Run from the Bills

Stories about 'The Credit Crunch' are, of course, more than a little prominent in the news these days, with financial institutions in turmoil and defaults on mortgages at a 15-year high, not to mention the plethora of defaulted payments on a much smaller scale. Which is why I am going to mention them. It's an oft-overlooked topic.

It's not just the big bills that go unpaid at times like this, but the smaller ones too.

I recall that during the last slump in the early 1990s I was pursued relentlessly by the finance department of a mail-order music club, because I failed on a couple of consecutive occasions to cough up for the ‘CD of the month’ or make my selection from the catalogue - this was way back before we could do price comparisons, listen to preview tracks, and then order cheaply online.

I only owed them about £22.98, or whatever the sum cost of the new Celine Dion album and Mariah Carey’s Greatest Hits was, but the effort they went to was quite extraordinary, given the trivial amount.

On several occasions over the period of a few months they sent me reminders through the post, and on several other occasions they had an actual person phone up from their call centre to leave a message on my answerphone reminding me that I owed them a few quid.

Then, eventually, after numerous attempts, they cancelled my membership and passed the debt on to a debt collection agency – who started their own campaign of letters and phone calls.

Eventually they got their 20-odd quid, but the cost to them in postage, power consumption, billable staff hours and whatever other overheads were entailed in recovering a few pounds from me almost certainly made the overall deal a losing proposition for them. What’s the retail margin on two CDs? About six or seven pounds?

Technology has advanced since then, though it isn’t always utilised for maximum benefit.

Payment collection still relies heavily on sending out paper mail (which has a cost to the environment as well as financial) and call centre-staff, who all need to be paid.

For small debts in particular, the manual process of collecting payments is wasteful, inefficient and far from cost-effective.

Using new technologies, such as Interactive Voice Response (IVR) and SMS messaging to automate the process can save money in two ways.

Firstly, because once an effective automated system is in place, there is no additional overhead to settle additional accounts, however small the outstanding balance may be. And while the small balances might not be worth pursuing if it’s proportionately expensive to do so, they all add up.

Secondly, many customers are more likely to respond to a process that doesn’t require interaction with a human being. Computers don’t judge you, and telling a machine you can’t afford to pay the balance now but you’ll have cleared funds on Friday week is a far less stressful experience than trying to explain it to a real life person.

At HTK, we’ve identified Payment Recovery as a key market sector for interactive customer contact, and one that is likely to become increasingly relevant as recession begins to bite.

We believe automating the process of Payment Reminders and payment collection can significantly reduce the overheads of consumer debt recovery, as well as providing a more tolerable experience to customers feeling the pinch. If you’re interested in learning more, feel free to check out HTK Horizon Billing and Payment for more information!