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Winning Customers for Life – How Your Debt Strategy Must Work Harder for Gen Z.
by Ian Haddon

Chastising younger generations isn’t exactly a new tactic for attracting eyeballs employed by certain sections of the US and UK media. Moral panics against the ‘youf’ are almost as old as the press itself. However, there is an extra level of cynicism now when older columnists and media figures swing at Gen Z.

For older members of that generation (18-24s – the youngest are still 10, remember), the first news story they’ll likely recall was the all-but complete meltdown of the global economy in 2008/9, not to mention the hours of footage of polar ice sheets cascading into the ocean. Through their teen years, they came to understand politics through anger, extremes, and zero-tolerance approaches. Then, as they came into adulthood and prepared to move into university or the world of work, their careers became collateral damage in the decision to fight coronavirus with lockdowns.

Their careers and educations have been delayed, for some irreversibly. But as they now head into the workplace, fears of global recession with a chaser of the not-so-distant threat of global conflict is leaving Gen Z with some of the responsibility of debt that wasn’t really theirs.

Gen Zs have a complex relationship with debt already. In the UK, two in five 18-24s owe debts of nearly £3,000 (on top of student loans), with 37% having no plan to pay debts back. 42% of 16–24-year-olds used buy-now-pay-later services in 2021, of these nearly six in 10 used them to buy new clothes, with half using it to buy technology. The scale of the issue is even more dramatic in the US. 18–23-year-olds have an average of $16,000 in debt and had the highest debt growth of any generation between 2019 and 2020.

Compounding this, any job losses that come from the next recession are likely to hit this age group worst of all. As William Lee, chief economist at the Milken Institute, a Santa Barbara, California-based think tank, explained in an interview with MarketWatch: “The Joe Six Pack, who used to be the first guy to be laid off, can be less concerned if he has one of these jobs that are in high demand, like the Amazon warehouse worker, delivery guy, the guy who’s working in the ghost kitchen.

“The entry-level white-collar guy is going to have to watch out.”

Lee explains this is because businesses have upgraded their models to automate entry-level roles with apps and new technology, reducing this crucial rung in the ladder for young professionals.

For brands, the relationship they have with younger consumers is going to change. You have young adults coming into the market for whom debt defines their lives. They may find themselves in financial difficulty through no real fault of their own. However, their total lifetime value as a customer of yours means that if you’re a telco, energy company or any consumer brand that ever needs collect debt, you can’t be too heavy handed and push them to the competition. Instead, this generation will need collaboration and flexibility to repay any debts they owe.

This is a radical shift in how companies need to rethink their debt collection strategies and it involves communicating in the right tone and through the right medium.

Let’s start with the right medium. Gen Z and Millennials are not fans of phone calls. Only 15% of 16-to-24-year-olds consider phone calls an important method of communication. It’s not just traditional phone calls. Despite the number of mobile devices increasing, the number of video calls is in fact going down. Phone calls can come off as entitled, they can interrupt what you’re doing, they can be stressful, and they can be time-consuming. In the complex world of debt collection, you do not want your communication to be regarded as any of these things. Young people also view phone calls as inefficient. While it takes less time to say your message rather than write it down, you’re putting the onus on the person you’re calling to keep a note. If you’re trying to reclaim debt, you need to make the process as easy as possible.

Text, WhatsApp and social media messaging – these are the methods young people use. It puts them in control of when they respond and gives them time to reflect on their response. Gartner states that SMS open and response rates can be as high as 98% and 45%, respectively — in contrast to corresponding figures of 20% and 6% for email.

Now for the right tone. It’s not about matching the way Gen Z communicates – we don’t want to see any emojis when you’re chasing debt, but it’s about respect. By combining AI with big data analytics, you can automate conversations in a way that matches and complements their tone, sending messages at a time that suits them and can offer a solution and repayment plan that is logged in a way that they will remember.

Crucially, we know this works. 73% of customers in late delinquency acted when contacted via a digital channel. If you scale that by the total number of Gen Z customers who may wind up owing you money in the coming months and years, these success levels are not to be ignored. If done the right way, you can get the money back and keep them with you as a loyal customer as they grow and, hopefully, become more financially stable.

The upcoming generation deserves a chance. They don’t need to be chastised, threatened, or lectured, but instead engaged in a mature, approachable, and professional way. The debt from this generation can’t be viewed from the perspective of bad debt totalled up with reckless spending by people who have no intention to pay. Most people want to do the right thing. If you truly value your customers, and you want your business to be a force for good in the long-term, then using AI to provide more ‘human’ solutions to debt is a crucial component.

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