Arjun Mitra, President of Global Collections at Firstsource
There are several harmful myths surrounding debt. Some think the borrower is at fault, others that it has some bearing on your character. But sometimes circumstances are beyond our control. Bills skyrocket, the car breaks down at the absolute worst moment, or any number of other unexpected life expenses crop up.
The pandemic disrupted careers, businesses, and whole industries. Citizens’ Advice – an independent organisation specialising in advising and assisting people with problems including debt – estimated that by mid-2021, 1.5 million UK households were at risk of unpaid, or ‘problem debt’. This figure was an increase of almost 50% from before the pandemic.
Support for those in debt is available from a range of sources – Martin Lewis’ Money Saving Expert, Citizens’ Advice and debt focussed charities like the Money Advice Trust. But the stigma surrounding debt has stopped many from seeking the help they need.
The evolution of the collections industry is a chance to combat this. The industry has emerged from the pandemic into an advanced digital landscape and society where there is a keener understanding of the importance of mental health and the need for supportive and unintrusive consumer engagement. Firstsource has been a vanguard of this charge, exploring new methods of collection that are conducive to the post-pandemic environment.
An empathetic approach to debt collection
Throughout our two decades of experience, we have found that empathy is increasingly proving to be one of the most effective tools creditors have available. When people feel valued, they are far more likely to work with their collection agency to resolve their debts. But treating each case with the required human touch has traditionally been too complex a task, and collectors have opted for a ‘one-size-fits-all’ approach.
But, the evolution of digital collection solutions is changing the entire industry. Not only can collection agencies offer personalised correspondence, but each borrower’s repayment plan can be tailored to their individual needs.
How does digital debt collection work?
Digital debt collection focuses on a customer-centric approach. The clear power imbalance between the two parties has always been detrimental to the debt collection process, but the fact that the borrower faces far worse consequences for non-repayment than the creditor is unavoidable. Digital debt collection eschews traditional methods and seeks to use technology to find ways of addressing this disparity, empowering people to repay their debt in the most personally convenient way.
The most prominent and widely used tool in digital debt collection is the personalisation of correspondence. Customers can choose the type of electronic communication they want to receive, and these messages are sent out with personalised subjects and details about the customer and their repayment plan.
Digital debt collection agencies have also incorporated machine learning into their processes. Using technology to analyse each individual borrower’s habits and financial situation has allowed them to create tailored repayment plans complemented by rich, nuanced journeys in line with customer needs. Collection rates significantly improve when payment plans are based on individual borrowers’ ability to repay.
These correspondences and plans are then communicated to the customer via automation. Many debt collection agencies still offer a 24/7 helpline for their customers but being able to contact borrowers without even picking up a phone and at the touch of a button has vastly improved agencies’ productivity.
With the ability to choose where, when and how they manage their debt, customers have better management of their financial health, which leads to stronger returns for the lender. We’ve seen clients report resolution rates improving by up to 400%, and collection costs drop by 3-4%. This has resulted in over $250 million dollars collected every year and 800,000 accounts saved from delinquency each month.
Today’s digital collection solutions technology conveniently plugs into your existing stack for quick deployment, alleviating in-house resource demands. Extensive experience in the market, including regulatory know-how, also means the provision of a fully configurable and compliant system. The result is complete control over workflow, processes and communications and mitigation of compliance and operational risks.
There’s no going back
The blame culture surrounding debt has long permeated the industry itself, its overall progression been hindered by the traditional approach to debt collection. Borrowers simply weren’t made to feel valued or cared for. Instead, collection agencies got in their own way, and their methods resulted in a perpetuation of the long-held negative opinion of debt collection.
There is a certain irony that it took a combination of technologies – machine learning, automation, personalised electronic messages – to bring the human touch to debt collection. The industry has grown to fit in with the post-pandemic, increasingly consumer-friendly environment, partly through embracing digital adoption. This modernisation has only served to enhance the industry, not only aligning it with consumer demand, but dramatically improving collection rates too.
Wealth Managers and the Future of Trust: Insights from CFA Institute’s 2022 Investor Trust Study
Author: Rhodri Preece, CFA, Senior Head of Research, CFA Institute
Corporate responsibility is more important than ever. Today, many investors expect more than just profit from their financial decisions; they want easy access to financial products and to be able to express personal values through their investments. Crucial to meeting these new investor expectations is trust in the financial services providers that enable investors to build wealth and realise personal goals. Trust is the bedrock of client relationships and investor confidence.
The 2022 CFA Institute Investor Trust Study – the fifth in a biennial series – found that trust levels in financial services among retail and institutional investors have reached an all-time high. Reflecting the views of 3,588 retail investors and 976 institutional investors across 15 markets globally, the report is a barometer of sentiment and an encouraging indicator of the trust gains in financial services.
Wealth managers may want to know how this trust can be cultivated, and how they can enhance it within their own organisations. I outline three key trends that will shape the future of client trust.
THE RISE OF ESG
ESG metrics have risen to prominence in recent years, as investors increasingly look at environmental, social and governance factors when assessing risks and opportunities. These metrics have an impact on investor confidence and their propensity to invest; we find that among retail investors, 31% expect ESG investing to result in higher risk-adjusted returns, while 44% are primarily motivated to invest in ESG strategies because they want to express personal values or invest in companies that have a positive impact on society or the environment.
The Trust Study shows us that ESG is stimulating confidence more broadly. Of those surveyed, 78% of institutional investors said the growth of ESG strategies had improved their trust in financial services. 100% of this group expressed an interest in ESG investing strategies, as did 77% of retail investors.
There are also different priorities within ESG strategies, and our study found a clear divide between which issues were top of mind for retail investors compared to institutional investors. Retail investors were more focused on investments that tackled climate change and clean energy use, while institutional investors placed a greater focus on data protection and privacy, and sustainable supply chain management.
What is clear is that the rise of ESG investing is building trust and creating opportunities for new products.
TECHNOLOGY MULTIPLIES TRUST
Technology has the power to democratise finance. In financial services, technological developments have lowered costs and increased access to markets, thereby levelling the playing field. Allowing easy monitoring of investments, digital platforms and apps are empowering more people than ever to engage in investing. For wealth managers, these digital advancements mean an opportunity for improved connection and communication with investors, a strategy that also enhances trust.
The study shows us that the benefits of technology are being felt, with 50% of retail investors and 87% of institutional investors expressing that increased use of technology increases trust in their financial advisers and asset managers, respectively. Technology is also leading to enhanced transparency, with the majority of retail and institutional investors believing that their adviser or investment firms are very transparent.
It’s worth acknowledging here that a taste for technology-based investing varies across age groups. More than 70% of millennials expressed a preference for technology tools to help navigate their investment strategy over a human advisor. Of the over-65s surveyed, however, just 30% expressed the same choice.
THE PULL OF PERSONALISATION
How does an investor’s personal connection to their investments manifest? There are two primary ways. The first is to have an adviser who understands you personally, the second is to have investments that achieve your personal objectives and resonate with what you value.
Among retail investors surveyed for the study, 78% expressed a desire for personalised products or services to help them meet their investing needs. Of these, 68% said they’d pay higher fees for this service.
So, what does personalisation actually look like? The study identifies the top three products of interest among retail investors. They are: direct indexing (investment indexes that are tailored to specific needs); impact funds (those that allow investors to pursue strategies designed to achieve specific real-world outcomes); and personalised research (customised for each investor).
When it comes to this last product, it’s worth noting that choosing advisors with shared values is also becoming more significant. Three-quarters of respondents to the survey said having an adviser that shares one’s values is at least somewhat important to them. Another way a personal connection with clients can be established is through a strong brand, and the proportion of retail investors favouring a brand they can trust over individuals they can count on continues to grow; it reached 55% in the 2022 survey, up from 51% in 2020 and 33% in 2016.
TRUST IN THE FUTURE
As the pressure on corporations to demonstrate their trustworthiness increases, investors will also look to financial services to bolster trust. Wealth managers that embrace ESG issues and preferences, enhanced technology tools, and personalisation, can demonstrate their value and build durable client relationships over market cycles.
How to Build Your Credit Up Safely
by Taylor McKnight, Author for Compare Credit
What Is Credit?
Credit is money owed by a person that allows them to pay off debts at a lower interest rate. Most banks use your credit score to determine how much they should lend you. Any business loan or mortgage requires that you have a good credit history. However, if someone has poor credit(www.comparecredit.com/credit-cards/credit-range/poor/), they may struggle to pay back these loans, resulting in higher interest payments, making it more difficult than ever to repay the debt. Lenders are aware of this issue and keep a close eye on your credit rating to ensure that no negative information gets reported. This could prevent you from getting another loan in the future. It is important to note that having a bad credit score does not mean you have had a bankruptcy or other kinds of defaults. Many people often face this problem because of unpaid bills or late payment fees. However, this does not mean that you cannot repair your credit – it simply means that all parties involved must work together to solve the problem.
How to build your credit safely
Building your credit score is a major concern for most people, especially if they plan to purchase something as big as a home or car. A good credit score will help one get better rates in the future and make it easier to finance their next venture. Here are some things you should know to improve your credit to be used for the best possible purposes.
1. Keep paying down your balances every month: One of the biggest mistakes that could hurt your credit score is not paying your balance down each month. People who don’t pay their credit card down within the agreed-upon time typically have high-interest rates and expensive monthly costs.
2. Pay your bills on time: The same goes for making payments on a bill. Not paying it within the specified timeframe will result in negative information being added to your report, further lowering your credit score. Ensure that your bank statements are accurate and that all accounts are up to date.
3. Become an authorized user: Some companies will allow customers to become authorized users after meeting certain requirements. Take a look at the terms and conditions before applying for this option. These programs usually give access to one particular service, such as checking or ATM transactions, but are helpful when you need additional coverage.
4. Set up automatic credit card payments: There are several ways to set up auto payment options on your credit cards, including sending them directly to your checking account via email or the phone. In addition, you may want to consider enrolling in online banking services that automatically make payments from your checking account into your credit card accounts.
Other tips when it comes to credit
1. Learn how to manage debt responsibly. This is true for both personal and business debts. Many people tend to spend more than they earn, especially during rapid growth and expansion. If you find yourself facing difficult circumstances, you can seek assistance by talking to friends and family members, getting professional advice, or using online budgeting tools.
2. Don’t skip any repayments. This rule applies specifically to late payments. You need to continue making regular payments, even if you’re behind by a few days or weeks. Once you miss a payment, you’ll start accumulating late payments that negatively impact your score.
3. Try consolidating your loans. Consolidation involves combining multiple small loans from various sources into one large loan, thereby lowering the total interest cost of the loan and reducing the risk associated with it.
4. Be wise with your credit report. One huge mistake most people make is neglecting to pay their bills on time or paying only the minimum due balance each month. As a result, bad information remains on their reports, impacting their scores. All outstanding balances must be paid off completely. Otherwise, negative items that remain on your report can keep you from achieving the best borrowing potential.
5. Get your questions answered. If you have any questions regarding your credit, ask for answers now rather than waiting until you’re experiencing trouble. With a little research, you should be able to learn enough to begin repairing your damaged credit report.
What to look out for that can harm your credit
1. Not checking your credit report: Most people use their credit cards frequently but fail to check their credit reports periodically. Checking at least every 12 months can give you valuable insight into whether or not there are errors on your credit.
2. Paying your bills late: Late payments can lead to hard inquiries affecting your score, which means it appears that you’ve applied for more credit elsewhere. Make sure you never miss a bill.
3 You Close Old or Inactive Credit Cards: If your close old cards, they may show up on your credit report for some time. Closing accounts can impact your score by causing “hard inquiries” that appear on your credit report. Before closing them, look for inactive or closed card accounts on your credit report.
4. You Have Negative Records: Many people think they’re protected because they haven’t had past credit problems. However, many factors may cause a “bad” rating to linger. A single application for a credit product with a low limit may count towards a negative review.
5. There Are Errors on Your Report: Mistakes such as missing debt or inflated balances can damage your credit report. Find out how much money you owe and what types of products you purchased, then try to dispute those entries on your credit report. Ensure you correct any information that needs to be corrected. Failing to do so could hurt your chances of getting approved for future credit.
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