In today’s market, your customers, whether businesses or consumers, may not be able to pay full price for a product or service immediately. However, they may be able to do so in smaller installments over time if you provide them interest-free credit for a limited period. The important thing is that, given this option of credit, they can afford to commit to a purchase today.
In some cases, you may be able to generate revenue from interest if your customer cannot pay you back in the allotted time or if you are a business that loans money on the basis of interest repayments, such as a credit-card provider or bank. Offering credit to your customers can provide you greater income over time, but how do you guarantee that they can and will repay you in full? The risk is higher for organizations that bill their customers once their services have been used. This is the case for most insurance, healthcare, utility and telecommunications companies.
The most important thing to determine when offering credit is the balance between your risk and your reward. The more credit you give, the more you have to gain in sales, revenue and, ultimately, profit. However, your risk of loss, reduced profit and even bankruptcy (particularly for smaller businesses) also grows. How do you mitigate this risk and tip the balance in your favor?
Credit policies can provide guidelines for your business around when to accept credit applications, any extra steps required for loans over a certain amount, e.g., specialist underwriting, or what your organizations’ approach should be to a first missed payment. Understanding the total value of the opportunity presented by a customer also can mitigate risk, particularly if you can assess their likelihood to respond to a credit offer, their ability to afford and repay credit, their loyalty to your brand, or any changes in their circumstance that could affect their behavior.
Regardless of how your customer applies for credit, creating a positive experience for them is important to stay competitive. People expect instant decisions, so you need to be able to establish their risk versus reward quickly and effectively. Throughout this process, you also will need to meet industry best practice and country regulations to ensure that you are operating in the safest way for your business and your customer.
Understand the aggregate risk of the markets you are in – this allows you to plan better for a market and adjust your risk policies accordingly.
Create the appropriate credit risk policies, products and contracts – we advise on a best-practice approach that complies with regulation and can help design decisioning frameworks that meet with your organization’s appetite for risk.
Identify and retain profitable customers – we can help you identify profitable customers in your portfolio and opportunities for wallet share growth.
Automate credit granting decisions – we provide data, analytics, software platforms and consultancy to support automated decisions throughout the credit lifecycle. Automated decisions can provide consistency and a good customer experience.
Grant credit manually – we provide application processing platforms that are programmed to route certain credit applications to a support team, such as an underwriting team. In this instance, we provide relevant data and information at the right time, which facilitates manual intervention.
Make payments easier for your customer – we can help you predict your customer’s likelihood to pay by automated electronic payment, allowing you to focus your marketing efforts. We also can support automated payments in some regions, check invoice addresses or deliver email invoices.
Take effective collections action for missed payments – we support a range of collections activities, from sending cobranded reminder letters in some regions that can highlight the potential impact of delayed payment on a credit score, to helping you prioritize your resources for chasing payment.