By Vipul Vyas, Senior Vice President, Strategic Consulting
Businesses that invest in language increase pre-collections payments and will stay ahead of the coming spike in missed payments.
Companies as diverse as telecommunications companies, retail banks, utilities, and the finance arms of automotive manufacturers are bracing for a surge in missed payments from the 43% of U.S. households that have lost income since the beginning of the coronavirus pandemic, according to the Pew Research Center. This comes as U.S. household debt set a new record of $14.3 trillion in Q1 2020, according to the New York Federal Reserve. AI-powered language presents an opportunity to help consumers get back on track and improve pre-collections payment outcomes.
The benefits of precise language
Businesses don’t need to just wait for the onslaught, however. Large, tech-savvy companies have spent the past decade maturing their customer analytics and multichannel messaging capabilities to target the right customer with the right offer through the right channel. McKinsey partner Matt Higginson and his team noted that there are many examples of delinquent customers responding positively to empathetic messages from their issuers. “Instead of sending generic or passive-aggressive notices of collections, issuers can use language that highlights options for solutions and payments,” wrote Higginson. “Many institutions have had success with this approach.”
Words, and the emotions they convey, are the last mile—they allow brands to engage with customers in a way that communicates trust, grabs attention, and motivates action across the entire pre-collections payments journey.
Instead of sending generic or passive-aggressive notices of collections, issuers can use language that highlights options for solutions and payments.”
–Matt Higginson, McKinsey Partner
Persado clients that have experimented with finding the right words have achieved double-digit increases in completed pre-collections payments–and in the process, have helped customers make effective financial decisions while improving the bottom line. Even businesses that fine-tune language at later stages of the payments journey have seen strong results.
Finding the right language to motivate action
More effective language puts a business at the front of the line of customer payment priorities. AI and machine learning can pinpoint the words that deliver a marked uptick in both completed payments and accepted program offers at all stages of the payment journey. Examples include:
- Recovering late payments within a 30-day window: A large US insurance carrier launched an outbound call campaign to alert policyholders that their payment was late. Clear instructions combined with words that conveyed Trust-based emotions led to a 16% increase in completed payments.
- Increasing payment recovery through self-service: A European telco provider fine-tuned the words in its Interactive Voice Response (IVR) prompts to add the payment due date. By tapping into the customer’s sense of Urgency, the telco increased completed payments through self-service channels by 24%.
- Motivating on-time, but at-risk customers: A large US credit card provider launched a preemptive email campaign to remind customers with previous late payments of their due date. The message evoked Urgency to drive an 8% higher email open rate and a 90% higher click-through rate.
The right messaging can also help reduce consumer financial distress
- Inform consumers of forbearance programs: Many consumers are unaware of government-sponsored or company-offered forbearance programs. These programs can be offered in a targeted manner when observing distressed payment behavior.
- Encourage partial payments: Allowing consumers to make partial payments while they regain financial resilience allows enterprises to retain these customers and avoid having to reacquire them.
- Allow consumers to customize their payment date: Helping consumers align payment behavior with their cash flow realities can help them manage financial distress with simple, small modifications.
How to use language more effectively for pre-collections payments
Typically, businesses decide what language to use based on what worked in the past. Digital communications have many elements, however, from the subject line and the layout of a web page to the placement of a call to action (CTA). Each element plays a role in whether a customer takes action. It’s impossible for a human to optimize all of them individually, let alone together and in concert. Sometimes, businesses get lucky with a campaign, and sometimes a message falls flat.
AI, machine learning, and experimental design remove the guesswork from payment-related messaging.
AI, machine learning, and experimental design remove the guesswork from payment-related messaging. AI can take an analog message and test different variations of words to find the combination that best connects with customers. It’s important to also experiment with elements like page layout, use of color or images, placement, etc. to find the optimal combination—for example, visual elements like placement of the CTA can have more impact in payments than in other contexts.
Align language insights to the payments journey
The right message—and conveying the right emotion—changes depending on where the customer is in the payments journey. During the coronavirus era, analysis shows that Trust-based emotions like Intimacy and Gratitude are driving the most engagement overall; yet Attention-based language tends to be more effective in later stages of collecting payments.
Businesses that successfully maintain the lion’s share of payments intervene early in the process with at-risk customers, before they miss a payment. Successful reminder messages use Attention (sometimes combined with Gratitude) to promote autopay; inform customers about self-service payment options; or provide incentives to pay sooner rather than later.
Businesses that successfully maintain the lion’s share of payments intervene early in the process with at-risk customers, before they miss a payment.
Use language to address missed payments
Once customers have missed a payment, however, successful payment programs initiate regular reminder messages between days 1 and 30 via text, email, outbound calls, web banners, and other channels. High-performing messages continue to integrate Intimacy with Urgency early in the journey, as in: “In case you forgot, your payment was due on May 18—Please Press 1 to get back on track.” That Urgency language might intensify between days 16 to 30 as the second half of the message shifts from “Please bring your account up to date” to “Make a payment right away.”
After day 30, the emotional content of messages adds more Attention and Urgency. Subject lines might remind the customer that their payment is past due. Depending on the product, businesses might begin offering a payment option or a relief program to customers that qualify.
Early intervention using the most effective language and emotions motivates customers far more than analytics and multichannel offers alone. Words are a critical, underutilized resource for keeping customers at the high-value end of the payments journey.
Testing different messages and word combinations allows businesses to find the right words to engage their customers before collections and charge-offs.