“The value of having a direct line of sight of the primary transactional account to clarify the position of the customer will be crucial in terms of when they expect to return to full employment, and whether there are any extenuating family circumstances or health and related issues that could impact the customers’ ability to financially recover. There is a significant opportunity to arbitrage for efficiencies in the collection and analysis of such primary data.
“A return to individual, risk-based assessment as well as recoveries is also important. While single, unqualified offers were acceptable and necessary given the crisis circumstances when debt relief was provided, as we get deeper into the pandemic and its long-term economic impact, each customer must be managed and engaged on a merit basis. The three-month payment freeze in many instances has created indebtedness to an already vulnerable consumer, and affordability will now most certainly become an issue with the regulator,” says Levinsohn.
Banks also face major challenges in a post-Covid environment as far as collections are concerned. Firstly, in this economy there is a limited market to buy and sell repossessed assets as a means of recouping outstanding debts. Secondly, the landscape has changed dramatically for traditional collection practices. Banks can no longer contract with collections service providers who work solely on a ‘success basis’, and success cannot solely be measured in Rand Collections alone. There are numerous factors to consider, both from a legislative perspective as well as an ethical one. There is a fine balance to be struck – banks and their collections providers need to act in the best interests of the customer given the Covid uncertainty. However, the debts remain exactly that, and must be collected to ensure that financial services providers avoid blanket debt write-offs or any other actions that might place depositors’ funds at risk or otherwise undermine the integrity of the financial sector.
“As South Africa continues to navigate through the pandemic, it is abundantly clear that there has been profound damage to every facet of livelihoods and the economy. The full and long-term impact is still unfolding before us and will continue to do so in the months ahead. While the true magnitude of the financial distress facing both individuals and businesses remains to be seen, it is evident that there is no short-term fix for this Mach1, black swan disaster. It has taken South Africa and its citizenry, and indeed the world, to the wall in terms of plummeting household income, soaring unemployment, widespread business closures and crippling consumer indebtedness. For our financial services sector to navigate through the post-Covid economy will demand that a new approach is developed, and as such, there must be a readiness to restructure, with a more customer-centric, empathetic approach driven by current, forward looking customer data and analytics based on people’s changed realities,” concludes Levinsohn.