work hard to maintain to build up savings. A mortgage hike, utilities increase, an extra £50 a week on groceries will all add up. For businesses that rely on monthly payments, there may well be plenty of perfectly ‘successful’ people who suddenly find that they owe debts that they cannot immediately pay.

Businesses need to prepare for a new type of debtor, which need to be treated in the right way. The old way of thinking – that those who end up in hard times are somehow morally or spiritually bereft – is dead. Covid, war in Europe, impending recession, these are not the faults of individuals and so debt collection operations that operate punitively will find themselves acutely out of touch with what people expect.

You can already tell the shift in the public mood. People are shocked and outraged when debt collectors are even used. ‘Water Company to use debt collectors against customers boycotting payment’ a recent Guardian headline read, indignantly, mirroring sentiment that a company would dare use such measures to retrieve money it is owed. 

How AI can build on human judgment

69% of people who are in debt don’t talk about it with anyone. The main reason why people avoid this is because they feel ‘embarrassed’. Just under half of people who don’t want to discuss debt say that they do not want to ‘burden’ anyone else, while 39% said it is because they did not want people to think badly of them.

When we talk about AI communications, we often talk about the need for machines to do the legwork, processing the data and asking the simple questions, so that a human can come in over the top and provide the emotions that customers really value. While this works well in cases of grief or in service where the customer needs to feel valued, there are reasons to believe that in intimate issues where there may be feelings of guilt or shame, this may be turned on its head.

Whether they mean to or not, humans can give off subtle tones of judgment in their speech and their own experiences can make them prejudiced. By contrast, a machine can be consistent, fair, and logical – qualities that are essential when discussing financial solutions. They do not get bored; they do not get distracted. Machines can have the difficult conversations humans can’t.

How AI can give debtors a personalised experience

A machine can only be an effective communicator with affluent debtors if they communicate in the ways they expect. This is a demographic that is busy – busy with working late and starting early, busy with commuting, busy with mid-week socialising, weekend brunching and morning exercise. Long, continuous forms of communication, such as phone calls, are out. Similarly, letters – long serious prose that demands attention in the evening after a hectic day – are also not suitable. You need to reach this demographic in bitesize chunks, such as with instant message over text and WhatsApp.

You also need to speak to them in the way they will expect. For most people who find themselves in this unfortunate situation, they will genuinely want to pay the money back. They won’t see themselves as ‘criminal’ and will switch off entirely if they are chastised or threatened, resulting in a much more expensive process for you. The tone needs to be one of understanding and reassurance. It needs to be serious, without being downbeat.

Fortunately, machine learning algorithms have become finally tuned over years of millions of conversations with people, reflecting a user’s language, resulting in a natural, warm, and engaging dialogue.

What the benefits are for debt collection

Sending debt collectors round and taking cases to court comes with a cost. This cost can be more than the debt itself, making it a more astute business decision to drop the case altogether than to go through the process. That all changes if you can put those with high earnings – or high-earning potential when they find employment again – onto a sensible plan with automated, tailored AI communication.

If done well, the way you handle debt collection can not only recover what you are owed, it could also work as something of a customer sales tool – keeping that customer with you as their finances restabilise.

Your company needs to treat its new wave of debtors as the valued customers they were and as they will see themselves as capable of being again. Harnessing AI to have millions of light-touch, automated conversations, is certainly a step in the right direction.