Telecom operators face many challenges. Among the clearest are falling average spending by customers, shifting subscribers away from older infrastructure, rising energy costs, the lack of supplier diversity and hypercompetitive markets.
But there’s another hugely important topic that receives relatively little attention: the recovery of bad debt and non-payment from customers. It’s a significant and costly problem for providers around the world, and it’s most acute in developing markets.
I recently spoke to Trustonic about both the size of the problem and how its new telecom platform is helping to combat it. The company shared some startling statistics: in Latin America for example, 25% to 40% of all post-paid smartphone payments are delinquent over a 12-month period. In a market like the UK, the figure may be far lower, at 12% to 15% of total contract customers, but it’s still significant.
Non-payment not only costs the industry hundreds of millions in lost revenue every year, but brings significant and unwelcome expenses when trying to recover the debt.
Concern about customers not paying their bills is the main reason why credit rejection rates for some network operators can be as high as 70% in periods of heavy promotion. It’s a challenge the mobile industry has never properly addressed. Yet if operators can lower the credit restrictions they feel they have to apply, it’ll enable them to more confidently acquire new customers without risking an increase in bad debt. In doing so, they can also drive higher average spending by offering premium smartphones to more consumers.
Trustonic has its ambitions set on three main areas: reducing payment delinquency, better recovering bad debt and enabling operators to accept more customers. The company’s solutions range from subtle notifications of upcoming due payments to more obvious full-screen warnings that service may be cut if payment isn’t made.
The most extreme measure is a locked screen. Customers can still connect to Wi-Fi but are restricted from using most apps. One of the few exceptions could be access to an operator’s billing function to settle an account.
As well as helping recover revenue leakage, the platform can also cut costs. This is because it’s all automated and so doesn’t need costly investment in areas like call centres. This frees up agents’ time to focus on areas such as upselling.
The initial results shared by Trustonic are impressive and highlight the high value people place on staying connected. The company shared some anonymous data with CCS Insight, covering two operator customers in Latin America.
It showed that non-payment rates for post-paid smartphone customers over a 12-month period had reduced from 35% to just 11% since deploying the platform.
More than six in 10 people (62%) made payments in five days of receiving a notification, rising to 83% in 15 days.
The service has also enabled an improvement in the credit application acceptance rate, up from a dismal 30% to 60%.
But the impact isn’t just near-term. Trustonic also highlighted a more permanent change in customer behaviour. It said lapsed payments typically occur less frequently after people have received one or two notifications.
Another benefit is a reduction in street crime, as locked smartphones are useless on the black market.
Every industry has a level of bad debt, but I was struck by just how rife it is in the telecom sector. With the cost of living crisis becoming more acute, operators’ challenges in recovering delinquent payments will only accelerate.
As operators continue to make heavy investment in fibre and 5G networks, making greater efforts in recovering outstanding payments could be every bit as important.
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