Mobile Mania

Aashutosh Mishra, Head of Risk, Cabot Credit Management, looks at the growing presence of telecoms in the debt purchase market and the characteristics of these accounts

We are living in a digital age where a mobile phone is considered a necessity. According to figures from Ofcom, by the end of 2011, 91% of UK adults owned or used a mobile - 48% of which were under contract rather than pay as you go - 76% of adults had either fixed or mobile broadband connections, and 34% of users used their phone to access the internet.

With a minimum anticipated face value of £300m expected to come to market in 2012 from mobile companies alone, is it any wonder that telecommunications are becoming a mainstream feature of the UK debt sale calendar?

Over the past few years in the consumer debt sale and collections industry the spectrum of debt and debtor types has been broadening. Customer profiles vary not only from one portfolio to another, but also within a portfolio. There has been an influx of different products: retail, utilities and student loans, available for both purchase and contingency collections as well as telecoms.

This increasingly complex mix of debt and debtor types requires a more customised decision process across the debt life cycle, as there is a need to constantly evaluate and re-valuate account level predictions. Activity-based debtor management is key.

There are some obvious characteristics of telecom accounts. The propensity to repay on telecom debt may be broadly similar to other consumer credit types, but the propensity to establish and subsequently maintain contact can be lower. This is possibly due to the more transient nature of the underlying customer profile which will vary by provider, but more obviously customers have lost their primary mode of communication and may not have provided alternative telephone numbers, always a challenge in a call centre environment.

Coupled with the lower average balance of telecom debts, this means that one off and lump sum payments are more prevalent, and longer termed instalment plans less likely when compared to other debt types sold. Outstanding telecom balances usually comprise call charges and early termination fees, and the split between them will attract different emotions and therefore reactions from customers.

For such a dynamic collections environment, harnessing data led analytics is critical. The entire cycle of analytics, from data and profiling, to decision-making as well as subsequent performance data, needs to be instilled in a scientific and measurable way to allow it to continually evolve. The static account and customer level data provided by the creditor at the time of placement or purchase has historically been the basis of collections activities.

However, there is now a need for better segmentation of the portfolio to be able to focus collection efforts whilst optimising operational costs. This can be achieved by enhancing information from the lender with a layer of third party data such as suppression data, automated tracing and credit triggers.

Furthermore, the very nature of the product brings with it a wealth of behavioural and lifestyle data which, subject to Data Protection Act limitations, can be used to enhance debtor profiling.

This combined single customer view forms the basis to create customer level propensities to repay or react to certain collection actions.

One can only assume that our love affair with, and indeed our dependency on, our smart phones will continue to grow. As the diversity of “apps” appears to know no bounds, consumers will carry out more and more of their daily activities via their mobiles, with every click producing data. The ability of the telecom providers - and subsequently debt purchasers - to harness this data can enable collections strategies that are tailored to each individual customer. If cognisant and tolerant of customers’ lifestyles, they should ultimately result in the optimal outcome for all parties involved.

April 2012

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