EXUS Collections & Recovery Blog

The global psychology of promises and what that means for your kept promise ratio

Posted by Marios Siappas on Thu, May 24, 2018 @ 07:57 AM

Handshake

I promise.

It’s one of the most solemn word pairings in the English language. It’s personal. We make promises in our private lives, at work, to ourselves.

Promises carry a tangible psychological weight. Numerous psychological and economic studies show just how seriously we take making (and breaking) promises, and how promises greatly enhance cooperative behavior.

It’s why many restaurants use the power of promises to fight against the epidemic of no-shows - by asking people who reserve a table to 'promise to call if they can't make it' as it increases the number of tables they serve each night.

Promises also play a large role in business - and debt collections, too. Even in a globalised world, an old fashioned promise retains an acute power. Few things are more intuitively obvious and more widely shared than that promises ought to be kept.

Again, studies back it up: keeping a promise isn’t emphasised simply because people fear the repercussions, but rather because they prefer keeping their word. It makes people feel good. And this doesn’t seem to change among cultures: keeping your word is a universal value. Each of the world’s three largest faiths forbid breaking an oath, for example.

The cross cultural power of the promise makes it crucial to collections departments who deal with diverse customers. Modern financial institutions will have debtors from all over the world. It’s a concept that’s easy to transport across boundaries and borders.

The cultural lens

But, while a concept like a promise might be fairly universal, the cultural lens through which it’s viewed might alter how and when promises are made.

These cultural barriers are familiar in business. In her book The Culture Map, the academic Erin Meyer talks at length about the challenges posed by cultural differences. A French manager, for instance, once confident in their leadership ability, might discover leading a team of Americans is quite different.

Other factors like praise, criticism, even when it's appropriate to speak are affected, too; culture adds a layer of nuance to universal qualities. Meyer found that national culture trumps organisational culture.

 

“It is no longer enough to simply offer a product translated in ten to twenty different languages. Users also want a product that acknowledges their unique cultural characteristics and business practices.”

 

The invisible barriers presented by culture will change how you communicate, decide, or schedule a promise, for instance. In the UK, a firm ‘yes’ may be enough to indicate a guarantee, but in Japanese culture it’s normal to nod and say ‘yes’ as sign of polite attention.

Similarly, Western cultures tend to view time as linearly. So Western people structure their lives, especially business operations, by milestones and deadlines. But other cultures, as in India, view deadlines as targets among other competing priorities.

These differences have a tremendous effect on how we understand each other and, ultimately, how we get the job done. In the case of collections teams, these sorts of cultural misunderstandings can impede debt recovery.   

Collection across cultures

In debt collection, a helpful behavioural metric is a kept promise ratio. Simply put, it’s the rate at which debtors make payments when they say they will.

A self-service collections system will enable customers to easily make promises to pay. After logging into your customer facing collections portal, for instance, debtors are presented with their overall debt status and may proceed with performing actions of their choice, such as submitting a promise to pay.

But given the cultural challenges of working across the world, how can your technology cater to your customers’ needs? Whatever software you use, it’s important that you can customise the interaction.

As Elisa M. del Galdo and Jakob Nielsen put it in their book International User Interfaces: “It is no longer enough to simply offer a product translated in ten to twenty different languages. Users also want a product that acknowledges their unique cultural characteristics and business practices.”

A kept promise ratio is a universal metric, but you can tailor how and when the promise is made. It’s not just a catch-all feature. It’s bespoke and can be applied anywhere. But improving it isn’t a standard operation. Getting customers to keep promises means catering to their cultural norms.

Think about your tone, sure, but also how and when you communicate. In Germany, a low-context culture as Erin Meyer terms it, an honest and forthright payment reminder by SMS could spur a customer into keeping a promise.

But in many countries, including high-context countries like Brazil, cordiality is prized and confrontation is studiously avoided. This means that Brazilians place a strong emphasis on how a message is said rather than on the words used alone. Personal understandings are often more binding than contracts.

Conclusion

Ultimately, a kept promise ratio feeds into a lower non-performing loan ratio. A hard financial metric like NPL ratio is important, but it doesn’t quite capture the subtler parts of debt collection.

Debtors are customers, after all - not just a number on a spreadsheet. And how financial institutions interact with people affects the bottom line. The perception of collections as adversarial are hopelessly old-fashioned.

A customer focused debt channel means operating on their terms. Trusting and empowering a debtor to make a promise to pay changes the power balance. How this universal moral obligation is offered by you is another step in improving customer service.

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Photo credit:

Handshake - Man and woman by Amtec Staffing via Flickr

Marios Siappas

Written by Marios Siappas

Topics: collections and recovery