Editor’s note: Sushmitha Koka is a Senior Research Analyst with PayStream Advisors, Inc.
CHARLOTTE, N.C. – "Build and they will buy," was Henry Ford’s mantra in the early 1900’s when he introduced his first horseless carriage, the Model T. He built, and consumers eagerly lapped up the cars as soon as they came off the assembly line. But today, more than a century later, the days of Ford’s Model T are long gone.
Biller organizations – utilities, telecom, credit cards, mortgage companies and others that bill consumers on a recurring basis – can no longer be confident that all they have to do is provide easy and convenient electronic options for bill payments and their customers will adopt them. Results of a Billing and Collections Survey by PayStream Advisors, a Charlotte, NC-based research and consulting company, validates this fact.
The survey revealed that biller organizations were forging ahead on the automation curve – with 74 percent of survey respondents offering an electronic option when it was time to pay the bill, whether it was accepting payment over the Internet, the telephone or even automatic recurring debit. However, it was a completely different story when the survey measured actual consumer adoption and usage of these electronic bill payment methods. While there were wide variations by industry, the common trend was that less than a quarter of consumers, on average, were taking advantage of the alternative payment mechanisms offered, preferring to rely on paper-based payments through cash or the ubiquitous check.
There is no doubt that billers are building robust e-payment systems hoping to reduce costs and improve customer service, but consumers are not always buying into the value proposition. Here are some do’s and don’ts to keep in mind to help billers move from implementation to adoption of e-payments quickly and efficiently.
DO make the system simple and intuitive to use. One of the primary reasons electronic bill presentment and payment (EBPP) did not take off as anticipated was the fact that it took more time and effort to enroll in the online/phone system and navigate through the cumbersome interfaces than it took to stuff a check in an envelop and put a stamp on it. Billers are learning from their mistakes and making the system interfaces more user-friendly and dynamic to drive adoption of cost-effective channels like the Internet and Interactive Voice Response (IVR) systems.
DON’T offer a patchwork of services. Owing to the rapidly evolving payment offerings, many organizations currently use a patchwork of providers to service different business units (e.g. call centers, collections units, and walk-in centers) and channels (Internet, IVR, call center agent). With so many options, a consumer who used an online website to make a payment this month faces a completely different experience the next time if he decides to use the phone instead. However, as a multi-channel approach becomes a key component of billers’ payments strategy, demand is building for integrated payment services that bundle together solutions, which can service a variety of payment channels and types regardless of the consumers’ appetite.
DO charge convenience fees for flexible payment options. Our research indicates that almost 10 percent of U.S. consumers have initiated a convenience payment (payments which include a convenience fee for using a particular channel or timing) within the last 30 days, while more than 25 percent have used this option in the last 12 months. This can be explained by the fact that consumers are weighing the fee against potential late payment penalties they would incur or the hassle of using an alternative payment mechanism. Innovative billers are prudently using convenience fees to drive consumers from high-cost channels to more cost-effective ones.
DON’T ignore the divergent priorities of consumers. Understanding the needs of customers and developing the correct payment menu is critical to designing a successful payment strategy. Billers want to accelerate the collections cycle, while consumers want to delay payment until the last possible minute. Further, today’s consumers want choice. They demand access to multiple payment channels and types so that they can choose the one that it convenient for them. However, a wider menu increases product costs and service complexity for billers. The key to billers’ success lies in understanding these divergent priorities and designing an e-payments program with the appropriate incentives.
Sushmitha Koka is a Senior Research Analyst with PayStream Advisors, Inc. (www.paystreamadvisors.com). In addition to managing PayStream Advisors’ overall research effort, Sush writes research reports, studies market trends, and participates in consulting engagements. Her experience with technology companies as a market analyst enables her to analyze trends in financial services automation, assess feasibility of products and drive research publication. Her areas of focus include electronic billing and payment, travel and expense management and business process automation.