As a Collections consultant, I have a simple methodology….if it’s easy to do, it’ll be done. And I’m not the only one who thinks like this. The ease of payment method often turns a non-payer into a payer.
20 years ago, when regular payment meant a visit to the bank, or the writing of a cheque which then needed to be posted, procrastination sometimes came to the forefront, and payments were late, or missed altogether. Nowadays, there should be no excuses for missed or late payments, but that’s not the case, and a lot of times, it’s the same reason….it’s too much hassle for the payer.
If you’re spending time contacting people who can, and will make payment, then you are a payment processor, and not a payment collector. Collections is about streamlining the payers to make it easy for them, so that you can spend valuable time working with those who are struggling, and with the non-payers. These days, even one too many clicks can prevent a payment being made.
Why are there still missed or late payments?
In my experience, if we rule out the change in circumstances for some, and perhaps the affordability aspect, for those who can pay, it’s because a lot of businesses, and local authorities place more emphasis on providing the service, or underwriting the loan, to ensure targets are achieved (quotas for social housing, revenue from issuance of loans, etc…), and sometimes neglect, or leave the responsibility of the payment on the shoulders of the consumer. And this is where the problems begin.
However, the good news is that there’s an easy solution.
“When it comes to payments, a frictionless experience minimizes the barriers involved in the checkout process for both online and offline hubs.
A streamlined checkout process eliminates or cuts down waiting time by reducing the number of steps needed to make a purchase. When it comes to making a payment, a frictionless experience includes convenient choices like mobile payments, one-click payments, auto-renew subscriptions, contactless card payments, digital wallets, and other invisible payment methods.” (Smullian, 2020)
Everything these days is about ease and speed, and COVID has certainly accelerated this with 38% of consumers believing that contactless is now a basic feature.
Contactless payments indicate that consumers wish to not only make payment with their card, but also to do so without effort. COVID has of course deterred people from touching the keypad, but the growth of Apple Pay and other mobile wallet systems, “people are slowly adopting to swiping their smart devices for purchases, eliminating the need for cash….and relying more on apps and other software for financial transactions. With over 383 million users worldwide, Apple Pay is one of the most prominent mobile payment providers worldwide with a global iPhone user base reach of 43% as of December 2018” (de Best, 2020), payment behaviour is changing, and now even entering a 4-digit PIN is too much trouble.
So, consumer behaviour was changing even before COVID, which just gave it a push. In a recent Banking & Payments Federation Ireland (BPFI) article, which published it’s latest figures for Q1 2021, Brian Hayes, Chief Executive, said “it shows that in-store contactless payments, which includes payments with cards as well as mobile wallets such as Apple Pay or Google Pay, made up 47% of those payments. And over the course of the quarter the volumes of contactless payment volumes rose by 12.9% to almost 149 million. “It is notable that growth in electronic payments over the quarter were substantial despite the Level 5 Covid-19 restrictions which were in place. With the reopening of the country now underway and likely to gather pace in the weeks and months ahead, we anticipate that the upward trends in electronic payments will continue into the future with an ongoing decline in cash and paper-based methods.” (Shevlin, 2021)
What does that mean for consumers?
With the statistics to back up this theory, it means that consumers (and SMEs of course) prefer the easy way to pay. And they don’t want to waste time making their payments, especially if it’s a recurring payment, like rent, rates (for smaller businesses), and loan repayments.
And this becomes even more important when the payment is an ‘unpopular’ payment. The local Credit Union generally has a better collections performance than most other financial institutions….and why is that? It’s not because they have better processes in place, because they don’t. And it’s not because their staff are better trained, because they’re not. It’s because the Credit Union is a popular institution, with a local and popular face, and people generally borrow from them for popular things (holidays, cars, etc..). From years of experience restructuring financial statements, people would prioritise their Credit Union payment ahead of their mortgage payment.
What is the solution?
Ensuring you have a process in place that allows the payers to pay automatically and that notifies you immediately when they don’t (which rules out standing orders and direct debits), meaning you can monitor the behaviours of your customers, identify the missed or late payments, and contact the customer immediately. Believe it or not, that is called great customer service and an excellent way to treat your customers fairly.
Allowing them to fall into arrears without contact, and then into further arrears while you wait to see whether they paid or not, is the exactly the opposite.
Use the technology available, that is popular and commonly used by your customers, and your arrears will immediately reduce. Step away from standing orders, An Post’s bill pay and other antiquated payment methods, and allow your customers do the work for you. If it’s easy to do, they will do it. If you put hoops in their way, don’t expect them to jump through them with your payment.
For more information, or help with improving your collections processes, please get in touch.
de Best, R., 2020. Topic: Apple Pay. [online] Statista. Available at: <https://www.statista.com/topics/4322/apple-pay/> [Accessed 3 June 2021].
Shevlin, L., 2021. BPFI Payments Monitor – Q1 2021. [online] www.bpfi.ie. Available at: <https://bpfi.ie/publications/bpfi-payments-monitor-q1-2021/> [Accessed 3 June 2021].
Smullian, N., 2020. What to Expect from Payment Trends in 2021 and Beyond. [online] DataArt Technology Consulting & Solution Design. Available at: <https://blog.dataart.com/what-to-expect-from-payment-trends-in-2021-and-beyond> [Accessed 2 June 2021].