Persistent Debt Account Status for PayPal Credit UK

Case Study

The Problem

PayPal Credit faced a double-sided problem related to persistent debt:

  1. Customers did not receive notice if and when they had fallen into persistent debt, either through email or account messaging.

  2. The customer support and collections agents’ systems used could not identify that a customer was in persistent debt until the account reached the 36-month mark.

The unfortunate outcome of this was that customers had no way of knowing they were in persistent debt until they reached the 36-month mark. At that point, their account would be flagged in the system, they’d receive a notice that they were in persistent debt, and their credit would potentially be frozen. Many customers call customer support at this point, generating a significant amount of call center traffic.

Additional Context

  • PayPal is a digital line of credit (basically a credit card but without the card)

  • If you are new to the world of UK financial parlance, the Financial Conduct Authority defines persistent debt as when a person is paying more in interest, fees, and charges than they are paying off their credit card balance, over a period of 18 months or longer. Basically, you’re not paying enough of your principle down, so you end up falling deeper into debt.

The Solution

  1. Notify customers, if, and when, they fell into persistent debt, and provide them with information on how to get out of persistent debt.

  2. Update the customer support and collections agents’ systems to identify if a customer was in persistent debt status at the start (18-month mark).

Our Process

Research

1. Review the Financial Conduct Authority’s recent Consumer Duty guidelines and our existing servicing emails.
Part of PayPal’s need to address this problem is related to Consumer Duty. In 2023, The Financial Conduct Authority instituted a new series of rules and guidelines, known as “Consumer Duty.” These rules and guidelines are designed to hold financial institutions to a higher standard and level of responsibility in putting customers’ needs first. Firms are required to:

  • End rip-off charges and fees

  • Make it as easy to switch or cancel products as it was to take them out in the first place

  • Provide helpful and accessible support, not making people wait so long for an answer that they give up

  • Provide timely and clear information that people can understand about products and services, so consumers can make good financial decisions, rather than burying key information in lengthy terms and conditions that few have the time to read

  • Provide products and services that are right for their customers

  • Focus on the real and diverse needs of their customers, including those in vulnerable circumstances, at every stage and in each interaction

2. Explore competitors’ and other UK financial institutions’ approaches
As with any project, we took a gander at how some of our competitors and other major industry players approached persistent debt. All the UK credit card issuers and banks we reviewed had, at minimum, external site pages that explained persistent debt and offered guidance on how to get out of it.

Barclaycard, HSBC, Lloyd’s Bank, and VeryPay went one step further and provided interactive repayment calculators. These allow users to input a balance, payment amount, and interest rate to see how long it a) will take them to pay off and b) how much interest they will pay.

Now, it’s important to note we were very aware that we were looking at external sites whereas our project was on the internal, servicing side. Despite our best sleuthing, we were unable to scrounge up any examples of how competitors handled persistent debt within customers’ accounts.

American Express

Competitor Examples

Lloyd’s Bank

Barclay’s Card

Design

After reviewing and researching, my design partner and I discussed and decided on the following:

Ideal UX Plan
Add persistent debt status on servicing home page
• Stage of persistent debt account is in
• Number of months customer has been making only minimum payments
• Link to new persistent debt info page
Create new page with comprehensive persistent debt information and interactive repayment calculator
• Repayment calculator would auto populate their current account balance, last minimum payment amount, and variable interest rate.
—> This way the customer could quickly calculate the time it’d take to pay off their current balance and how much interest it would cost them.
• Provide a suggestion below the calculator to try adding £5 to their monthly payment to see how much time and money it would save them.
Update servicing emails to include clear and direct communication about persistent debt

We were jazzed with our plan but knew there would probably be some restrictions and technical limitations. We started running early iterations by our product partner, engineering team, and legal advisor to see what would and wouldn’t be feasible. So from our ideal, we landed on our real:

Ideal Real UX Plan
Add persistent debt status on servicing home page with:
• Stage of persistent debt account is in
• Number of months customer has been making only minimum payments
• Link to new persistent debt info page
Create new page with comprehensive persistent debt information and interactive repayment calculator static persistent debt examples
• Repayment calculator would auto populate their current account balance, last minimum payment amount, and variable interest rate.
—> This way the customer could quickly calculate the time it’d take to pay off their current balance and how much interest it would cost them.
• Provide a suggestion below the calculator to try adding £5 to their monthly payment to see how much time and money it would save them.
—> Technical limitations meant the interactive calculator was out (which, honestly, was quite the bummer).
Update servicing emails to include clear and direct communication about persistent debt.
—> Different team owned those emails and there were legal reasons why we were not saying “persistent debt.”

A very cool note about #1: This would be an industry-first from what we could tell. No other companies use numerical stages to talk about persistent debt. They frame it as a binary: either you’re in persistent debt or you’re not not. But that belies the monthly benchmarking that companies track persistent debt at: 18, 27, and 36 months. American Express’s FAQ page was the only example we saw that even referenced those monthly benchmarks.

We hypothesized that using stages to mark an account’s persistent debt status would give the customer a more accurate time-frame of when financial ramifications could occur. For example, during stages 1 – 3, their account would not be adversely effected. If they reach stage 4 though, there is a chance for frozen credit and even account closure. We also hoped it would spur a customer to action sooner rather than later — a kind of long-term countdown that would keep them from reaching that final stage 4

Persuading our legal partner to agree to this was a Sisyphean task. PayPal, particularly in the UK, is not looking to be an industry-leader. Being the first in the industry to launch with this then was understandably a somewhat unsettling proposition in terms of legal risk. Thankfully we came to an agreement that these new stages of persistent debt were very much in the spirit of Consumer Duty and could be instrumental in keeping customers from falling into (and getting out of) persistent debt.

The caveat of this agreement was that what I had as “stage 1” of persistent debt wasn’t actually persistent debt, but more of a pre-persistent debt stage. Hence the slightly different language for the 12-month mark account status notification.

Launch and Results

PayPal Credit UK’s new persistent debt status launched in December of 2024. As of now (early Q1 of 2024), we do not have statistically significant results.

We’ll continue to monitor the number of customer service calls regarding persistent debt and track the number of accounts in persistent debt post-launch to compare to pre-launch numbers.