Enhancing Collections Strategies for Digital Engagement – [FULL INTERVIEW]

0:02
So hi, everyone. I’m here with Pedro Maya today. So Pedro I go away back, actually, we used to work together at Amex. But Pedro, you’re based in Canada, or you got huge amounts of experience at a senior level working in the banking industry, with some of the big banks, also in the telco industry, both in credit risk, and then collections as well. So Pedro, thanks very much for joining me today. I think we’re going to talk a bit about Canada and what some of the things you’ve been seeing. Oh, hello, everyone. And yes, we go a long way back when you were here in Canada. And although many things have changed over the last several years, a lot of things have not. So how have things changed over the last sort of six months or so we had the pandemic and we hit everyone in the world pretty hard. I think in Canada, it sounded like the lockdown was pretty strict, right? It’s been pretty strict and pretty strict for a while. So as we’ve come out of that period, as we come out of the period of like restrictions, what’s been the what’s been the impact on the consumer, in terms of the economy, really,

0:57
it has been really important. Of course, we went through a period where there was a lot of government support to ensure that people in businesses that were not able to work, were able to get some support to keep things going. But those government grants ended. And now people need to pay them in the best fit the first payment of those who were in the tax year for a 2022. So starting April, you have now consumers and businesses paying alone, seeing that the economy is soft, you see the across the world, but in Canada, a significant rate of inflation, if which we were not used to interest rates have been hiking over the last several months. So all that has been adding pressure to both consumer and small businesses. And that is impacting the creation of jobs, and making people who were used to save over the last couple of years, right now use that disposable income to pay for that. But it’s but everything seems that everything is collapsing at the same time. So you’ve got interest payments from government loans or government support. That’s happened this year. And then we’ve got increasing energy costs, which I think affects the candidate, maybe a little bit less than expected in Europe, but it’s still there, because it’s a global market. And now we’ve got increasing interest rates. So it feels like it’s almost like a perfect storm to a certain extent. And it’s that’s this year, is it that really things are starting to crystallise. Yes, and I will say that tip of the iceberg, even I will say it’s a little bit of calm before the storm, because people know if you can seek the what is happening in the economy, you can feel it. But you there are still people wanting to go back to their day to day and spend. And you can see across a small, medium and large corporations starting to see some signs of delinquency coming up. But when they see especially the big corporations, the big banks, the risk in their portfolio, they see this massive overhaul growing, that’s why you will see in many of the Canadian banks, adding additional provision to their portfolios, in short, in order to assure that they will be ready when those loans will default. A lot of Canadians they have a home properties in they have this is very important home equity. And I think people have started start to tap into those home equity is using their credit cards, try to keep up with the day to day and spend. But as we all know, that cannot last forever, people are starting to have a more important and bigger minimum new payments across the credit cards and their lines of credit. And at some point, they will not be able to catch up with their mortgage payments. And what’s your sense is you obviously continue to chat with folks across the industry there. What’s your sense around when you think delinquencies are going to start flowing through? Sounds like some of its you starting to see some of it but it’s not huge amount. But when do you think that’s going to start flowing through

3:43
is interesting in every industry within in Canada is different, every company will have different levels based on the risk management policies and controls that are put in place. But based on what I have talked to different people, they expect that delinquency will rise towards the end of the year. And at some point April expects there will be this seasonality of delinquency plus a snowball that has been created in q1 of next year. So this is the time for people to get ready.

4:12
And in terms of readiness to that point, you’re gonna see in terms of like call volume coming through or SMS volumes coming through. So there’s that volume aspect, we’ve got inflation, which might be a cost aspect to it, what are some of the things that people are doing to get ready for it? What should they be doing to get ready for it? And is not a rocket science but has it complexity and is moving for more self serve digital channels, you can see across different players, small or big, that there has been a level of investment in detail in sending SMS emails make improvements to the IVR to be able to help consumers to help themselves serve to make payments to do basic transactions at their own time, but I think that has not been enough. Implementing detail strategies is the right way to go is the point

5:00
And we’ll be the future. But take Stan is complex. And sometimes the returns are not seen right away. And that is making some of the companies that are spilling distress in how much money they can spend in technology to maybe slow down and not at the pace that they should be to be ready for the significant volumes that everybody is expecting. Yeah. Digital has been obviously quite involved, I’d say over here in Europe, what’s the state of evolution? Does it change by industry sector as well? So in terms I know you’re in in telco for examples, is that different from what you saw in the bank versus what you see elsewhere, as you as you’re talking with other industries as well in collections? Yes, aside from the technology investment that you need, you can see that telcos have a big advantage, they have their cell phone number of their customer in that in that as a key element to be able to send SMS and they have a better email base, I think, relatively speaking, versus financial institutions, which may be kept that consumer a long time ago, when maybe emails were not even something that were captured. So having that ability to have the right contact with the customer is the same. I think that there is a bigger investment in more transactions going through SMS and email versus telephony. But I think telephony still a very important channel to communicate with customers in collections. The problem with that is that consumers are not picking up the phone, they have caller ID, they know who’s calling, they can decide to pick up the phone or not, that’s level of not wanting to deal with things at that point. And customers are feeling more comfortable doing that at their own time, or their own pace, going, maybe there’s no people around them. And I think that in the way that the company’s telco financial institutions continue to make investments in understanding something is not only for those low risk customers that you should be using digital, SMS and email is really for everybody is channels where you can connect with customers and engage with them. And I think that’s a key element in engaging with customers. So they will come back to you and tell you, I can pay or guess what I need help to make a payment. So I know you’re a real advocate of it, because you’ve seen it work. And you’ve seen it work in the local market as well. If you’ve almost got that blank slate where you don’t have digital strategies, or either you need to make improvements in digital strategies, where’s your recommendation terms like where best to start? In terms of looking at it in terms of implementation,

7:20
I will say that if you have the capability of sending SMS and emails, I will say nothing like this to learn, pick up really all of your customer segments, low medium or high risk segments, as an example, and test them, send them that early not connecting the earlier that you do it in the cycle of delinquency, the higher the chance that customer will engage with you in comeback. I have seen even SMS when we’re asking to have customers call you back is just really a nudge that says, Yes, guess what I forgot to pay, let me pay, and there’s no further interaction needed. Sometimes that customer will require an interaction and maybe call you back or interact with SMS or email to pay. But I think the key element is to across all the segments, and tests. And from that testing, you will learn a lot of things that the customer wants to do in order to engage. What do you think is holding back adoption of digital? I mean, I know when we were chatting and I was over there, were chatting to some folks around it did feel like there’s a little bit of a sort of resistance around whether to do that versus traditional channels. And there’s a little bit of if it isn’t broken, don’t try and fix it to a certain extent. But what do you think? What’s the hesitation that people have got? And how do you get around that? And what what are the benefits that you’ve seen from it? Is it is it a valid hesitation that people have got?

8:35
It’s a great question, Chris, I think there’s I can divide that in three. One is, of course, that the total investment is not that simple, in that cheap to implement a good digital strategy. So that requires investment and time. That’s number one. But let’s say that people understand the business case, and they’re willing to invest in companies are doing that, probably in baby steps, some of them but they’re doing that. The other one is really their perception or their legal framework in terms of privacy and how you can contact customers, nothing one is the biggest roadblocks that companies are facing, especially the big corporations. I think that dialogue between the legal teams and the business and the shops that are doing collections, that communication needs to get better to really understand not why we should not do it. But what are the things that are required from a legal perspective in the text in the communication in the constraints in order to engage with more customers to pay and the third one rejecting is the one that people have under control. Is there a risk of what will happen? I just said I think you said if it’s not broken why need to change it and people are saying like call customers in by calling they pay play I want to change that the an SMS and email is less intrusive. So there’s this perception and I want to use the word perception that because it’s not such an aggressive channel, that’s

10:00
Some customers will not respond. In my experience, I have seen that even high risk customers respond better to an email and SMS, as long as it’s early on, has a call to action, and offers solutions to help that consumer that may need help to make their payments. So I think you can remove some of those barriers, both in additional investment dialogue with a legal teams, and be able to feel confident that by testing, you will see good results across your segments. I think that will make companies more comfortable that digital is the right way to go. Do you think sometimes we get caught into this hole? It’s either digital or it’s manual? And it’s one or the other? So we’re going to be completely committed to it? That’s a different question from let’s try and do that almost like in a low key way first, and doing both things and having a blend of both. Because the cost of digital is, it’s so much less particular, if it’s self serve on the investment side, the cost is so much less, you can almost do both the cost of the emails is sense, isn’t it? Versus versus dollars or 10s of dollars for calls? Are we using that sort of almost like binary kind of world? And really, we should be thinking about that? It seems like how do you have almost like a blended strategy, but it includes digital, because it’s cheap enough to almost do across the base. I think you’ve hit the nail on the head, Chris, I think companies are starting to realise that needs to be an omni channel strategy, you can send an email, send an SMS, and do a call, maybe not at the same time in one day. But through the lifecycle of that strategy, let’s say the first month of delinquency, you can know when to send each right, so that you can schedule an SMS and an email and maybe a call five days after you get that customer has not reached back to you. Or maybe you can send a call and say it will also be sending you an SMS or an email to give you additional information. I think by using an omni channel approach, the customer can identify in which of those channels they feel more comfortable to engage with you and resolve their delinquency problem. I think more and more I’m seeing that they’re starting to, to have those strategies being implemented. But I think it’s still a long way to go. And what about customer treatment? we’ve chatted quite a bit about what’s happened over here in Europe, and particularly the UK, which has been regulatory driven, I would say to a certain extent in terms of customer treatment, or customer support and collections, which I think is a bit of a different kind of approach than at least I knew 10 1015 years ago over there. What’s your what’s been your reaction to that from a collection point of view, or even what some of your concerns around that in terms of applicability in the really in the North American market, not just going to Canada, but also, you know, North America, like us or Mexico as well.

12:39
I think that COVID A

12:42
terrible thing that happened to the humanity. But in our space, one silver lining was the development of loss mitigation tool, and payment plans to help customers that will need that help. I saw across the board in many industries, that from the top of the house, there was that appetite to create plans to help customers stay over time to give them a breather understanding that they were not able to work in COVID ended for now we’re seeing many customers not being able to work all the way hours being laid off. And they will need that same kind of help. And I think those plans cabling been developed the payment affordable payment plans to help customers, I think the secret sauce is still ease in how to engage with that customer to be aware that can exist if the customer doesn’t know what the plan is how we will help them pay their account over a period of time to regain their telecom service to keep their credit card open, or any kind of service open and available. If they did not aware of that, then that customer will not take the plan and acting that’s still the problem to be solved. How to let those customers know that there’s a plan for them to repay their account in really an affordable way. So that’s the engagement piece really isn’t it? It’s like exciting to engage people, how do you get their attention to then be able to have that that that kind of conversation as well. It’s just interesting looking at the treatment piece in terms of do we need to make look at different plans or different ways of actually in particularly if you talk about it being q1? If we go into not sort of an extended downturn or if the downturn ticked if it gets worse? Are we going to need new tools in our lockers to really offer customers in terms of thinking from a brand protection point of view or from from a financial protection point of view as well? And what are your thoughts on that? I think those plans having developed some of them will need to fine tune to ensure that they’re easy to communicate because at the end of the day, the customer needs to understand that it was good to communicate that person over the phone, an email or an SMS, they need to explain the conditions of the plants I think that needs to continue to evolve and mature because once the customer role it will take some time to repay their account. And that requires engagement and communication to should that customer let’s say we’ll pay over a period of six months their loan that will require a different

15:00
level of engagement assured that keeps up. I think a key element for that is that customers see that there is a part not only to pay their account, but what’s in it for them, what they will get from paying that loan, that service over a period of time, they will be able to improve their credit bureau, they will be able to get back the same level of Turks that they had before they went into delinquency. I think they need to see that there’s a win situation for them. If not, I think there will be hesitation for consumers to take the plans. And I think something that we’ll talk about when you were here, back in the spring. I think that engaging early on, even before delinquency, before the problem happens, or barely early on, that will be the key for company’s success. Customers will be struggling across different bills that they need to pay. The person could get there first and offer the right solution explained that correctly. Maybe in a better position to get that customer’s attention, engagement and loyalty to pay their account and stay with them for a longer period of time. It feels like there’s a window there to do that. It sounds like the windows extended maybe a little bit. So it sounds like it’s in q1 now. But there’s still it moves really fast. It was time seems to just fly by at the moment actually over the summer, will be into the summer will be into the September sort of October timeframe. And then really these things got to be in place, haven’t they? It’s that’s when things starts as things start to flow through. I know you’ve got a lot of large people leadership experience. Padre, what’s your view around people leadership, particularly in times when times are tough. We’ve been we’ve been removed versus in the office. And we’ve got digitalization going on in the background, which can raise a lot of fears, there’s cost pressures going on, what’s your view around sort of how to how to handle that on the floor, how to handle the like the large group management, really to make sure that you’re getting the best from the people as well, because that’s also a tough situation. And we can’t hesitate to say to mention the fact that employees have been through a tough time too.

17:00
It has definitely been a game changer. I think that the way that we used to engage our employees in the past, has changed dramatically over the last two or three years. I think it’s more difficult today to engage an employee to be at the office to be loyal to a company when you work remotely. So that combination, I think that all companies are still exploring what is the right model, bring everybody back five days a week 100% remote, something in the middle, I see from the industries here in Canada, that will be that probably bringing people for a period of time to the office 234 times a week, every company needs to decide what is best for them. But I think by bringing people in, the key element is to engage them to train them so they can feel the brand in the company that they represent. Because I think that’s the key element. When you go back and talk to customers. You need to know your services and products that the company wants to do right for the customer. And if there’s not that level of I’m the representative of the company to help you miss or Mr. Customer is very difficult to engage properly. You can have we’re talking about loss mitigation plans. If you’re not well trained to offer that plan, you don’t believe the plan will help you cure your account is very difficult to convince that customer to take it. So it’s still a people business and employees will need to be very engaged, very well trained, and understand that they’re really helping customers in moments of growth. Collections is a moment of growth. If you do it right, that customer will not only pay that account, most likely will be a customer for life, and most likely will talk to other people about their experience. That was brand loyalty, then a kind of marketing that all companies are looking for. And I suppose particularly if you do use digital automation, it takes some of the easier calls out of the cycle. So average handle time goes up the knowledge and complex products and the complexity of the calls also goes up as well. So all of that probably has to be managed in terms of making sure that those people are getting the right training or they that they are understanding what the products the product set is

19:09
definitely is changing. All those easy calls are probably now moving to lead or Channelside, you said so the level of training required to manage more complex calls is evolving. But I think that’s a great problem to have. Because I do need employees that have experienced that they have the knowledge to be able to work with more complex transactions in those complex transactions are more rewarding when you can have a customer’s going through a big problem in their personal life. They lost their job, they lost a family member, they don’t know what to do, and if you can be there to help them. It’s a great moment of a knowing that the job that you do is meaningful. But as you said, requires more training takes more time on the call and I think that’s something that both the employees and the employers we need to realise because our more complex

20:00
Some take longer time. So the investment in training, the number of people that you’re required to work those accounts will be different is something that I think we have talked to that in the past, I think the UK has seen that significant change already. I think that in the Canadian market, you’re starting to see those people are learning sometimes the hard way that you’re moving volume to digital does not eliminate call volume, it just changes, the amount of calls that you get, or the length is something that people are appreciating and understanding that the dynamics are changing and takes more time. But is the right thing to do to help customers that are struggling the most? And in terms of so do we do you think we need a different measurement system in terms of some of the KPIs we would look at in terms of like, how you manage that, how you manage the floor, how you manage the operation, how we think about, for example, stick rates, those kind of things? That is our our KPIs set up right for the environment we are in today, particularly look at the the ongoing, ongoing economic situation as well do we need different KPIs, particularly if we see a downturn? I think that there are some fundamentals that will need to stay there. But I think that just they need to evolve, in my experience, what I have seen the most difficult to be able to align and create that KPI and measure it correctly, and be able to align the work that we’re asking our employees to do, versus how they’re rewarded these, those loss mitigation plans, you work with a customer and as an example, work a six month payment plan,

21:32
I know is the right thing to do to the customer. But what is easier for me to do as an agent on the phone, ask for an immediate payment, my call will be faster, I get a payment, most of the times I get incent by getting a payment and I get rewarded, doing the right thing and work with that customer over a longer period of time getting those payments over six months, those incentives are not aligned. So you need to align those payment plans, those cure rates to the employees incentive plan and performance once you can align those, I think that the right conversations will happen. What I have seen is difficult is how you can properly track those payment plans over a period of time. Do I need to wait six months to get my incentive being paid? Or I get it upfront? But what happens if the payment plan is not fulfilled? So I think that there’s still work to do to aligning incentives with the performance of our employees to work with customers, based on what the customer needs, not necessarily what the employee wants. The danger of incentives Absolutely agree is you get the suboptimal systems can’t you worry about your incenting the wrong behaviour as much as you’re trying to incent the right behaviour. And that wrong or right behaviour is a critical thing, isn’t it? So if you don’t get that, then you get all sorts of things you don’t want to happen. Yeah. Early detection. There’s a lot of discussion around churches up as an example, or large language models or AI that’s been taking over seems to take over my life for the last three months in the last three months. But it did strike me in North America like that was further ahead and adoption was further ahead. And I’m quite interested in hands on what you’ve heard from a business point of view. Certainly the kids seem to be using it all the time.

23:14
I mean, but what’s happening from a business point of view? And is that generating the same kind of excitement that we’ve seen over here in the UK?

23:22
The thought is there. I think companies, key decision makers know that is the future. I think that the appetite to embrace that as a priority is not there yet. I think what I have heard from different places is let’s try to leverage technology that we have that feels something that consumers will not necessarily will be able to engage in responding the same way than with regular typical channels, let’s call it a talking to a person. So I think that they’re still at a very infant stage a I kept seeing very indifferent players offering that artificial intelligence in natural language to be able to help improve the results, the business cases there. But I think that the payback is not as fast as many of the companies would like to see. So I think that is going to take some time, you will need one or two key players to embrace that technology, see seeing it work. And then I think people will follow but I have not seen the leader in the industry that will say I will take that

24:24
step and move forward ahead of the rest. And take advantage of it. I think the company or the companies that will take that leap of faith early on, I think they will see great results. But I think still a long way to go. So there’s a little bit of risk aversion there. And then it’s also where does it fit within my investment pipeline and some of the earliest stuff that’s easier to do those first to a certain extent. So that’s holding it back a bit. It doesn’t seem to be holding back teenagers for using it for homework, but, but, but maybe that’s a different question. They have a different investment timeframe. Maybe Maybe I don’t know, they’re less risk averse.

25:00
We’ve heard that’s true. So if there were five things that you’d recommend taking a step back, that people look at in the collections industry, particularly in Canada, but in North America, what would you say the five things you think are really worth looking at top priorities? A great question, and I think is a good rapid recap of what we have been talking. I think the first one that comes to mind is early delinquency strategies, pre delinquency strategies, that’s a game changer, and really a way to really tackle the problem when it starts. The second one is smart investment in digital strategies across all of your risk segments, in order to improve cure rates, but also to optimise costs across the companies, which is a big problem that companies have. Third is engage employees the right way and train them properly to help customers when they need the most. For a continue to improve and enhance payment plans, loss mitigation tools to help customers when they are going through difficult times. I think that will be a key element to help customers down the road. And I think the last one, but I think the one that is most important is continue to invest in collections. I think the biggest mistake I have seen in my career these companies invest in collections, was they have the problem. And once you have the problem is very difficult to come out of it. You make continuous investments in collections in technology in process and people, you’re ready when things are good. But you will be ready when things start to deteriorate. And again, if you do that timely, you can save hundreds of 1000s millions of dollars to your company’s p&l. But I think I pretty much agree on the last point, which is it might look like a raise aren’t necessarily spiking, particularly at the moment. They’re although they’re going up slightly. But now’s the time to invest. Because in six months time, if they do spike, and this gets too late, and you’re on you’ve got a six month timeframe for it to flow through. So I know we both know that but that’s obviously often critical, isn’t it? Pedro? Thanks very much. I know we did a write up of when we were chatting back in the spring. So we will put that that down in the links as well. But it’s it’s great to talk to you as ever. I know you’re chatting with everyone over there. So I think it’s greatly a bit of an update as to where we are from a Canadian point of view, at least anyway, so really appreciate it. It was my pleasure, Chris it always good talking to you and looking forward to talk to you again.