PAIR Finance Service for the energy industry

Digital receivables management for energy providers – psychology instead of cutting off supplies

For energy supply companies, it is an every occurrence for electricity clients to be late paying their bills. According to the Federal Network Agency and the Federal Cartel Office, around 330,000 clients in Germany had their supplies cut off in 2016 because of late payments. The number of threats to do so was much higher. Reminder messages for overdue bills were sent to around 6.6 million electricity customers. But the “traditional” threat of cutting off supplies is becoming ever-less effective as it is now so easy to switch suppliers. So defaulting customers can simply “escape” their cut-off supply. Thus there is an increasing move towards specialist debt collection for energy providers for these outstanding debts. PAIR Finance is a high-tech company with an innovative approach in the era of digitalisation.

The benefits for electricity and gas providers

From a provider’s perspective, appointing a debt collection company means outsourcing receivables management. In operational terms, this means fixed costs can be converted into variable ones, personnel issues can be resolved and efficiency can be improved. Whether debt collection is actually worthwhile in the energy sector is a function of how successful the service provider is compared to in-house debt recovery. Success can be measured directly in terms of the repayment level, i.e. the number of outstanding amounts which are paid. But this is just one side of the coin, as it is not just about recovering outstanding debts, it is also about not scaring the customer off with the debt collection process. Given the fierce competition in the energy supply sector, successful customer retention is massively valuable.

However, many debt collection companies focus primarily on recovering the funds. They try to convey the necessary pressure through the tone and content of their reminders, which often leads to legal proceedings. This may be successful when it comes to settlement of the outstanding amount, but is a different story when it comes to customer retention. Considered as a whole, this kind of approach is rarely effective. At PAIR Finance, customer retention is very deliberately considered in communications with overdue payers. Experience also shows that “once a late payer” does not necessarily mean “always a late payer”. Many unpaid bills are due to temporary financial difficulties, they are down not to a lack of willingness to pay, but a lack of ability to pay.

PAIR Finance – Motivation instead of threats

Receiving post from a debt collection agency is often seen as a threat. PAIR Finance has a different approach. Motivation instead of threats, with an individual, personal approach, is the key to PAIR Finance’s success. PAIR Finance wants to revolutionise debt collection for energy providers, and not just energy providers. All providers can benefit.

  • Primary providers in accordance with the Primary Provision Ordinance.
  • Gas providers
  • Municipal services companies and regional providers of gas, water and electricity.
  • Heat providers, and many more

For payment reminders, an individual, personal approach works better than standard texts texts which are clearly sent in the same form to all overdue payers. This is not just about changing the name or using first names or more formal forms of address. The content also needs to be adapted to the individual debtor and their situation, so the message really hits home and inspires them to take action. This is based on using the latest findings from behavioural science. At the same time, the communications process should bet targeted towards the person in question. In the digital age, PAIR Finance does not rely on the post and telephone, but instead consistently uses all possible methods of communication, including e-mail or text message straight to the phone.

Debt collection based on the latest behavioural research findings.

PAIR Finance uses proven behavioural science methods and consistently capitalises on the opportunities offered by digitalisation, all in compliance with the data protection laws, of course. In collaboration with the Simply Rational research institution at the Max Planck Institute, it has developed and implemented a completely new kind of customer communications. The method completely does away with the “threats” often used by traditional providers, instead focussing on cooperation rather than confrontation. The interaction is also new. Customer reactions are considered at the early stages of approach and the content tailored accordingly. The result is a dialogue which is consistently targeted at the “payment objective”. It is made as easy as possible for the customer to pay. For example, the payment can be triggered from a mobile phone from within the ongoing conversation.

Successful debt collection with respect for the customer and no damage to the image of the energy provider – this is what debt collection in the digital age with PAIR Finance is all about.