Financial institutions around the world are seeing massive changes to the way consumers are engaging with their finances. The COVID-19 pandemic and the growing recession are also changing the way that consumers are engaging with their debts.
During the 2008 financial crisis, we actually saw that “charge-off rates for subprime consumers increased only moderately relative to pre-crash levels” according to a white paper recently published by 2nd Order Solutions and Boston Consulting Group.1
The recent historic and exponential rise in unemployment rates and the rapid onset of an economic recession, however, also means that there isn’t a precedent for precise predictions. Thankfully, based on current trends and existing data, we can see some patterns beginning to emerge.
Based on a survey conducted by Bankrate, roughly 25% of Americans expect to put their stimulus checks toward paying off a debt, and 50% plan to use their checks to pay monthly bills. TrueAccord’s consumer payment trends support this information. Our teams saw a 120% increase in contact rates as the government deposited consumers’ stimulus checks, and even amidst the crisis, we are seeing a change in the way consumers are approaching their payments.
We’re seeing a shift in consumer preferences toward long-term payment plans, rather than one-time payments. While only 30% of payments made in April 2019 were from payment plans, a year later, we now see a near-even 50% split between plan creation and single payments.
Evolving technology meeting consumer needs
Another trend outlined by Boston Consulting Group’s whitepaper highlights the role of technology amidst a recession.
“[Financial institutions] with a more sophisticated approach to communication fared better than their peers during the crisis. Multi-channel strategies spanning phone, SMS, and email, underpinned by predictive analytics and integrated data acquisition, are commonly seen at these financial institutions.”
TrueAccord’s digital-first collections strategy is showing us first-hand the power of enabling consumers to manage their own finances, at their own pace, even in a crisis.
Wnat to learn more about how we’re reaching consumers? Get in touch with our team today!
Citations
- Boston Consulting Group, 2nd Order Solutions (2020) Winning in the Next Era of Collections: Preparing collections for a recession