Recent statistics from the Bank of England showed credit card borrowing rose 10.6% in the past year, the biggest rise in three years. This will be partly because unsecured credit is so readily available, but partly because the monthly income available is reduced.
One area in particular that has been reported seems to be the disproportionate borrowing rates on personal overdrafts, with many equivalent annual percentage rates well above 30%, compared to what used to be similar rates to credit cards before the pandemic.
Overall, if this situation continues to escalate, it will likely be the secured lenders who will be asked to show the utmost patience to ensure people stay at home.
And of course, all of this against a backdrop of the economies of some world powers seeing their GDP decline, which will only have a ripple effect on the UK and other major countries.
We must also remember that property prices have skyrocketed during the pandemic and many commentators are increasingly pessimistic about downward corrections in UK property valuation, whether at regional or other level.
What we have seen to counter this is a big shift in the market towards recruiting collectors compared to previous years; and this is clearly an indication of the risk that many institutions feel they have on their portfolios at this time.
Investing in staff is always a good thing, but there should be no need to manually manage primary or special maintenance these days. Service solutions should automate standard processes such as events triggering letters, texts, etc. automated, which means that collectors can process cases that need to be processed in more detail.
A self-service portal for borrowers to request information and make payments etc. will also reduce incoming call volumes. Service call center users can now benefit from screens powered by artificial intelligence (AI) and predict borrowers’ most likely needs. The AI can suggest the screens and information needed based on the results of similar cases on the wallet.
While the focus has been on replacing the origination platform for some time, there is now an influx of lenders and servicers looking to ensure that their origination platforms service are fit for purpose and stand the test of time. With transformation project timelines also being shortened due to automated migration activities, this is now seen as a key strategic and winning area for many institutions.
Richard Pike is Director of Sales and Marketing at Phoebus Software Limited