Payment intent; the missing ingredient in risk management
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Following on from the BBC’s Panorama programme ‘Can’t Pay, Won’t Pay’ – Fraudscreen warns that taking a ‘same difference’ approach to people who ‘can’t pay’ as to people who ‘won’t pay’ is costing companies, and our economy, millions.
Fraudscreen advises assessing risk by combining both ability and intent to pay at the same time. With this approach, Fraudscreen have identified four states of payment likelihood:
- Can Pay / Won’t Pay: These are customers who pass traditional credit scores – but take goods and services with no intention of paying.
- Can Pay / Will Pay: A business’s bread and butter customers. Moreover, their positive disposition towards payment means that should they default in hard times a sensible arrangement could be made to support the customer through hard times.
- Can’t Pay / Won’t Pay: This group are typically on low incomes and deliberately seek out attractive promotional offers and extended credit to fund a comfortable lifestyle they could not otherwise afford.
- Can’t Pay / Would Pay: People with borderline credit scores who would make good customers but are rejected on ‘ability to pay’ and those with changes in personal circumstances who are temporarily unable to meet their commitments, but would be sound investments to support through a temporary crisis.
Middlehurst goes on to provide examples from various industries, where credit referencing alone could not have predicted non-payment and concludes by advising companies on three key strategic areas where predicting payment intent could improve performance, the report recommends:
- Marketing: Adding ‘payment intent’ as a factor in marketing planning – using the technique to tailor products and messages to those with positive payment intent and screening out those potentially bad customers who have no intention of paying.
- Customer Service: Improving customer service by developing contact strategies appropriate to individual customers and working with them appropriately should they encounter payment difficulties.
- Collections & Recoveries: Approaching debt recovery with Fraudscreen’s customer intelligence and adapting the collection approach depending on the customers’ intent to pay. This allows a company to be more sensitive and understanding to people genuinely wanting to find ways to pay.
