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Consumers More Pessimistic About Financial Health as Cost-of-Living Crisis Intensifies

(London, UK): Consumer expectations for future financial stability is worsening, with many looking to credit cards for support during the cost-of-living crisis. According to Auriemma Group’s latest issue of Cardbeat UK, 37% of cardholders believe their financial health will worsen in the next 6 months.

Gen Z and younger Millennials express greater optimism about their future financial health than their older counterparts despite increased levels of borrowing. Auriemma’s research found that 20% of cardholders are borrowing more to afford everything they need, rising to 32% among Gen Z and Millennials, and 33% of sub- and near-prime customers. The added strain of rising costs will likely cause these figures grow in the coming months.

“Since the start of the pandemic we have seen a resurgence in consumer spending on debit cards and a rise in transfers from savings to current accounts,” says Jaclyn Holmes, Director of Auriemma Research. “Today it appears rising inflation is furthering the strain on consumers, leading some to rely on their credit cards for essential spending.”

According to Auriemma’s latest findings, over 90% of credit cardholders anticipate rising costs of food, housing, fuel or energy bills to impact their personal finances negatively over the next 12 months. While energy prices were capped at £2,500 for 2 years beginning this month, some households may still see their bills double.

“At a time when all other costs are skyrocketing, the price cap will offer little comfort for many households,” says Holmes. “With more monthly outgoings attributed to energy bills, the pressure on credit card usage and borrowing will likely be even higher.”

But consumers aren’t the only ones bracing for impact. Issuers are also trying to assess how the cost-of-living crisis is currently impacting their cardholders and anticipate the enduring impact moving forward.

“Lenders have already begun seeing the operational impact of this change in customer behaviour,” says Louis Stevens, Director of Auriemma’s Industry Roundtables. “This comes at a time where regulatory initiatives, such as The Consumer Duty Act, are already taking up considerable time and resources.”

As issuers likely tighten risk criteria for customers seeking credit, some may turn to Prime and affluent customers for lower-risk lending opportunities. Auriemma Group will continue to monitor this space closely in upcoming Cardbeat studies and within its Customer Service Roundtable groups.

Survey Methodology

This Auriemma Research study was conducted online within the UK by an independent field service provider on behalf of Auriemma from April-May 2022, among 80o+ adult credit cardholders. The number of interviews completed on a monthly basis is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualification.

About Auriemma Group

For more than 35 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, visit us at www.auriemma.group or call Jaclyn Holmes at +44 (0) 207 629 0075.

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How Rising Cost of Living is Impacting Spend and Borrowing Habits

(London, UK): Rising costs for fuel, energy, food shops and housing are already impacting consumers around the UK, but many believe this is only the beginning. According to Auriemma Group’s latest issue of Cardbeat UK, 73% of credit cardholders expect the rising cost of living to have a negative impact on their personal finances over the next 12 months.

Others factors will further impact consumers, including the Bank of England’s forthcoming increased interest rates. Coupled with rises in the cost of living, these elements are set to put considerable strain on some UK cardholders.

“Rate increases will create added pressure on homeowners across the UK at a time of significant financial uncertainty,” says Jaclyn Holmes, Director of Research at Auriemma. “Meanwhile the volatility of the rental market is already putting a strain on those who do not own their own home.”

The rising costs of food, energy and fuel have impacted over eight-in-ten credit cardholders, and rising housing costs have impacted about six-in-ten. Auriemma’s research found that rising housing costs were of particular impact to Millennials, who more commonly rent—a cost that has increased 9.5% on average since 2021 according to the latest HomeLet Rental Index.

“These indicators are a sign that banks and lenders must ready themselves to provide additional support to struggling customers,” says Holmes. “When rising costs become insurmountable it often leads to cardholders making spending cuts, missing payments or even becoming delinquent.”

In fact, 67% of credit cardholders agree that they are already spending less on non-essential or luxury items due to the state of their finances. And four-in-ten say they are unable to afford a holiday, a figure that increases to 57% among sub-prime and near-prime customers.

“These changes in spending habits could have an impact on the retail, entertainment and travel sectors,” says Holmes. “This could be a considerable blow after such a short period of recovery following the start of the pandemic.”

Looking ahead, the cost of living crisis will have a notable impact on consumers. Auriemma’s research shows one-fifth of cardholders are already borrowing more to afford everything they need, and as prices increase Auriemma anticipates this figure to rise. Auriemma Group will continue to monitor this space closely in upcoming Cardbeat studies and within its Card Customer Service and Complaints roundtable.

Survey Methodology

This Auriemma Research study was conducted online within the UK by an independent field service provider on behalf of Auriemma in April 2022, among 80o+ adult credit cardholders. The number of interviews completed on a monthly basis is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualification.

About Auriemma Group

For more than 35 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, visit us at www.auriemma.group or call Jaclyn Holmes at +44 (0) 207 629 0075.

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3 Ways Banks Are Implementing Hybrid Working Models

(London, UK) Widespread work-from-home started as an adaptation to COVID-19 but is here to stay. In Auriemma Group’s recent roundtable meetings financial institutions discussed long-term working models, all of which include some element of working from home. Their next challenge is developing a hybrid engagement model for their hybrid workforce.

Some have already taken then leap, and since implementing these hybrid models, Auriemma’s roundtable members received employee feedback that some feel less engaged and connected with the company. This, in conjunction with high attrition rates and challenging recruitment, means engagement strategies have become an area of focus.

Those who feel they have developed strong hybrid engagement models have focused on three areas: intentional scheduling, variety of choices and well-being considerations.

Intentional Scheduling

Firms strategically schedule location-appropriate activities when employees are onsite or working remotely. When onsite, firms try to have full teams concurrently present to build comradery and schedule more team-building activities like catered lunches and happy hours. When remote, roundtable members manage engagement via gamification and weekly competitions like step counts and quizzes.

“When managing a hybrid workforce, it is crucial that firms give equal treatment to employees regardless of on-or-offsite work,” says Louis Stevens, Director of Roundtables at Auriemma Group. “Otherwise, this can create a divide in the workforce and even lead to further attrition. Engagement models must cater to both demographics.”

Variety of Choices

Workforces are composed of a diverse mix of people with a diverse set of interests, which can make it challenging to find engagement activities that appeal to everyone. The solution? Including variety in the engagement offerings.

According to members, offerings should cater to both extroverts and introverts alike. One firm developed a successful monthly engagement programme for its employees, which allowed them to choose from a variety of activities like cocktail making classes and sporting events.

Well-Being Considerations

As part of their engagement strategies, financial institutions have incorporated well-being initiatives to protect the mental health of their employees. Initiatives vary from providing access to therapists to scheduling inspirational speakers and allotting weekly personal time in schedules.

30% of Auriemma Customer Service and Complaints Roundtable members have intentionally increased off-phone time for front-line agents since the start of the pandemic as a means of dedicating more time to employee well-being. Employees have the choice to use this time as they wish whether that be for professional development or something like meditation or yoga. Since implementing, firms have seen an improvement in productivity levels.

Auriemma’s roundtable members are still developing their engagement strategies. New developments and learnings will be discussed in depth at the upcoming Collections and Recoveries Roundtable meeting on the 9th and 10th of June in Edinburgh, as well at the Customer Service and Complaints Roundtable meeting on the 16th and 17th of June, also in Edinburgh.

About Auriemma Group

For more than 35 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, visit us at www.auriemma.group or call Louis Stevens at +44 (0) 207 629 0075.

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Declining Mental Health Takes Toll on Financial Services Operations

(London, UK) Absence and attrition rates are on the rise for front-line agents working in financial services. Mental health concerns are a primary driver, forcing financial service providers to address a once-taboo workplace subject. According to members of Auriemma Group’s Customer Service and Complaints Roundtable, mental health is frequently the cause for taking time off or leaving the company entirely. This, in conjunction with recruitment challenges facing the industry, has made mental health and well-being a top priority for firms.

According to the researchers at the University College London (UCL), only 49% of working age adults say they feel in control of their mental health, down from 54% six months ago. The study also found that the proportion of people with symptoms of anxiety and depression is at its highest level in 11 months.

There are several reasons why mental health issues are growing at higher rates amongst front-line agents. Increasingly complex calls and a rise in vulnerable customer volume has taken its toll on the mental health of many agents. Concurrently, the cost-of-living crisis is placing more pressure on all consumers, which agents are also not immune from.

“This compounds when considering many are still working from home and missing out on the social elements of the workplace,” says Louis Stevens, Director of Auriemma Roundtables. “It is easy to see why many firms are in firefighting mode in terms of capacity planning.”

The combination of these factors has led to a marked increase in both attrition and absence rates. In 2021, Auriemma Group’s Customer Service and Complaints Roundtable members reported an average attrition rate of 23%, up from 16.5% in 2020. Mental health-related absence rates showed a similar trend up to 14%, in 2021 from 11% in 2020.

“The cost-of-living crisis will only put further stress on both customers and employees, meaning without sufficient support measures in the place, this trend will likely only worsen throughout 2022,” says Stevens.

To combat this, firms are taking a varied approach by making mental health resources more accessible, building overall engagement amongst their employees to improve job satisfaction and embedding mental health awareness into their company culture and rhetoric. Roundtable members have also reported more return-to-office strategies, which will help those who have not taken well to home-based work.

This is an area of focus within Auriemma Group’s Customer Service & Complaints and Collections & Recoveries Roundtables, both of which have upcoming in-person meetings at the Sheraton Grand in Edinburgh. The Collections and Recoveries meeting is scheduled for the 9th and 10th of June, and the Customer Service and Complaints Roundtable meeting will be on the 16th and 17th of June. If you are interested in attending either session, please contact roundtables@auriemma.group.

About Auriemma Group

For more than 35 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, visit us at www.auriemma.group or call Louis Stevens at +44 (0) 207 629 0075.

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How High Street Banks May Benefit from Incoming Buy Now, Pay Later Regulation

(London, UK): Incoming FCA regulation could add restrictions on how consumers can use Buy Now, Pay Later (BNPL) services, but these changes may be welcome. According to Auriemma Group’s latest issue of Cardbeat UK, there was an 80% increase in negative experiences with BNPL plans between September 2020 and July 2021.

The increase is uniform across customer segments, including different age groups, household income, and levels of familiarity with BNPL, signalling concerns around the product itself, rather than new or unfamiliar user experiences.

“Our research shows that the few who have negative BNPL experiences most commonly attribute it to unexpected fees or issues it’s created for their other finances,” says Will Moody, Manager at Auriemma. “With a growing segment of consumers turning to BNPL options for borrowing, regulation may play a role in maintaining positive customer sentiments for the product.”

Auriemma’s latest findings show an increase in negative experiences using BNPL or instalment plans–from 5% in September 2020 to 9% in July 2021. While 9% remains the minority, it represents a large community when considering that 17 million UK consumers have used BNPL services as of November 2021.

“This sentiment is being reflected within other markets too,” says Moody. “In the US, a market where over half of adults have used a Buy Now, Pay Later service, about one-third had a negative experience. This rapid growth has caught the attention of the CFPB, and surprisingly enough, half of BNPL users in the US agree these plans should be more regulated.”

Klarna is the leading BNPL and instalments provider in the UK with 16 million customers using its products and services, but the Swedish FinTech reported a round of substantial losses in H2 2021 to add to the strain of incoming regulation.

Many of the UK’s High Street Banks and lenders already have products in market, such as NewDay with its NewPay product. Moreover, regulated FinTechs such as Monzo and Curve also joined the BNPL space in 2021, with Revolut soon to follow.

“Auriemma expects that BNPL regulation will put significant strain on compliance resources for unregulated players such as Klarna,” says Louis Stevens, Director of Roundtables. “This, in turn, could impact innovation, development and growth, opening the door for regulated lenders such as High Street Banks and credit card issuers to step in.”

Could the future of BNPL in the UK rest with traditional players integrating instalments into their existing product sets? And will this be the solution to reversing the rise in poor customer experience? Auriemma Group will continue to monitor and discuss BNPL in upcoming Cardbeat studies, and within its Customer Service Roundtable groups when they next meet June 16-17 at the Sheraton Grand in Edinburgh, Scotland. Email research@auriemma.group to learn more about our consumer studies and roundtables@auriemma.group to inquire about our forums.

Survey Methodology

These Auriemma Research studies were conducted online within the UK by an independent field service provider on behalf of Auriemma from in September 2020 and July 2021, among 80o+ adult credit cardholders. The number of interviews completed on a monthly basis is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualification.

About Auriemma Group

For more than 35 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, visit us at www.auriemma.group or call Will Moody at +44 (0) 207 629 0075.

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Challenging Transition Ahead for Lenders as HMT Breathing Space and Payment-Holiday Conclusions Near

(London, UK) Collections Departments faced unprecedented challenges throughout the COVID-19 pandemic, from embracing remote working to managing significant payment holiday volumes. And now, they must take action on HMT Breathing Space while transitioning from payment holidays. Auriemma Group’s Collections and Recoveries Roundtable has been discussing these events and their corresponding strategies amongst the UK’s top financial institutions. These two deadlines are quickly approaching, and along with the unpredictable macroeconomic environment, lenders must leverage learnings from the last year to prepare for the likely spike in volume ahead.

“Payment holidays have been the primary focus since the beginning of the pandemic, but with the extension of support schemes, that has now switched, and priority is on HMT Breathing Space,” says Louis Stevens, Director of Roundtables at Auriemma Group. “However, the payment holiday conclusion date is looming, which could mean a significant strain on Collections teams.”

In 2020, lenders quickly learned the need for automation and additional headcount to manage volume spikes, and they are now applying these learnings to prepare for the coming months. On average, lenders intend to increase their collections teams by 42% throughout 2021. Additionally, 86% of lenders have invested in their automated decisioning and digital channels to prepare for volume spikes.

Are Lenders Prepared for HMT Breathing Space?

On 4th May 2021 HMT Breathing Space (Debt Respite Scheme) will go into effect, giving consumers in problem debt the right to legal protections from their creditors. The Debt Respite Scheme has two paths: either through “standard problem debt” or through “a mental health crisis” referral. During this moratorium, lenders cannot communicate with customers and must stop interest from accruing.

According to Auriemma Group’s Collections and Recoveries Roundtable, as of April 1st,69% of lenders indicated that they feel somewhat prepared for the regulation, and the remaining 31% still feeling somewhat unprepared. There are a number of remaining concerns affecting preparedness, including the delay of the creditor portal, ambiguity in the regulation and unknown volumes.

To try to estimate the volume of customers who could potentially enrol in the scheme, lenders are utilising data from payment holidays, debt-advice charities and usage rates of other types of breathing space (e.g., CONC). They are also slightly increasing forecasts due to the worsening economy, payment holiday conclusions and the ceasing of furlough programs.

38% of lenders have already, or are planning to, increase their teams due to HMT Breathing Space. Initially, most lenders will use a combination of manual and automated processes to manage the regulation with the hopes of further automating as they get a better grasp on volumes.

How Will Payment Holiday Conclusions Affect Operations?

Although the deadline to enrol in payment holidays was 31st March, consumers have the option to extend their payment holidays until 31st July as long as it is within their six-month allowance for both secured and unsecured products. The number of customers returning to contractual payments after a payment holiday has remained strong; however, 92% of lenders are anticipating an increase in delinquency volumes following the conclusion of payment holidays.

“The primary watchout is the cohort of customers working in particularly hard-hit sectors, such as travel, tourism and food service. As the support ends for these sectors, we could see significant increases in delinquency volumes as many of these businesses are currently overstaffed,” says Stevens. “The magnitude of volume is contingent on the ability of the economy to bounce back and if predictions, such as the travel boom, come to fruition.”

Customers needing additional support will likely look to long-term forbearance plans, which have caused lenders to focus their attention on that process. Investments have been made in streamlining income and expenditure assessments and digitising the forbearance enrolment process as well as increasing the size of Vulnerable Customer teams.

Auriemma Group’s Collections and Recoveries Roundtable is tackling these challenges head on through our executive meetings, workshops and benchmarking exercises. Within the next three months, the group will be meeting six times with two sessions dedicated to HMT Breathing Space. If you are interested in attending any of these sessions, please reach out via roundtables@auriemma.group.

About Auriemma Group

For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, call Louis Stevens at +44 (0) 207 629 0075.

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Rethinking Debt Collections: Give Up Outbound Dialling & Pick Up Digital Channels

(LONDON) – The debt collections space in the U.K. is ripe for disruption: As outbound dialling performance yields decreasing returns, lenders have an opportunity to explore other contact strategies.

Over the last 18 months, core dialler performance metrics have deteriorated, according to Auriemma Roundtables data. A key indicator, right-party contact (RPC) rate, fell from 2.5% to 2%, a decrease of 20% since November 2017. Despite this slipping performance, firms have been apprehensive to retire their diallers, which have been the cornerstone of collections outbound strategies since the 1980s. Outbound calling is still relied upon to drive output, keep agents at the heart of the collections process, and demonstrate to internal stakeholders that firms are performing their part in mitigating risk by contacting customers to resolve their arrears.

Auriemma’s Roundtable members have often viewed the inertia associated with outbound dialling as a major hurdle in the adoption of alternate communication channels. To mitigate the decline in dialler performance, U.K. firms are looking at a variety of experimental solutions to improve overall contact rates.

Omnichannel Approach

Challenger banks by design have minimal telephony operations and demonstrate strong customer engagement via digital channels. Without the handicap of legacy systems, these firms utilise more efficient ways to support delinquent customers, primarily relying on live chat and two-way SMS staff using omnichannel systems. These systems provide agents with a holistic view of customer interactions across all channels and products throughout the account lifecycle. Consequently, agents are equipped with deeper knowledge of customers’ past interactions and can better anticipate contact preferences.

“Dialler-less” Approach

Recently, a few firms have tested completely switching off outbound dialling for the lifecycle of ring-fenced accounts and continued to track the progress of the test group. Inbound contact rate remained flat – disproving the prevailing wisdom that most inbound calls are responses to a voicemail or a missed call from a number. Moreover, turning off the dialler saves considerable costs and resources which can be reallocated across alternate and more efficient contact channels.

One such firm found performance improvement when testing tactical and precise usage of SMS, email, and live chat for customer outreach as a substitute for the dialler. This makes intuitive sense, due to the predominance of non-voice communication for the bulk of servicing requests and customer avoidance of answering calls from unidentifiable numbers. Moreover, missed calls or cryptic voicemails can further degrade repayment rates, as many customers perform Internet searches for these phone numbers, which may lead to incorrect information listing the number as part of a scam.

As the customer preferences continue to evolve, the way firms communicate will have to change to ensure future success. Auriemma’s Collections and Recoveries Roundtable provides members with access to industry expertise and best practises to support actionable improvements within the debt collections space.

About Auriemma Group

Auriemma Group’s mission is to give clients access to data and intelligence that drive decision-making. We provide information and advisory services in four areas: operational intelligence, co-brand partnerships, consumer research, and corporate finance. Founded in 1984, Auriemma serves the consumer finance industry from our offices in London and New York City. For more information, visit us at www.auriemma.group or Louis Stevens at +44 (0) 207 629 0075.

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Financial Institutions Take a More Proactive, Holistic Approach to Vulnerable Customers

(London):  Fair treatment of vulnerable customers has been high on banks’ agendas since the Financial Conduct Authority (FCA) issued guidance in 2015. In the three years since, financial institutions have invested time, money, and effort to identify and improve outcomes for customers in vulnerable situations.

Vulnerable consumers, or those whose personal circumstances make them especially susceptible to detriment, make up 2.4% of credit card accounts and 3% of balances, on average, according to Auriemma’s UK Card Collections and Recoveries Benchmark. However, the size of vulnerable populations varies widely based on portfolio composition and other factors, with some issuers reporting larger populations.

Until recently, vulnerability was tied to debt collection, as there is a natural correlation between vulnerable customers and those in arrears. Now, attention has shifted to proactively identify vulnerable consumers across the product lifecycle, with more precise treatment applied based on customers’ personal circumstances.

“Vulnerability is an increasingly complex concept and cannot be treated as a binary phenomenon,” said Louis Stevens, Director of Auriemma’s UK Roundtables practice. “While card issuers recognize the benefit of having a standardised definition for vulnerability across the industry, it’s virtually impossible to capture all the grey areas with a single, uniform classification system.”

Here are three ways financial institutions are taking a more targeted and holistic approach to address customer vulnerability:

Proactively identifying vulnerable customers. While customers in arrears tend to be more vulnerable, issuers are embedding their approach across more functions of the organisation. Over the past year, the focus has shifted toward identifying potential vulnerability, regardless of where the customer is located within the lifecycle. For example, Customer Service teams are now tasked with identifying triggers or clues to vulnerability, such as a mention of illness, and proactively monitoring potentially vulnerable customers even if they make payments on time.

“By definition, vulnerable customers are anyone who can suffer difficulty, and it’s the job of financial institutions to identify and rehabilitate that,” Stevens said.

Tailoring treatment to individuals. While the FCA defines vulnerability broadly, financial institutions have developed more precise definitions to meet non-standard needs across a diverse customer base. Most card issuers use two broad categories to determine severity – for example, “soft” vs. “hard,” “temporary” vs. “permanent,” – with further sub-categories to capture the nuances of a customer’s situation. In fact, issuers may have 20 or more classes of vulnerability to ensure a flexible, tailored response. For example, a customer with hearing or visual impairment may need special assistance to complete routine payments. These cases may not typically be indicative of financial difficulty but can be a sign of vulnerability.

Maintaining a flexible exit strategy. Effectively dealing with short-term vulnerability, such as temporary unemployment, is another key consideration for financial institutions. In particular, it’s important to have a defined exit process for customers who move out of a vulnerable situation, to ensure vulnerability treatment is accurately applied and customer care efforts are appropriately prioritised. Card issuers are taking steps to establish regular contact to monitor the customer’s situation and ensure timely removal of vulnerability flags for rehabilitated customers.

“Anyone can find themselves in vulnerable circumstances,” Stevens said. “Financial institutions will continue to reevaluate their vulnerability strategies to ensure a culture of empathy, support, and inclusion.”

 

About Auriemma Group

For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, call Louis Stevens at +44 (0) 207 629 0075.

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Cardholders Want to Communicate Digitally, But Issuers Are Still Getting Up to Speed

(London, UK): Hold the phone: Email is cardholders’ most preferred means to communicate with their credit card providers, but concerns remain before issuers can deliver a consistent customer experience in that channel. Email topped the list of all channels, including phone calls manned by agents, live chat, mobile apps and SMS, according to Auriemma Group’s recent issue of UK Cardbeat.

Nearly four-in-ten cardholders prefer email when communicating with card issuers. Despite this consumer preference to communicate with card issuers by email (and with younger cardholders ages 18-34 also preferring live chat or mobile apps), issuers had not—until this year—invested as heavily into the channels for servicing or Collections-related activities. At a recent meeting of Auriemma’s Collections and Recoveries Roundtable in London, Collections executives discussed how digital channels could offer new opportunities to refresh contact strategies.

When weighing particular channel investments, issuers must analyse the performance of each potential channel and determine the contact methodology and channel mix that creates the best experience and increases an agent or collector’s success. Issuers are exploring how different channels can augment contact rates and payment rehabilitation within collections. For example, some executives are in the process of testing email’s efficacy by sending default notices digitally along with a conventional letter.

“The industry knows that email could be a highly successful contact channel, particularly for those in collections who tend to close off contact at some point in the lifecycle,” says Louis Stevens, Director of UK Industry Roundtables. “There is opportunity to develop email as a priority channel instead of a supplementary one. Many collections operations today are centered around a call-and-collect model, which could be less effective as cardholders skew toward preferring digital communication.”

However, integrating digital channels into the collections process can be a challenge, due to legacy system restrictions and painstaking approval processes. Currently, only 20% of Roundtable members offer live chat within the collections process, and further progress has been limited by the prioritisation of other controls, such as conversation transcript recording.

Despite the momentum for email, it is important that issuers maintain an excellent experience in the phone channel, which is the second-most preferred. One-third of customers prefer speaking with a representative on the phone, which is starkly higher than the 3% who prefer an automated service, such as an IVR.

Even though consumers have a strong preference for migrating more routine activities to digital channels, the phone is still the centerpiece for more in-depth and complicated interactions. This is evidenced in the Card Collections and Recoveries Roundtable Benchmark Study, which reports that the average handle time for calls has increased 11% since January 2018.

“Consumers don’t mind using self-service or automated options for simple tasks, such as due date inquiries,” says Stevens. “But for now, cardholders still call when they need a more impactful and in-depth experience.”

Survey Methodology

This study was conducted online within the UK by an independent field service provider on behalf of Auriemma in March-April 2018, among 800 adult credit cardholders. The number of interviews completed is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualification.

About UK Card Collections and Recovery Roundtable 

Auriemma Group runs a series of information sharing and benchmarking Roundtable groups designed for executives and managers in collections and recovery. These Roundtables combine executive meetings, industry-leading operational benchmarking, and peer group surveys to help participants identify tools, technologies, and strategies to offer best-in-class customer experience at all touch points.

About Auriemma Group

For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, call +44 (0) 2076-290075.

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How to Best Prepare for GDPR Compliance

(London, UK):  Since the European Parliament adopted a new standard to improve data protection for individuals within the European Union (EU) in April 2016, firms have faced massive fines for non-compliance. In the UK alone, the fines doubled year on year. Bring on May 2018 and a new set of standards set by the General Data Protection Regulation (GDPR) which aim to provide predictability and efficiency for organisations and offer all EU residents increased data protection rights.

The potential fines for non-compliance are unprecedented: Fines range between €10 million (£7.9 million) or 2 percent of an organisation’s global turnover (whichever is greater) up to €20 million or 4 percent of turnover (whichever is greater). For many businesses, fines could result in severe cash flow problems, insolvency or even bankruptcy/closure. The Information Commissioner’s Office (ICO) fines are currently capped at £500,000 which GDPR will override.

GDPR applies not only to EU domestic business, but to worldwide companies targeting goods and services to European citizens. Some of the key requirements include: increased rights for data subjects, the development of security-first software, encryption of personal data, secure data processing and a 72-hour notification for data breaches containing personal data. The UK Government have confirmed that Brexit will have no impact on the adoption of GDPR.

But many organisations are not yet ready, according to a recent poll one in three of all businesses in the UK are not familiar with GDPR. Many also believe that the regulation does not apply to their business. At Auriemma’s latest slate of Industry Roundtables, anxiety was expressed about the amount of work remaining to be ready by the deadline. Some of the most widely talked about components of GDPR compliance at the recent Auriemma events include:

  • Increased rights for data subjects (i.e., the right to “be forgotten” and data portability)
  • Software to be developed with security in mind (privacy by design and by default)
  • Pseudonymisation or encryption of personal data (privacy by design and by default)
  • Secure processing of data
  • 72-hour notification for breaches of personal data

To account for these changes, most organisations will have to fundamentally change the way they manage and protect data. A shift of this size will need buy-in from the board level and firms should be endeavouring to make sure all employees are aware of the requirements.

To help financial service firms best navigate the GDPR and PSD2 landscape, Auriemma will be holding a UK regulatory Roundtable in London on the 26th January.

We are fast approaching the end of two-year adoption period and 25th May 2018 is when the ICO expect all to be GDPR ready. Organisations should be adjusting their policies, internal and external procedures for data security breaches and considering the new rights of the EU citizens. It will be necessary for all to analyse its current privacy policies, security measures, and underlying operational processes. Firms will also need to identify areas for which process improvements and redesigns are required to ensure compliance with GDPR.

About Auriemma  Group

Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space.  We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines.  Founded in 1984, Auriemma has grown from a one-man shop to a nearly 50-person firm with offices in New York and London.  For more information, contact Louis Stevens at +44.(0) 207.629.0075.

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