In Summary
- Traditional collections models may no longer provide enough insight into increasingly complex customer circumstances.
- Smarter segmentation can help organisations tailor communication, intervention and repayment strategies to individual needs.
- Combining customer data, vulnerability indicators and human insight can support better decisions and stronger outcomes.
For decades, collections strategies have been built around a simple distinction: is a customer unable to pay, or are they unwilling to pay? While that question remains valid, the reality facing collections organisations today is considerably more complex.
Customer circumstances are rarely static. Financial pressures can emerge unexpectedly, life events can alter affordability overnight, and engagement behaviours can change throughout the collections journey. As a result, many organisations are discovering that traditional approaches built around balance, arrears status and repayment history alone are no longer sufficient to deliver the outcomes they seek.
The challenge is that organisations often spend too much time debating whether customers can’t pay or won't pay, when the more important question is whether they have enough information to make the right decision. In reality, the answer is rarely binary. Customer circumstances sit across a spectrum, and determining the most appropriate treatment strategy requires a far deeper understanding of affordability, behaviour, vulnerability and engagement.
Organisations must demonstrate fair treatment, support vulnerable customers appropriately, satisfy regulatory expectations and maintain operational efficiency while also improving recovery performance. Achieving all of these objectives requires a deeper understanding of customer circumstances and a more intelligent approach to decision-making.
Why traditional collections models fall short
The changing nature of financial vulnerability illustrates this challenge well. Data from StepChange shows that 60% of individuals seeking debt advice are currently employed, with almost half working full-time. Financial difficulty is no longer confined to customer groups that can easily be identified through traditional profiling techniques. Individuals who appear financially stable on paper may still be experiencing affordability pressures, changing household circumstances or unexpected financial shocks.
The broader economic environment reinforces the importance of understanding these dynamics. Individual insolvencies in England and Wales increased by 11.2% during the second quarter of 2026 compared with the previous year, highlighting the continued financial pressures facing many households.
For collections organisations, this creates a significant challenge. Two customers with similar balances and payment histories may require entirely different treatment strategies. Without greater insight into customer circumstances, organisations risk applying standardised approaches that fail to meet customer needs, increase operational costs and ultimately reduce collections effectiveness.
From segmentation to smarter outcomes
The organisations achieving the strongest outcomes are increasingly moving beyond generic collections strategies and adopting more sophisticated segmentation models.
Effective segmentation is no longer simply about grouping customers based on financial characteristics. Instead, it combines behavioural data, payment patterns, engagement history, operational intelligence and customer interactions to create a richer understanding of likely customer circumstances and behaviours.
This enables organisations to distinguish more effectively between customers who:
- Are experiencing genuine financial hardship.
- Are facing temporary affordability challenges.
- Are displaying indicators of vulnerability.
- Have the means and capacity to pay but choose not to engage.
While these groups may appear similar when viewed through traditional collections metrics, they often require fundamentally different treatment strategies.
The value of intelligent segmentation extends well beyond collections performance. It enables organisations to allocate resource more effectively, prioritise customer engagement more intelligently and ensure that interventions are aligned with individual circumstances. Most importantly, it allows collections operations to move away from a volume-led approach towards a decision-led approach, where actions are driven by insight rather than assumption.
Beyond customer outcomes, effective segmentation delivers measurable commercial benefits. By directing the right level of resource towards the right customers, organisations can improve recoveries performance, reduce operational costs and increase the productivity of collections teams. At a time when businesses are under continual pressure to improve efficiency while maintaining service standards, smarter decision-making has the potential to create significant value across the collections lifecycle.
The evolution of customer treatment
A deeper understanding of customer circumstances creates an opportunity to rethink how collections journeys are designed and delivered.
Not every customer needs the same approach. The right communication, intervention and repayment solution should reflect their circumstances:
- Customers experiencing genuine hardship may need supportive engagement and sustainable repayment arrangements.
- Customers showing signs of disengagement may respond better to alternative communication channels and tailored engagement approaches.
- Customers with the ability to pay may require a firmer strategy to encourage engagement and resolution.
The need for a more tailored approach is becoming increasingly evident. Research from the Financial Conduct Authority found that 92% of individuals with low financial capability felt overwhelmed when interacting with financial services providers, with many finding customer service interactions confusing and difficult, resulting in a delay of important financial decisions. This demonstrates that customer engagement is influenced by far more than account balance or arrears status alone and the way in which organisations communicate with customers can have a significant impact on outcomes.
The challenge for collections leaders is turning that insight into practical engagement strategies that improve both customer and commercial outcomes. Collections operations are no longer measured solely on recoveries performance. They are also expected to demonstrate fair customer treatment, regulatory compliance and operational efficiency. Tailored treatment strategies help organisations achieve all three objectives simultaneously.
When organisations align engagement strategies with customer circumstances, the result is often better customer experiences, improved operational effectiveness and stronger commercial outcomes. In an increasingly competitive and regulated environment, the ability to make these distinctions is quickly becoming a defining capability for high-performing collections functions.
Understanding vulnerability beyond compliance
Alongside affordability and engagement behaviour, vulnerability has become one of the most important considerations within modern collections operations. However, vulnerability should not be viewed purely through the lens of compliance.
For many customers, vulnerability can have a direct impact on their ability to engage, understand information or manage financial commitments effectively. Illness, bereavement, caring responsibilities, financial hardship and significant life events can all influence customer behaviour and alter the type of support that may be required.
The challenge for many organisations is that indicators of vulnerability are not always visible, consistently recorded or readily accessible across customer journeys. Information may exist in multiple systems, customer circumstances may evolve over time and frontline colleagues often need support to identify and respond appropriately.
Technology is increasingly helping organisations address this challenge. The ability to capture and manage vulnerability indicators consistently across customer interactions is becoming an important component of modern collections operations. Solutions such as Support Point provide a structured framework for identifying, recording and managing vulnerability indicators, helping organisations build a more complete picture of customer circumstances and ensuring that relevant information is available when treatment decisions are being made.
Importantly, this is not simply about compliance. It is about enabling frontline teams to make better decisions, ensuring vulnerable customers receive appropriate support and creating collections strategies that are informed by the whole customer picture rather than isolated data points.
Better decisions deliver better outcomes
Recent research found that 7.7% of UK households reported missing at least one housing, bill, loan or credit card payment within a single month. Behind every one of those missed payments sits a unique set of circumstances, motivations and challenges.
The future of collections will not be defined by how many accounts an organisation can process or how many communications it can send. It will be defined by the quality of the decisions being made and the ability to align treatment strategies to the realities of customer circumstances.
Organisations that successfully combine data, intelligent segmentation, vulnerability management and human insight will be best positioned to distinguish between customers who cannot pay, customers who will not pay and those whose circumstances sit somewhere between the two.
At Sopra Steria, we believe that is where the future of collections lies. By creating a more informed view of customers and enabling more targeted treatment strategies, organisations can improve recoveries performance, support vulnerable customers more effectively and deliver stronger outcomes across the entire collection’s lifecycle.