Q&A with Philipp Reischauer, Business Consultant, Calvi

The cost-of-living crisis is putting up operational costs for service providers, while soaring inflation is placing large sections of its customer base (both B2B and B2C) under pressure. How it deals with this challenge is critical to its long-term prosperity. Philipp Reischauer, Business Consultant at Calvi, spoke about the bill's role in solving this dilemma.

Just how big a problem is the cost-of-living crisis for telcos?

The January 2023 European Parliament Eurobarometer survey found that 93% of Europeans are worried about soaring inflation. This concern rises to 100% in Greece, 99% in Cyprus, and 98% in Italy and Portugal. Customers are either cutting back on their spending because they’re struggling to pay bills or because they fear they might in the near future. A recent YouGov survey found that 93% of Italians, 88% of French, 83% of Germans, and 82% of Swedes have already cut back or were planning to do so. This is refocusing customers on their bills, which they’re scrutinizing as never before. At the same time, service providers need to keep their operational costs under control in the face of rising wage bills and higher electricity costs. Therefore, they must support customers as cost-effectively and efficiently as possible.

The cost-of-living crisis is causing service providers to rethink their ‘dunning’ processes. Why?

Dunning is the process of communicating with customers about overdue amounts, and given the volume of customers struggling with bill payments, service providers have to rethink how they do it. In the past, they took a one-size-fits-all approach to dunning. But by utilizing their data about customers and their usage, they can take a smarter and more personalized approach to dunning.

There’s also a recognition that dunning could be avoided altogether if their approach was smarter further upstream. For example, many service providers have already started to take a different approach to previously good payers who have fallen into difficulty with customers who are habitual late payers. This might take waiving late payment fees if the payment is received by an agreed date. By interrogating their data, service providers might also find that there’s another group of customers who consistently pay late but at the same time each month. A common cause of this is that the billing date comes just before they’re paid, and by switching them into a later billing cycle, they can reduce the stress on the customer and solve the problem of late payment for themselves.

Service providers have also realized that keeping the customer ‘on net’ - i.e., reachable and able to communicate - is key, leading to a new approach to dunning, particularly in the B2B context.

So what is smart dunning, and why does this put more emphasis on the billing process?

Dunning becomes smarter when it considers the amount and age of a debt and the context around the debt. The debt might be due to overage fees, such as roaming or exceeding bundled allowances. The customer might otherwise have a good payment history, so instead of bluntly demanding payment, service providers are beginning to utilize AI to analyze the context and offer the customer a personalized solution or payment plan. This might involve waiving the overage fee if the customer agrees to opt into a plan with a higher allowance or offering a more affordable installment plan.  If the customer has suffered a life event that means they have less income, then the solution might be to downgrade them to a more affordable plan or offer them a much cheaper, basic plan with add-ons that they can pay for when and if they need them and can afford.

Whatever the approach taken, invoice data plays a key role in understanding the debt context, as it reveals customer behavior and usage over time.

Will the move to dunning change our approach to billing?

Smart dunning needs context, which can largely be derived from invoice data. This context needs to be readily available to support smarter dunning decisions. Machine learning (ML) and AI use in the billing and dunning environment is still in its infancy, but this is a clear use case for its application.

Interactive digital bills undoubtedly aid the collections process. Opening disputes, changing payment methods, changing billing addresses, etc., should all be possible from within the bill rather than expecting the customer to log into a different portal. Changing legacy bill presentment to an interactive bill communication layer brings benefits and reduces effort for both service providers and their customers.

How will this affect the call center?

Smarter dunning will free up call center resources and enable agents to focus on solving the most difficult inquiries. Most of the necessary tasks to help financially distressed customers – such as setting up installment plans or searching for invoice insights to discover the relationship of a dispute to the invoice – can be automated or handled through self-service. If service providers can get this right, they can make call centers more efficient or even deflect the call entirely.

What would your top three pieces of advice be to service providers currently considering what to do as they move to smarter, more customer-centric dunning?

I think there are three key things service providers need to do:

• Start small, gain quick wins, and learn from experience. I suggest implementing a simple use case (for example, ‘first-time forgiveness for late payment fees’) and then analyzing the impact. The KPI might be how it reduces calls-to-care, for instance. Having analyzed the results, consider how they could be improved and feed insight back into the next iteration.
• Don’t worry about lost dunning fees. Smarter dunning will result in a drop in ‘revenue’ from dunning fees. But this should be regarded as a win. Dunning fees need to be seen within the context of increased customer care costs, higher churn, the cost of litigation, and brand damage. When seen holistically, the loss of dunning fees is more than offset by the gains elsewhere.
• Share insight. Insights into invoices or invoice history are not only useful to customer support – they’re also useful to the customer. Try and find a way to share these with the customer – ideally proactively and combined with a corresponding solution or offer.