Know your digital customer – the future of credit management

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“Know your customer” is the credit managers’ mantra. So when your customers jump on the digital train, should you? In my eyes the traditional craftsmanship of credit management has come to a point where it needs to reinvent itself and travel down the digital route.  The credit manager will continue to be a strategic business […]

“Know your customer” is the credit managers’ mantra. So when your customers jump on the digital train, should you? In my eyes the traditional craftsmanship of credit management has come to a point where it needs to reinvent itself and travel down the digital route. 

The credit manager will continue to be a strategic business partner by balancing credit risk appetite with potential earnings. However, analyzing financial statements, making collection calls, and releasing orders is simply a bit backwards in the age of fast-moving social media, big data, and advanced digital fraud. I believe that evidence of the digitalization happening already is provided in some of the topics for the 2016 NACM credit management conference, which includes: cloud solutions, social media, credit management automation, e-invoicing, and new payment solutions. 
As a credit manager, there are now three different routes you can choose: expand the (digital) activities of the credit department, introduce new tools, and/or contribute to the Digital Customer Experience (DCX). 

Expanding role of the credit manager to support other departments

New potential for credit management activities can be found around social media as new information about customers and companies can be posted online months before you can see the result in the financial statement. This makes you think. One might therefore need to integrate social media listening with the monitoring routine and feed sales with reports not only on payment behavior but also the financial and business status captured through social media. A simple way to integrate with sales and customer service is to provide the credit and collection department access to the CRM system, and if you are on using the Chatter application is a given.
Speaking of social media, LinkedIn is a great tool because it provides an array of information about companies and its employees, with possibilities to identify names, role structure, and even estimate retention rates. This information can obviously support you when estimating risk or collecting an outstanding receivable. The flip side is that if a credit manager can do this, so can the fraudsters. Fraud monitoring and detection, both internal and external, is therefore another area credit departments can become more involved and eventually play a key role protecting the company’s assets. 

Technology and automation

Needless to say, the credit management tool landscape is changing. One example is the Dun & Bradstreet or Experian apps now available for integration with Another example is the emerging trend to utilize big data and analytics to drive risk predictability. Credit management is after all about speed to determine risk. Credit professionals therefore seek solutions that quickly pull data to help them make smarter and more informed decisions faster. Additionally, now there are new players in the market providing credit scoring based on completely different data sources and dimensions than the established firms do, with examples of such being quality of LinkedIn connections and home address patterns. Prepare to be surprised… 
Credit scoring and rating is an area where most companies with significant volumes have already looked into automation. There are many ERP native tools available as well as bolt-on solutions. To my experience the challenge for companies is to define a standard scoring model, and on top of that find the business case for the technology investment. Because of this, surprisingly few companies seem to have automated credit scoring and rating. Here robotics (RPA) could play a role, supporting data fetch from several sources and feeding multiple models, finally uploading results to the ERP. 

Improve customer experience

Enhancing the digital customer experience (DCX) is one of the elements of a truly digital company, simply because the digital customers would expect new and improved ways of communication. And even if DCX is a broad concept, including everything from virtual agents to mobile apps for tracking delivery status, the credit department can contribute a lot to this area from a finance point of view. The focal point is of course defined by the type of business. However the credit department should look into opportunities such as:
  • New online credit applications and payment options, facilitating easier and earlier payments
  • Email Invoice for consumers and small companies, giving additional abilities to monitor read rates of emails can impact the collection strategy.
  • Integration with any multichannel strategy and tools. If a virtual agent is used, the credit department should be incorporated and have (for example), a ready auto-response for standard questions.
  • Customer portals for invoice and claims matters, where for instance invoices and document copies can be displayed, and payments and claims can be submitted. And don’t forget that even the field sales force can benefit from this if extended to a mobile app! 

What’s next?

Businesses are more willing today to seek external support for more complex tasks around financial risk management. One way is to use third party support for routine credit tasks, such as social media listening and fraud detection. Another is to bring in partners to support transformation and ease new technology implementation. I believe running a relevant process and digital maturity assessment is a healthy way to start. It is important that the skill set be assessed to ensure you have the right processes and competencies in governance to drive digital. Needless to say, the credit manager of the future may have more of a technical background than a finance profile.
And yes, there is quite a lot of hype around digital at the moment, but I am convinced that for the credit manager of the future, elements such as social media and big data will be their best friends to provide better insight, identify the best customers, and control risk. The challenge for many credit managers might be that the digital train has already left the station, with the customers on it. The good news is that there is still time to step up the game, reinvent, and utilize new opportunities for credit management and further increase your value as a key business partner.

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