How using data can help you keep your customers out of financial difficulty

By Michael Chatfield, General Manager – Australia & Asia, illion Digital Tech Solutions

Experiencing financial difficulty can be tough for everyone involved. When a customer slips into arrears a gap is created between projected and actual revenue. It’s distressing for the customer who may be juggling competing financial priorities, and a disruption for the supplier, who now has to allocate time and resources to recovering the debt.

Proactive support for consumers who may be susceptible to falling into financial difficulty makes good sense. It’s now also becoming a legal requirement for energy retailers. In Victoria, Australia, the Payment Difficulty Framework, part of The Energy Retail Code by The Essential Services Commission, is setting new standards for the way companies treat customers experiencing difficulty in making payments. Coming into force in January 2019, the Payment Difficulty Framework ensures all customers have access to support, with energy retailers needing to be pre-emptive in offering help and making sure customers are aware of the assistance available to them.

There’s a big difference between wanting to offer customer support, however, and being able to deliver it. Retailers should consider how they identify customers who are most likely to require assistance. The regulation states that all customers should have access to advice and guidance, not just customers at a certain stage of debt. It’s simply not feasible to approach all customers with the offer of support as this can be costly, time consuming and potentially damaging to customer-relationships. Retailers must think about how they can identify customers early on, preferably before they’ve slipped into arrears.

There are various signals that can help identify if a customer is at risk of slipping into arrears, coming from a mix of data sources. Firstly, there’s the customer information that retailers hold. This includes payment patterns – if a customer isn’t paying by direct debit, and the date on which they pay fluctuates or they are consistently late, this can suggest financial challenges. It may be as simple as payments consistently being made after the due date, in which case being able to switch payment dates could solve the issue. The customer may not have access to the internet and can only pay by cheque or over the phone, so the retailer needs to be able to offer flexible payment channels.

Secondly, there are readily available external data sources. A customer’s credit report can help pinpoint any potential issues, allowing the retailer to identify where flexible payment options, or varying amounts, could help ensure the customer doesn’t fall into debt. Loan application history, which will provide insights such as whether the customer has a mortgage or car finance, can help assess the customer’s ability to pay and flag anything which may take priority over settling energy bills on time.

Once energy retailers have this data, they can begin planning how to proactively communicate with and support customers. The aim is to keep customers out of arrears while providing support when necessary in a positive manner that maintains the relationship.

Take a moment to imagine you’re a customer who knows you may struggle to pay next month’s bills. You’re grappling with how to approach providers and increasingly anxious about the response you might receive. If one of those providers were to reach out and suggest, unprompted, a change to how or when you pay, or offer the ability to split charges, your perspective of that business is going to be significantly altered to the good. That’s the kind of result that fosters loyalty and leads to long-lasting customer relationships, which is an outcome all business should be striving for.

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