What does the customer have to do with debt?

At a time when the average person is spending thousands on Christmas gifts, our Partner Charlie Sim takes a look at the dark side of that seasonal spending – debt – and why it’s an industry crying out for a customer-led transformation

It all started a very long time ago. Debt collection has been around longer than money itself. Some believe it dates back to around 3000 BC, as the some of the early empires in places such as Egypt were being formed. If a debt was owed that could not be paid back, the debtor and the debtor’s family or servants were forced into "debt slavery", until the debt had been repaid.

Over thousands of years, the way we collect debt has been refined. Becoming more efficient and effective, but also guided by the moral compass of the day, treading the fine line between what is in the best interests of everyone and acceptable to society. It has and continues to be an important part of our culture, so much so that both the Bible and the Koran contain guidance on debt collection.

So if we have spent thousands of years refining our approach, surely we’ve nailed it by now? Or have we missed something that sounds very obvious, but is much harder to see? At a basic level, debt doesn’t make sense. Why would anyone get something without having the means to pay for it? It’s not fair or right, so why do they do it?

I want to tell you about Simon. It’s not his real name, but he is a real person and this is his story. Having left university he needed to move back home with his mum. Life felt full of opportunity so getting a loan from the bank to tide him over while he found a job was a great idea. Everyone else must be doing it and it meant he could carry on enjoying life. That loan was just the start and over the next 15 years one debt added to another, while he never quite got to the point they could be fully paid off. He met a wonderful girl, got married, had a child and the need for money kept growing. It became harder to do the things that everyone else did without so much as batting an eyelid. An unexpected taxi home at New Year caused anxiety and stress. He made changes to save more money, taking the bus instead of the train to work, but the stress kept growing. And when the bus was late one evening, Simon came home in a panic to find his daughter in tears because they’d missed her football practice.

None of this was planned. None of this felt extravagant or out of the ordinary. When I met Simon I couldn’t believe how similar his story was to mine. That could’ve easily been me with the daughter in tears and the stress growing every day. Not everyone in debt has the same story as Simon, but almost all of them do. The assumptions we make about people in debt - that they're careless or just trying to get away with it - are, for the most part, utterly baseless. Those people are a tiny minority. The vast majority are just like Simon, just like me and just like you.

So why does Simon’s story matter? What does this really mean?

What if tomorrow…

…debt wasn’t the dark cloud that hangs over millions of people every day, impacting their mental health, preventing them from getting the most out of their lives?

…the people and businesses that collected debt were seen as saviours – as the ones that finally helped them get out of the rut, lift the cloud and made their lives better?

…more and more people engaged with their debt because it was no longer too upsetting or difficult to face, and everyone could find their own way out with help from debt collection?

…the industry was not designed for the very few who tried to get away with it, but for the vast majority of people like us who don’t know how to get out of it? If everyone saw the world through the customer’s eyes, they obsessed about finding new and better ways to help them address their debt, not just reclaim what was owed?

…for the 8m people in the UK suffering from problem debt, it was no longer a hidden secret? It wasn’t something to be ashamed of, but a challenge that so many people shared. Businesses were there to help, the people who worked there were proud of what they do everyday. For them it’s not just a job that gives them money, they are all motivated to help make it better for everyone.

It is very easy to write these things and just as easy to say them, but much harder to make them real. It sounds so obvious, simple and clear, so why doesn’t the world really operate like this?

The simple answer is because it’s hard. Words are easy to write and easy to say, but making them real is much harder. We all see the world from where we stand, looking from the inside-out. We measure how we are doing based on what we can see and how we perform, not the impact we have on the outside world. To challenge this norm, you need to start by seeing the world from the outside-in, genuinely listening and understanding people’s motivations and behaviour so that you can be clear about what matters. Not just what matters to you (i.e. them paying back the debt), but what matters to them and how you can deliver both.

Customer-led success is measured by the actions you take, not the words you use or say. It delivers success for everyone involved, finding new and better ways to deliver value to customer first, then how to commercialise it. There is a lot of talk around this topic, but actions and cultures that act in this way are rare. Examples such as Timpson or Handlesbanken stand out for an enduring culture that creates customer-led success.

At its heart it sounds simple, but why doesn’t the industry create better solutions to offer people like Simon? It is not about being nice or even doing the right thing, it is about creating simply better businesses that deliver more value to customers and more value commercially too. Wouldn’t it be a better world if the industry could help to remove problem debt? I’m sure Simon would agree.