On 14 September 2020, the FCA confirmed the next stage of support for mortgage borrowers recognising that payment deferrals for a large number of customers will be ending soon, and that firms may want to offer forms of short term support that they consider broadly appropriate for certain types of customer. In addition, the guidance stressed that firms needed to take steps to identify customers where short term solutions would not be suitable, which could include customers who:

  • have a payment shortfall;
  • have only a short term remaining on their mortgage and no or limited scope to extend;
  • are unemployed, or have seen a significant loss of earnings;
  • have high levels of overall debt or are having problems with their debt; and
  • for whom short term support is unlikely to be appropriate.

The impact of COVID-19 on customer’s circumstances is likely to be felt throughout the medium to longer term, as the number of individuals and households throughout the UK are impacted by job losses, contract adjustments or changes in government support schemes. Customer income reductions are predicted to rise significantly. As a result, firms may need to consider what changes are required to implement new and/or enhanced processes to support customers during this period, such as adapting income and expenditure tools and implementing revised forbearance measures.

Firms will need to appropriately analyse and segment different customer cohorts considering the key characteristics, for example, distinguishing those customers who have been made redundant vs temporary reduction in working hours.  This will assist firms in being able to react, adapt and be proactive in providing appropriate forbearance and mitigate the risk of poor outcomes.  This risk is increased due to the continually changing and volatile circumstances that some customers may experience moving forward. It is crucial that organisations have the ability to identify and analyse customer cohorts in a way that enables resource and capacity planning, operating models, contact and collections strategies, and forbearance options to be adapted and flexed to the specific conduct risks posed by COVID-19; ensuring fair customer outcomes throughout.

In order to perform effective and timely customer cohort analysis that enables risk based segmentation of the lending portfolio, it is important that firms have a dynamic view of its customer base to determine the implications of government updates, particularly in the event of targeted furlough and job schemes. In addition, other data points should be considered that are relevant to the circumstances presented by COVID-19 and that support the identification of potential or actual financial difficulty. These could include items such as consumer vulnerability, product type and previous history of arrears.

To support firms with these challenges we have developed our Deferral Dashboard which supports the dynamic analysis of internal data (product type, employment status and previous financial performance), alongside the use of external sources (ONS data, market analysis). The Deferral Dashboard is a standalone data fed dashboard that can support you to quickly and efficiently identify key risk characteristics within your portfolio to help shape how customers are segmented and subsequently contacted and treated.

These are challenging times and the analysis and segmentation of customer data will be critical to how firms react, adapt and proactively support customers. If you want to find out more about how we could support you please contact us here.