Utilities focussed on communicating with vulnerable customers in collections and recoveries
Last Thursday (16th March 2017) Arum were the sole sponsors of Utility Week’s annual Consumer Debt Conference.
The participants at the event, mainly senior executives, managers and practitioners from the power and water sectors in the UK and Ireland, heard a series of consistently excellent presentations that prompted substantial discussion during breaks. A large amount of ground was covered but for me the themes that emerged were:
- the difficulties of and the innovation occurring to overcome the lack of trust that many customers in arrears have of utilities;
- the challenges of identifying/communicating with vulnerable customers in order to help them, and the cultural change that has occurred, inferred by the strenuous efforts underway;
- the sectors’ improving (albeit still patchy & from a relatively low baseline) use of internal and external data in collections and recoveries to derive customer insight and take action;
- competition and the various regulators motivations, indicated direction of travel and likely actions in the debt collection and recoveries space.
SE Water, United Utilities, Southern Water and ScottishPower all talked about the importance of partnering in identifying and communicating with vulnerable customers and those in arrears. The successes have come from:
- talking plain language – for example United Utilities renaming some of their customer assistance schemes;
- striving to introduce consistency in communication across all channels with a multi-partner approach – SE Water working closely with councils and the not-for-profit sector;
- the need to consider every case individually and impartially – ScottishPower working with Social Enterprise Direct.
As Arum is intimately involved in collections and recoveries good practice across many consumer sectors it was particularly good, I felt, to hear a good deal of consistency from Ofgem, Ofwat, FCA and (later on) the Institute of Customer Service on the expectations and benefits of treating customers well – when in arrears and when vulnerable – “vulnerability is a state not a trait” jumped out. It was also good to hear from many of the utilities throughout the day as the ‘penny has dropped’ (with those who spoke anyway) on vulnerability within debt collections, and progress is being made.
Ofwat’s John Russell provided some newsworthy quotes picked up by Utility Week’s own journalists around how Ofwat will consider debt within PR19 and that Ofwat will immediately and rigorously enforce its Customer Protection Code of Practice when the English non-domestic retail market opens on 1st April.
We heard from Policy in Practice and E.ON on how, through very different data sources, good use of insight from data and analytics can be used to identify vulnerable customers and tailor customer services. Whilst Arum’s own Sandy Duckett, explained from his experience as Head of Credit Management in power and water sectors, the benefits that leveraging insight from excellent debt collections and recoveries can have across the entire customer journey and highlighting that investment in improving collections and recoveries activity improves customer satisfaction whilst typically delivering positive returns faster than other investments.
Stuart Ledger from Thames Water shared one of the most notable stats of the day – that in a year since go-live of a new collections and recoveries target operating model and associated systems/tools (vision, operating model definition, tool selection and transformation assisted by Arum!) they have moved their bad debt charge as a % of turnover from 3.4% to 3.0%. He also outlined the further improvement planned using the tool set and next initiatives with smart meters.
I spent a good amount of time chatting to other attendees during the day. Quite a few were senior in various utilities and some were new to the debt collections and recoveries space so we spoke a lot about big picture trends, where debt collection and recoveries has come from and my favourite topics of ‘what good looks like’, and ‘what excellence in collections and recoveries looks like’. It is unbelievably more than 12 years since my first utilities transformation project, since then Arum/I have completed a number of other collections and recoveries advisory and transformation projects, I have chaired conferences and judged many awards in the space. Arum/I have also completed many successful projects in banking/financial services sectors in many countries and have become (to the best of my knowledge) the leading vendor-independent specialists in debt collection and recoveries, so I don’t feel too arrogant in thinking that I am as well placed as anyone to reflect on where the utilities sector is today in this specialism.
I have to say that overall it is impressive how far many utilities have come in understanding the business importance of excellent collections and recoveries and moving capabilities forwards. Cynics might say that this not surprising given that bad debt charge and collection costs can represent 20-40% of retail costs and the regulatory focus – but in my view there appears to be genuine pull to improve both for the benefit of the businesses and their customers at all levels in many companies.
In some businesses however there remains a lack of awareness of the value of good collections and recoveries and the importance of data quality and analytics in driving process improvement throughout the customer journey. It is these businesses that I am most concerned for as my view is that (particularly given the forecast UK economic and competitive environment over the next few years) they will see increasing costs, deteriorating customer satisfaction, customer attrition, downward pressure on profitability and ultimately maybe regulatory intervention.
The utilities doing best in this space have made real progress on culture in collections and recoveries and on building excellence into the business model which is both good for the business and good for customers. So, whilst recognising that excellence is an ongoing journey not a destination, we should celebrate this!
For more information or to discuss anything raised in this blog with Aleks or Arum please contact us.
Aleks is the well-known and respected CEO of Arum, the leading independent specialist consultancy in collections and recoveries. Aleks has many years of consultancy experience, during which time he has successfully delivered major credit change and transformation programmes in utilities and banking. He specialises in the management of change, collections technology and in transition programmes and has led full life cycle project management of major projects and managing stakeholder relations and approvals up to plc Board level.