Gabriel Hopkins looks at the annoying and everpresent cold caller and what the UK government is doing to combat this nuisance to the benefit of consumers
Starting on April 6, it will be easier for the UK government to fine firms that perpetrate nuisance calls and texts. The fines run as high as £500,000. The government is responding to a tidal wave of complaints — more than 175,000 complaints last year, according to the BBC.
This glut of nuisance calls and text messages has caused annoyance, inconvenience and distress for consumers. Anyone who has been hounded at home by cold calls, or mobbed on their mobile by spam texts, will be glad that the law’s muzzle is being removed.
But consumers aren’t the only ones cheered by this move. Banks, card issuers and other large enterprises should be grateful as well.
Nuisance calls impair the opportunity for legitimate contacts between companies and their customers. Many large well-known brands, such as banks, successfully use automated customer engagement to quickly and efficiently resolve issues, such as determining the validity of suspicious transactions, helping borrowers make payments or simplifying aspects of customer service.
Automated contact – a valuable channel
By reaching customers in real time across a range of channels, companies are simultaneously improving customer experience and their ability to tackle fraud, manage their accounts and collect overdue funds – helping customers stay current with their payments.
Using these tools, one major UK bank reduced the number of fraudulent transactions per compromise from 5 to 3 on average. Another bank found that 94% of customers would recommend them to friends following a positive automated experience.
Mobile communications can be extraordinarily useful in collections. By giving customers more control and making it easier for them to pay, many more of them pay within a much shorter time frame. State-of-art mobile payment systems can not only manage standard customer payments, but also payment plans. These systems also feature a two-way text messaging system that allows payment via regular mobile phones. Alerts are sent to customers as payments are due, and customers can authorize repeat payments just by replying to the SMS, paying in real-time without any need to provide card details. Payment reminders go straight to their pocket.
Mobile services often achieve better results than standard strategies. One leading utility found that on average customers pay six days sooner and that they were able to volume of paper letters to customers by 34%. A survey revealed that 55% of consumers said they preferred the automated voice call, while just 29% said they would prefer a call centre agent. A major bank was able to increase customer contact in collections by 400% without increasing staffing numbers significantly reducing bad debt.
Talking to Millennials
Mobile contact strategies are also important as a channel to reach younger borrowers. FICO has just released research that shows that Millennials are five times more likely to use mobile payment services than other age cohort. In addition, twice as many Millennials (32%) reported that they are likely to use mobile wallet services like Apple Pay or Google Wallet in the next 12 months, compared to survey respondents who are 35 and older (16%). Additionally, 56% of younger Millennials (18-24) report that they are already using or very likely to use alternative payment services like Venmo and PayPal. Banks and card issuers need to use SMS to communicate with younger borrowers through their preferred channel – the mobile device. Without this, customer service for the customers of the future will be hobbled.
The Financial Conduct Authority also recognizes the value of automated communications. The FCA just released an occasional paper on their research into what helps consumers better manage their current accounts and avoid unintended overdrafts.
As shown in a handy infographic the FCA posted on its LinkedIn page, annual summaries of costs and activity don’t help at all. What does work? SMS alerts and mobile banking messages. The FCA found that these together resulted in a 24% reduction in unarranged overdraft charges.
As the paper reports: "We find that text alerts reduce monthly unarranged overdraft charges by 6% (£0.22) for Bank A. Mobile banking apps reduce monthly unarranged overdraft charges by 8% (£0.33) for Bank A and by 5% (£0.23) for Bank B. Signing up to both services reduces monthly charges by 24% (£0.93) for Bank A, an effect greater than the sum of the individual effects of each service (an additive effect)."
SMS texts and other automated communications truly are a win-win-win; a lower-cost channel for lenders, a better service for customers and a legitimate way for both parties to ensure and protect the consumer’s financial health. It’s absolutely critical that we encourage consumers to embrace this form of communications; not train them to shun it. That’s why so much of the industry stands behind stepped-up enforcement of the nuisance call laws.
Gabriel Hopkins manages customer communications solutions for FICO, the predictive analytics and decision management company.