Rising Costs, Redundancies and Rate Pressure: How to Protect Your Collections Portfolio in 2026

Fill up a car, buy a weekly shop, pay a utility bill, the evidence that household budgets are under sustained pressure doesn’t require a financial model to see. Fuel prices have been climbing. Inflation, while off its peak in many markets, remains stubbornly above where central banks would like it. And for the significant proportion of mortgage holders who locked in rates when they were historically low, the reality of servicing that debt at current rates is a very different calculation to the one they made a few years ago.

But it isn’t only households that are feeling it. Businesses are under pressure too, from rising operating costs, from tighter margins, and from the difficult decisions that follow. Redundancies have been increasing across a range of sectors as companies look to cut costs and protect viability. That creates a particular kind of double exposure for collections portfolios: commercial debtors who are struggling to service obligations as their own businesses come under strain, and consumer debtors who were managing their commitments fine until they weren’t employed anymore.

For collections and credit leaders, this isn’t abstract economic commentary. It’s already showing up in portfolios. Early-stage delinquency rates have been moving in segments that were stable twelve months ago. Hardship enquiries are increasing. And the mix of reasons customers are falling behind has broadened, it’s no longer just mortgage stress, it’s job losses, business cashflow problems and the cumulative effect of costs that have moved in the same direction for too long.

The question is whether the systems, processes and communication strategies currently in place are built to handle what’s coming, or whether they were designed for a more forgiving credit environment that may not return for some time.

This piece is about the structural changes that make a genuine difference to delinquency outcomes, not quick fixes, but the foundational investments in technology and customer engagement that position collections operations to perform through a sustained period of economic pressure.

Key Takeaways

• Rising fuel prices and inflation are squeezing both businesses and households. Collections portfolios are feeling pressure from two directions simultaneously.
• Businesses cutting costs through redundancies create a double exposure: commercial debtors under strain and newly unemployed consumers struggling with bills and loan repayments.
• Collections operations that are still running on legacy systems or manual workflows are structurally exposed to volume increases they cannot absorb efficiently.
• Communication strategy and channel fit matter more than contact frequency, reaching customers the right way changes outcomes.
• Automation should handle volume and consistency; your people should handle complexity and judgement.
• Meaningful operational change takes time to implement and embed. The organisations positioning themselves now will be better placed than those who wait for the numbers to worsen.

 

The economic backdrop: pressure from two directions

Most collections portfolios sit across two distinct populations, consumers managing personal debt, and businesses managing commercial obligations. Right now, both are under stress at the same time, and the dynamics are intertwined in ways that make the current environment more complex than a standard credit cycle.

Start with fuel. It’s easy to think of fuel prices as a consumer inconvenience, a bit more at the pump, a slightly higher heating bill. But for businesses, particularly those with any dependency on logistics, transport, field operations or physical supply chains, rising fuel costs are a structural margin problem. A small haulage firm, a trade services business, a regional distributor, these are the kinds of commercial borrowers where fuel isn’t a line item you can easily absorb. It eats directly into the cash available to service debt. And when those businesses start to struggle, the knock-on effect into their own supply chains and workforces follows quickly.

That knock-on effect is real and could start showing up in redundancy numbers soon. Businesses under sustained cost pressure, from fuel, from inflation in materials and wages, from the ongoing adjustment to higher borrowing costs, could start cutting headcount to protect margins. For commercial collections teams, this creates a direct exposure: debtors whose ability to service obligations is shrinking as their workforce and revenue base contracts.

Those redundant employees don’t disappear from consumer portfolios, they move into them, often at speed. Someone who was managing their mortgage, their car finance and their credit card commitments on a stable salary is suddenly doing that calculation on a redundancy payment with an uncertain employment timeline ahead. The consumer collections teams watching early-stage arrears tick upward aren’t just dealing with mortgage stress and inflation. They’re increasingly dealing with the downstream consequences of a labour market that is softening in sectors where cost cutting could become unavoidable.

Add in the rate environment and the picture sharpens further. Mortgage holders who rolled off fixed rates over the past eighteen months could see increased monthly mortgage costs. For many, this was manageable when employment was stable and other costs were contained. It becomes much harder to sustain when fuel bills, grocery bills and energy costs all move materially in the same direction at the same time.

Why legacy operations struggle in high-volume environments

There’s a version of this challenge that collections operations have managed before, a period of elevated stress, increased volumes, some additional resourcing, and then a return to normal. What’s less well understood is how significantly the operational cost of that approach has grown as portfolios have become larger and more complex.

Manual workflows that were manageable at lower volumes become genuine bottlenecks when contact volumes increase by twenty or thirty per cent. Teams that rely on spreadsheets and disconnected systems to track customer interactions find themselves unable to maintain the consistency and timing that effective collections require. And the reporting lag that comes with manual processes means that leadership is often looking at data that’s days old in an environment where customer circumstances are changing quickly.

The collections operations that handle volume pressure best tend to have a few things in common. Their workflows are automated at the points where automation adds value, routine contact sequences, payment reminders, case routing, document generation. Their customer data is centralised and current, so agents aren’t starting each interaction without context. And their communication infrastructure is flexible enough to reach customers through the channels where they actually respond, rather than the channels that are easiest to manage operationally.

These aren’t advanced capabilities. They’re the baseline infrastructure that modern collections platforms should provide. But the gap between organisations that have them and those that don’t becomes very visible when volumes increase.

Communication strategy: the lever most operations underestimate

Ask a collections team how they communicate with customers in arrears and most will describe a contact schedule. Calls at these intervals. Letters at this stage. An SMS sequence somewhere in the middle. What they’re describing is a timetable, and a timetable is not the same thing as a strategy.

A communication strategy starts with a more demanding question: what does this particular customer need to hear, through which channel, and at what point in their situation, to make engagement feel like the most natural response? That framing changes almost everything, the sequencing, the tone, the channel mix, and the content of the message itself.

Channel fit matters enormously, and it’s an area where assumptions are frequently wrong. Customers who don’t answer calls and don’t open letters often respond promptly to a well-constructed SMS with a direct link to a self-serve payment option. Customers in genuine financial hardship frequently engage more openly through digital channels than they would on a live call, because the absence of a voice on the other end removes some of the shame and pressure that makes people avoid contact altogether. These aren’t edge cases, they’re patterns that emerge clearly when operations start measuring channel effectiveness with any rigour.

The content of the communication matters too. Templates that have accumulated over years of compliance reviews tend to be technically correct and humanly inert. They communicate obligation without offering resolution. They tell customers what they owe without making it easy to do anything about it. The communications that produce the best engagement rates are specific, low-friction and focused on the next step rather than the backstory.

Before investing in new technology or additional headcount, it’s worth spending time on the quality of what’s already being sent, because better communication with the same contact infrastructure will move outcomes more than most operations expect.

Getting automation right: volume without losing judgement

The case for automating collections workflows is well established, and most operations of any scale have some degree of automation in place. The question worth asking is whether the automation currently in place is matched to the right tasks.

Automation performs best where consistency and volume are the challenge. Routine contact sequences, payment reminders, hardship acknowledgement workflows, case routing based on defined criteria, these are areas where automation delivers significant efficiency gains without meaningful downside. It frees experienced agents to spend their time where human judgement matters: complex hardship assessments, customers who need to negotiate a bespoke arrangement, situations that don’t fit the standard playbook.

Where automation creates problems is when it’s applied too broadly to situations that require nuance. A contact sequence that fires off multiple touchpoints in quick succession to a customer who has just lost their job is counterproductive, and it can damage the relationship at the precise moment when you need that customer to feel like engagement is worthwhile.

Platforms built on Microsoft Dynamics 365 and the Power Platform give collections operations the flexibility to build sophisticated workflow logic around customer behaviour and circumstances, configuring triggers and exceptions based on real signals rather than fixed timelines. For operations that are still running manual processes alongside legacy software, the efficiency gain available from a well-implemented platform is substantial. But it’s worth being clear-eyed about what that implementation involves: meaningful change takes time to embed properly, and operations that treat platform migration as a quick fix tend to underestimate the design work required upfront.

Positioning for EOFY, and beyond

EOFY reporting creates real pressure in collections operations, and it’s worth being direct about the risk that pressure creates. When the focus narrows to moving the June numbers, teams can end up making decisions that improve the year-end position at the expense of Q1, payment arrangements structured to collect before 30 June that aren’t sustainable for the customer, or escalation decisions that are rushed because someone’s watching the calendar.

The collections leaders who manage this tension well are the ones who maintain a clear distinction between actions that genuinely improve portfolio health and actions that temporarily improve portfolio optics. Sustainable delinquency reduction comes from fixing the underlying conditions (communication quality, workflow efficiency, segmentation, channel fit) not from pushing contact volume harder in the final weeks of the financial year.

That distinction matters particularly right now, because the economic conditions driving current delinquency levels aren’t going to resolve before June. Mortgage stress doesn’t ease when the financial year turns over. Businesses that are struggling with fuel costs and reduced revenue don’t recover because a reporting period has closed. And employees who have been made redundant don’t return to full employment the moment the calendar ticks into the new financial year. The operations that will be in the best position at EOFY 2026, and into the following year, are those investing now in the infrastructure and practices that manage elevated delinquency systematically rather than reactively.

Where to focus

For collections and operations leaders thinking about what to prioritise in the months ahead, the honest answer is to start with an assessment of where your operation is genuinely exposed. Not just the portfolio data, but the operational infrastructure behind it. Are your workflows built to absorb a sustained increase in volume? Are your communication strategies matched to how your customers respond? Do your agents have the tools and information they need to have productive conversations with customers under financial stress?

These are structural questions, and structural improvements take time. A well-implemented collections platform, designed around your specific workflows and customer segments, typically takes a couple of months to implement and embed properly. That’s not a reason to delay, it’s a reason to start the conversation earlier rather than later.

We work with financial services operations to design and implement 365 Collect, built on Microsoft Dynamics 365 and the Power Platform. If you’d like to talk through what a more capable, automated collections environment could look like for your organisation, we’d love to talk.

Get in touch here.

 

Frequently Asked Questions

We manage both commercial and consumer portfolios. Is the right approach the same for both?

Commercial debtors often require a more relationship-oriented approach, where the conversation is about business viability rather than personal hardship, and where the decision-making sits with a director or finance manager rather than an individual. Consumer collections, particularly where redundancy or income loss is a factor, typically requires more empathy-led communication and a greater focus on hardship pathways. A well-configured platform should allow you to run different workflow logic and communication strategies across portfolio segments without managing them as entirely separate operations.

Our delinquency rates are still within acceptable ranges. Should we be acting now?

Early-stage delinquency data is often the most reliable leading indicator available to collections operations. If you’re seeing a gradual upward trend in accounts that are one or two payments behind, that movement tends to compound over two or three quarters before it becomes visible in your headline numbers. The organisations that manage elevated delinquency best are typically the ones who start investing in their operational infrastructure before the pressure becomes acute, not in response to it.

How long does it typically take to implement a collections platform properly?

A meaningful implementation, one that’s properly configured around your workflows, integrated with your existing data, and tested before go-live, typically takes a couple of months. Shorter timelines are possible for more contained deployments.

We already have some automation in place. Is there still a case for reviewing our platform?

Almost always, yes. Automation that was implemented a few years ago was typically designed for a different volume environment and a different set of customer expectations around digital engagement. The question worth asking is whether the automation you have is flexible enough to respond to current conditions, and whether it’s handling the right tasks. A platform review doesn’t necessarily mean starting over; it often means identifying the specific gaps where existing capability is falling short.

How do we make the case internally for platform investment when budgets are under pressure?

The most effective case tends to be built around operational cost rather than capability. Manual processes have a measurable cost per case, in agent time, in error rates, in the management overhead required to maintain consistency at volume. A well-implemented platform reduces that cost per case significantly, and the efficiency saving can often be used to justify the investment without needing to rely on harder-to-quantify benefits. We’re happy to work through that analysis with operations that are building an internal business case.

Read: We have a blog that walks you through how to make the case for a new collections platform.