How a Latin American mobile carrier reduced its bad debt and doubled credit application acceptance through our Telecoms Platform

reduce bad debt

All carriers and mobile operators have to navigate between accruing bad debt and enforcing prohibitive credit requirements. Our cell phone locking platform, which automates the process of nudging consumers into better payment behaviour through customised messages and device locks, addresses both of these issues – reducing one Latin American carrier’s bad debt from 35% to 11%.

This, in turn, allowed for prompter payments, a significant reduction in the cost of chasing outstanding payments, and an increase in credit application approvals by 100%.

Tight margins for mobile operators

Mobile operators and carriers have seen rapid market changes over the past fifteen years. They’ve witnessed a shift from high demand and low competition to rapid market maturity, accompanied by a host of governmental and regulatory changes that limit growth.

At one time, it was standard practice to make additional charges at certain times of day or on calls between different networks – but these forms of revenue are now firmly in the past. The present, by contrast, is dominated by substantial market penetration and stiff competition from a range of players.

These changes all have the effect of tightening margins which are constantly challenged by the need for outlay on necessities like licensing and increased network infrastructure. Such outlay can be substantial, whether carriers are implementing 2G to 4G migrations or building out to 4G and 5G networks.

In light of these varied and growing margin pressures, carriers and mobile operators have never had a stronger incentive to reduce their bad debt and find ways to acquire new end customers. Our Telecoms Platform is capable of performing exactly this task – and in-depth data on one of our Latin American mobile carrier clients reveals the significant and tangible impact of our automated platform.

High levels of delinquency

Our client faced a problem that any carrier will feel to varying degrees: delinquency and resulting bad debt. In fact, 35% of their postpaid smartphone payments were delinquent over an average 12-month period.

While not unusual, it’s worth reflecting on the magnitude of this figure. If 35% of people stopped paying their mortgages or energy bills, the economy would collapse. Yet this level of delinquency is entirely typical for many of our clients. North American and EU carriers suffer from 10-15% delinquency rates.

If reduced and recovered, this would amount to millions in what would otherwise be lost revenue. For the telecoms industry, this kind of delinquency-based loss adds a further layer of margin pressure and limits opportunities for growth.

By adopting Trustonic’s Telecoms Platform, our client achieved a substantial reduction in delinquency. Our device locking technology has led to the recovery of multi-million dollars’ worth of bad debt, reducing our client’s total delinquency from 35% to 11% by nudging consumers towards prompt repayments. This is achieved initially through customised reminders, followed (as a last resort) by locking a given handset until the payment has been made.

The operational cost of call centre debt recovery

Debt recovery isn’t the only way our Telecoms Platform eases margin pressures. After all, bad debt isn’t just an expense in its own right. It also incurs further costs in the form of expensive call centres, requiring carriers to employ staff to contact delinquent consumers and ask them to pay their bills.

Before adopting our solution, our client found this method ineffective: call centres represent a substantial operational cost. Yet they only recovered 50% of outstanding payments – and even those consumers who did make payments still took over a month to do so.

Through our Telecoms Platform, however, our client found that 62% of consumers made their payment within five days, while 83% of consumers paid within 15 days. Ultimately, our client recovered 89% of the outstanding amounts.

At the same time, the automated nature of the platform meant that call centre costs were significantly reduced – resulting in far higher volumes of recovered debt, delivered promptly and for less operational expense.

Lower credit thresholds, higher accessibility

The threat of bad debt doesn’t just result in lost revenue and the operational cost of debt recovery – it also limits the number of net-new consumers that can be onboarded. This is especially true of countries with limited banking or credit history – a form of uncertainty that can only be resolved with higher credit thresholds.

For our client, this meant that as many as 70% of consumer credit applications were rejected – leading to a substantial loss of prospective customers who either can’t afford a bigger deposit; don’t want a cheaper tariff or device; or decide to take their business elsewhere.

By using our Telecoms Platform, however, our client was able to take a more considered approach to credit thresholds without a corresponding uplift in bad debt. The platform’s mixture of custom reminders and device locking encourages repayments, making the device unusable until payments are met.

Our client enjoyed a 100% increase in credit application approvals, rising from 30% to 60%. In a high market penetration industry, this volume of consumer acquisition is highly valuable.

How Trustonic can help

Though this data pertains to a single client, these numbers are consistent with those we encounter across a range of clients – suggesting that our data represents the typical challenges faced by all mobile operators and carriers. Delinquency levels need to be reduced, debt recovery processes need to be more effective and efficient, and carriers need to be able to say ‘yes’ to more consumers applying for postpaid smartphone plans.

Our device locking platform addresses all three of these issues by nudging consumers towards timely payments, and – if necessary – locking their devices. Through the platform, our client has recovered market-leading volumes of lost revenue in a timely manner while improving net consumer adds.

The platform doesn’t just increase the quantity of net-new consumers but also the amount of revenue per consumer. Carriers and retailers can lower their credit thresholds on high-tier devices because our solution gives them confidence that more consumers will pay on time. This helps them say ‘yes’ to credit applications on more expensive handsets. The additional payments over time for a higher specification smartphone, alongside better features that encourage data consumption and other service revenues, ultimately increase the Average Revenue Per User [ARPU].

Don’t hesitate to contact us today for more information on our carrier mobile device financing solution and how it can reduce bad debt while increasing net consumer adds and retention goals.

Read the full case study here – Reduce Delinquency and Increase Market Share with Trustonic.

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