Mounting inflation and economic challenges in the wake of the pandemic have meant that an increasing number of customers are experiencing financial vulnerability. The onus is now on companies to help their customers ride out these difficult times with a differentiated approach.
Financial vulnerability includes the inability to pay dues towards energy and utility consumption or fulfil a home loan obligation. Vulnerabilities could arise from prevailing personal and health circumstances as well. Disability or old age, unexpected life events such as a bereavement in the family, and a lack of digital familiarity could likely cause vulnerability.
17% of the population were impacted by events such as a relationship breakdown, bereavement, or job loss in 2021. An economically detrimental situation, combined with soaring cost of living, is also leading consumers towards unsound financial practices.
A 2022 study reveals that the market for personal loans is getting a boost from financially vulnerable consumers. Nearly 38% of personal loan customers are financially vulnerable, with debt settlement being one of the top reasons for securing a 1000 loan.
Addressing vulnerability with a differentiated approach
A differentiated Customer Experience (CX) strategy becomes pivotal. It ensures that a company: alleviates the pain of vulnerable customers; gives them fair treatment; and simultaneously safeguards its business interests.
CX must be underpinned by a robust strategy that leverages the combined prowess of digital, data and domain. This human-digital approach will ensure that next-gen technologies are complemented by a team of domain experts who offer empathetic, proactive and personalised service.
Elements that power a differentiated CX strategy
Data-driven insights:
A leading utility company deployed an advanced analytical model to segment customers based on the propensity to pay and outstanding dues. The company then reached out to each customer and offered a payment method tailored to their situation. The outcome: 20% improvement in collection rate and a significant reduction in write-offs.
Data-driven customer insights are critical to making the right decisions at different stages of the customer lifecycle. When a new customer signs up, data can offer insights into the most appropriate payment profile to minimise the risk of default. Moreover, proactive identification of vulnerability among existing customers is key to preventing payment defaults and reducing risk.
AI backed by human touch:
To offer a personalised experience to customers, companies need to decipher behavioural patterns to identify the right emotion from conversations. Sentiment analysis that uses Artificial Intelligence (AI) and Natural Language Processing (NLP) across e-mail and text conversations, web chats and voice channel can offer useful clues in real-time. This, in turn, will help a trained human ear to pick the nuances and offer the right solution. Telecom firms are using technologies to improve customer vulnerability identification and offer customers their preferred channels to disclose the situation they find themselves in.
Proactive customer engagement:
There needs to be continuous engagement with customers. Avoid bill shocks and offer a payment method that best suits their needs. Energy providers in the U.K. have seen the benefit of being in touch with their customers on their preferred communication channel – driving conversations around ways to optimise consumption, lower the bill amount and normalise payments.
Companies have been successful in reducing vulnerability by drawing customers away from traditional prepayment meters to smart meters. Vulnerable customers can now track credit and usage anytime, and are thus encouraged to optimise energy consumption.
Clear, inclusive, empathetic communication:
Transparency and clarity in communication are important factors in dealing with customers with financial vulnerability. Insurance companies have found that vulnerable customers may need help understanding a product they are buying. For example, an interpretation of terms used in claims documents. Some financial firms have developed best practices when it comes to an accessible and inclusive product design.
The need for digitally integrated CX has never been greater
Customer service in today’s difficult economic climate needs a rethink. It cannot be a case of prioritising one over the other. Companies need to strike a balance between protecting their interests and being empathetic to customer needs. Therefore, it’s imperative that businesses strengthen and modernise their collections process with a digitally integrated CX model.
Such a model can combine propensity-based collection and predictive modelling to accurately forecast default probability. Furthermore, the model’s ability to intelligently blend automation and human assistance enables enterprises to proactively reach out to vulnerable customers and offer personalised solutions.
An end to the economic crisis is not in sight yet. The time to give a new orientation to an organisation’s customer experience strategy is now.