One of the key parts of the FCA’s Consumer Duty, and in particular the consumer support outcome, is the eradication of sludge processes. These are tactics employed by firms that create unnecessary obstacles and negative friction in customer journeys, hindering consumers from acting in their best interests and achieving good outcomes.
For example, how many of us have tried to cancel a subscription or product by selecting the “if you are thinking of leaving us” option when calling a firm and waiting endlessly without an answer? Then calling the same number and selecting the “if you want to place an order” option and getting straight through!
In this blog, I’ll explore the various sludge practices we still see in use across the industry, as well as what firms need to do to remove them.
What are firms required to do regarding sludge practices?
The consumer support outcome requires firms to:
- Ensure support is as easy to access as purchasing a product
- Remove unreasonable barriers and negative friction across areas where customers need help and support
- Proactively monitor for instances of sludge practices, whether unintentional or not
Sludge practices can originate from various sources and are often unintentional. In many cases, they go unnoticed or unaddressed because they have been ingrained in routines and procedures for so long that they are considered the norm
From a collections and recoveries perspective, these are some examples of sludge practices we see routinely:
- Slow Income and Expenditure processes - the use of postal or email Income and Expenditure templates, which can take weeks to fully complete after various toing and froing for further information and clarification.
- Too many proofs required - for example, asking the customer to post or email proof of income, visit a branch etc.
- Administrative constraints - basing back office and admin SLAs on internal staffing limitations, rather than focusing on good customer service.
- High abandon rates - due to insufficient staffing capacity.
- Bureaucracy overload - having poorly trained staff and ineffective processes which result in internal escalations for approvals or the customer being transferred from team to team (in general, lacking a “right first time” ethos).
- Poorly configured technology - this can lead to instances of sludge practices, for example strategies not configured correctly within a collections system can result in accounts sitting in process blackholes. The use of outdated systems that cause unintentional sludge are a violation of the Duty.
In general, lifting the rock on any manual process that has poor controls will reveal a sludge process, and opportunities to improve customer experience.
Firms should be wary. These practices could result in instances of not treating customers fairly, and we’ve all seen the resulting fines and customer remediation that can occur.
What steps should firms take?
I recommend the following as a starting point to eliminate sludge practices:
- Analyse your customer journeys – look at customer interaction points to identify unnecessary friction. Use appropriate metrics to help pinpoint sludge, e.g. inbound abandon rates, process service levels, customer complaints.
- Streamline your procedures - switch to digital solutions, eliminating unnecessary steps as a result (e.g. online and self-serve rather than postal).
- Empower your workforce - adequately train customer facing agents to handle more complex situations and adjust performance metrics to prioritise the customer outcome.
- Implement digital technology solutions – for example, chatbots can help with instant assistance. Utilise analytics to identify delays and drop offs.
- Continually refine processes – as well as monitor results using champion / challenger methodology.
Arum can help
We are collections and recoveries practitioners with decades of experience helping firms to remain compliant with all relevant regulations. Identifying sludge practices and poorly controlled processes is a key part of how we help firms improve, both for the benefit of the customer, and the firm itself. We can help you gain better oversight and control, reduce complaints and improve efficiencies.
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About the author
Nick Walsh
Principal Consultant, Global Advisory
Nick, a seasoned collections and recoveries professional, boasts over four decades of experience both domestically and internationally. His expertise has empowered numerous organisations, spanning various sectors and sizes, to swiftly adopt an optimal operating model tailored to their unique needs. This tailored approach carefully balances regulatory compliance with organisational limitations, whilst charting a more strategic roadmap for improvement. Nick, and Arum, ensure good outcomes for customers are prioritised in all the client engagements we undertake.