The Indonesian economy is transforming rapidly. A recent report by McKinsey projects that 90 million Indonesians will join the consumer class by 2030. With a young and quickly urbanizing population with improved spending power, there is considerable demand for potentially lucrative new markets and services.
However, as with any country in a state of transformation, there are challenges. While the rise of fintech companies has helped alleviate the problem of serving the financially underserved individuals and small and medium enterprises to an extent, financial organizations are grappling with challenges on the other end of the lending process — collections. According to a “2018 Collection Complexity Score and Rating” report by Euler Hermes, Indonesia ranked seventh among countries where the challenge of collecting unpaid debts is “severe”.
Considering historical perceptions of a typical collections process, it is only natural that consumers are wary of debt recovery practices. According to a 2018 Benchmark Study released by Intelligent Contacts and conducted by Marketing Research Firm AYTM, both consumers and lenders want the same thing — to pay it off. Most consumers are willing to be proactive in paying off what they owe.
They need to feel empowered and not intimidated by the recovery process. Lenders need to provide them control along with a digital, safe and consumer-centric environment to engage and manage their payments. This will eventually lead not only to better recovery rates but helps build trust, provides convenience and improves the customer experience, while successfully navigating an inherently frustrating process such as collections.
Consumers today expect to be engaged in “new digital” channels and this is the new normal.
Indonesians have embraced digital technology with much fervor and the digital ecosystem in the archipelago continues to thrive. While this shows the potential in implementing digital strategies to engage collections, engaging customers effectively across digital channels is yet to take off meaningfully in Indonesia.
There is a growing trend in early collections activities focused on customer-centricity and satisfaction. Customer-centricity is at the heart of building enduring customer relationships that bring better and more measurable value back to the lender as well as the borrower — particularly for a country such as Indonesia that is geographically wide and has high smartphone penetration and adoption. It is time financial services players focused on a new approach to collections.
In today’s digital world, the collections strategy needs to be digital, analytics-led and omnichannel. The approach needs to factor in individual customer circumstances (data) and engagement preferences (digital and omnichannel) to drive positive and consistent customer experience. Customers today want personalized services that are delivered and managed through a channel that they deem appropriate.
With the implementation of the right technologies and focusing on customer needs, the engagement strategy can be based on data that helps lenders determine effective channels and resource allocation. Identification of outreach initiatives can be correlated to customer behavior data points — helping lenders to identify defaults early and implement strategies before the default actually happens or managing delinquencies in a more effective manner.
Getting ahead of potential future losses by deploying next-generation techniques in collections will strengthen value-added returns from customers, changing the perception of collections from a cost center to a value generator. It also helps reduce dependencies on frontline collections capabilities such as call centers and collection personnel since it is pretty evident that consumers do want to engage collections agents, unless it is at their choice.
The debt collection “experience” does not have to be an oxymoron nor does it have to be a painful process. With investments in the right technologies and focus on providing the right customer experience, debt collection can be aligned to both lender and borrower needs — making the process intelligent, accessible, positive and engaging.
Managing director for Southeast Asia and Emerging Markets at Experian
Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.