When thinking about debt collection, what comes to mind? Difficulties, guilt, shame, stress, conflict, or frustration? Whatever the emotion, chances are it’s not pleasant. Debt collection is a notorious bogeyman for many people – and surprisingly, it’s just as fearsome for the companies involved.

Debt collection is a sidelined issue that often is awkwardly tiptoed around. In the unfortunate event of outstanding debt, companies tend to be straightforward and indifferent as to why the customer didn’t pay. Seldom do companies consider what a better approach could be, or why it matters in the first place?

German startup troy realized that by changing the way companies approach debt collection, they could unlock the power of customer experience to drive customer loyalty. Founder and Managing Director, Philip Rürup, alongside co-founder Till Völzke, explain how their thinking led to the launch of a friendly debt collection startup in 2018.

An interdisciplinary approach

Founder and Managing Director, Philip Rürup (right), alongside co-founder Till Völzke (left)
Founder and Managing Director, Philip Rürup (right), alongside co-founder Till Völzke (left)

Rürup has had many professional encounters with the debt collection industry while working as a Manager and Managing Director for global service providers in different branches of financial services. Meanwhile, Völzke has been working in the debt collection industry for almost 20 years.

His experience led to numerous conversations about the importance of customer experience in service businesses. Often, the two talked often about how the entire global debt collection industry had failed to adapt to the ever-growing customer expectations. 

Debt collection is still viewed as something inherently negative, and customers around the globe continually experience unauthorised, abusive, and confusing debt collection. Rürup and Völzke saw a great opportunity in challenging these realities by combining debt collection, customer experience, and Fintech into one innovative service.

It was clear that the first task of any debt collection company would still be to help collect outstanding debts for companies. But Rürup also knew that the way traditional debt collection communicated – the wording, the channels, the delay caused by manual processes, and the overall design – didn’t take new approaches to CRM and customer experience into account at all. 

Stay “troyal”

Studies on European payment behaviour gave Rürup clarity about the value of customers in debt collection. Approximately 50% of customers with late payments had only forgotten to pay or had a short-term bottleneck. Why then, hadn’t debt collection agencies been identifying ways to treat these customers better, in order to preserve valuable relationships for their clients? 

Approximately 50% of customerswith late payments had only forgotten to pay or had a short-term bottleneck.

EOS Solutions Debt Survey 2017

Studies on the debt collection industry shed light on the matter. When asked about the reasons for non-payment, “forgetting” and “short-term bottlenecks” made up only 6% of the responses from collection companies.

Viewed from a distance, it was hardly surprising that debt collection companies weren’t aware of the reality — customers who simply forget or face unexpected bottlenecks tend to pay quickly and easily, while dissatisfied customers or customers with permanent financial problems require more attention. 

Rürup and Völzke carried out extensive market research on the reminders, processes, and web portals of market-leading and medium-sized debt collection companies. Their research confirmed that although many debt collection companies had been promoting “customer-centricity”, “appreciative and respectful interaction”, and “cooperative dialogue”, they had not actually implemented these practices conceptually, technologically, or culturally.

The wording of their messaging was bureaucratic and sometimes threatening. The visuals evoked “red tape”, and the execution was mostly offline and batch-driven.

In response, troy redefines the entire debt collection process, using tried-and-tested concepts from CRM, data-driven methods from dialogue marketing, and the technological requirements of digital customer experience. “Customer experience as the key to maintaining customer loyalty” became the mantra. After all, the name of the startup in German resembles “treu bleiben”, meaning “stay loyal”. 

The kick-off of the “debt collection experience”

Following the “lean startup” approach, Rürup and Völzke tested their hypotheses within the market. They built mockups of the new debt collection experience, described the planned IT architecture and processes, and arranged appointments with leading companies from all relevant industries.

The first appointment with a leading European bank already proved that they were on the right track. The bank’s decision-makers affirmed that the proposed “debt collection experience” was even superior to the bank’s in-house processes in terms of digitisation, customer friendliness, payment methods, and degree of automation.

The same was confirmed by leading insurance companies, utility suppliers, e-commerce shops, and telecommunications providers. 

It’s not just debt collection that is underdeveloped in terms of customer experience; for many corporations, the upstream, customer-related financial processes have also remained unchanged for many years.

For example, over 50% of European companies believe that they aren’t yet sufficiently digitized in their financial order-to-cash processes. troy aims to support these companies in defending their competitive positions against tech challenges with digital end-to-end processes.

The debt collection platform uses a multi-channel approach to encourage customer communication.

The platform Rürup and Völzke have designed enables digital customer experience in real-time, proving customers’ willingness to pay increases with improved customer experience. Reducing bad debt massively, while preserving customers at the same time, is a game-changer in the debt collection industry.

One of the ways Rürup and Völzke wanted to distinguish themselves was through a multi-channel approach, allowing customers to communicate in ways that were most convenient for them.

For outbound, troy uses email, SMS, calls, and postal letters. For dialogue, troy additionally supports messengers and live chat. The optimal channel mix leads to the highest conversion – debt recovery, quick resolution of any queries, high satisfaction, and fast payments.

By integrating these together, the omnichannel experience has been taken even further and created a centralized communication point – fully transparent, easy to digest, and always accessible to the customer, to service center staff, and clients.

In hindsight, it’d be fair to say that Rürup and Völzke’s business idea was driven by global shifts in customer behavior and growing consumer expectations.

But that’s not the whole story. troy was launched because companies have only been adjusting their marketing and sales processes to the new needs while forgetting about the financial and administrative interactions in the customer life cycle – enforcing the negative perceptions of debt collection.

According to Rürup, “the truth is that to achieve high customer engagement, we have to think about customer experience end-to-end.”

Disclaimer: This article includes a client of an ESPACIO portfolio company.