Considering that debt can be used to describe anything from a house mortgage or overdraft to even an unpaid bill, we can all relate to ‘owing money’ in some way.
The latest data from the Australian Bureau of Statistics shows nearly 73% of households have some form of debt, and almost 30% said the amount owed was three or more times their income.
In fact, it is household bills that Australians are struggling with the most according to the findings in our Global Insights Report. As a result of COVID-19, 45% of Australians in the survey said they found it difficult to pay off monthly bills mid-last year. One third of the population still feel this way, despite many people feeling more financially stable now.
It’s clear – debt is a familiar and relatable topic for most of us. But with something as normal as monthly bills being a common cause of debt, why does this topic carry such a stigma?
The cause of debt stigma
Part of the problem causing awkwardness around debt and repayments is the demeaning way that this debt is collected, an altogether sub-par customer experience. Often people are approached in an unfriendly manner that feels harassing or have heavy legal language thrown at them, leading many to bury their heads.
Nearly 50% of people would switch lender if they had a bad debt-collection experience our research found, so it’s time for a new approach.
A new approach to collections
For many years this has been on the mind of lenders, who have done a lot of work towards gaining a better understanding of their customers’ specific circumstances, so they can identify appropriate repayment solutions and debt services for each individual. This is what we call a people-led approach to debt collection, and it has been long overdue.
The new systems being implemented into lenders’ debt collections processes are helping make the subject of debt an open and positive one and enabling Australians to feel more empowered when it comes to managing debt.
The power of data and analytics to help remove debt stigma
Part of the success of these new processes is down to the power of data and analytics. Collaborations like the one between Experian and InDebted aim to help lenders better understand and differentiate the preferences of the individual. This use of data offers a far more personalised and approachable service, in turn reducing the friction and awkwardness when addressing debt and repayments.
Even the small details such as knowing whether someone would prefer reminder texts, or a scheduled chat on the phone, contribute to making repayments as easy as possible. Ultimately, providing customers with the ability to self-serve at a time that suits them results in a simple, convenient and positive experience.
The future of debt collection
Now almost all of InDebted’s business is carried out digitally and over 90% of their customers use an online portal to manage their accounts without speaking to anyone at all. This indicates Australians clearly feel more comfortable taking control of their finances by proactively scheduling their own payments versus talking through their debt on the phone, or actioning requests sent through the mail.
The increasing people-led and digital approach across lenders means the future of debt collection will result in more manageable repayment plans, a better customer experience and soon become an everyday normality.
And as it should be – because at the end of the day, it’s an everyday reality so many of us face.
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By Mathew Demetriou, General Manager Decision Analytics, Experian A/NZ