Billing & Payment Options Driving Customers Paperless

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1 Billing & Payment Options Driving Customers Paperless Billing and payment options for customers have grown considerably in the last 5 to 10 years. Bill presentment has expanded from paper bills delivered through the U.S. Postal Service to , mobile phones, and the Internet with the option to receive bills on company websites, at banks, or special payment portals. Payments too have expanded from the days of walking inperson and paying by check or cash or mailing your paper check through the U.S. Postal Service. Now customers can pay by cash, check, credit/debit card, electronic fund transfer, ACH transfer using ATMs, IVRs, mobile phones, and the Internet. In a few short years customers have been offered and have come to expect many billing and payment options. Consumers now understand the benefits of online bill payment. A recent study conducted by the Marketing Workshop and Harris Interactive found that four out of five households with Internet access now use online banking services, primarily to access balance and account history and transfer money between accounts. Forrester Research predicts that the total number of U.S. online bill payment households will increase from 48 million to 63 million over the next 5 years. The rush to accept online payments has been a major driver of Electronic Bill Presentment & Payment (EBPP) programs for many. The focus appears to be shifting. Electronic bill presentment is now being pushed more urgently, in the hopes of reducing printing and mailing costs, and saving a few trees. Companies are also trying to tap into the mobile banking services market which is expected to increase 10-fold by While the greatest growth in mobile transactions is predicted in China and the Far East, Western Europe and India are also expected to grow quickly. While acceptance has been lagging in the U.S., a growing range of new mobile banking products and services are being introduced, such as bill payment and presentment, funds transfer, and account management, which should help entice customers into the fold. EBPP Quest Slow Going The Ascent Group recently conducted research into billing and payment practices. We asked companies about billing services and payment plans, including Electronic Bill Presentment and Payment (EBPP). While we confirmed that companies from many industries are actively implementing EBPP options for customers, we also confirmed that customer adoption (based on volume) for paperless billing and electronic payment is still quite low averaging 5.8 percent for ebill (of total bills issued) and 6.9 percent for epay (of total payments received) for all industries. While electronic payment transaction volume is still low, the number of customers paying through the Internet has doubled since our initial study in 2004 (from 6 percent to 13 percent) The Ascent Group, Inc. 1

2 These EBPP options are there for customers, as all of our participants accept payments through the Internet (up from 38 percent in 2004) and nearly half now offer paperless billing (up from one-third in 2004). We just have to wait for more customers to make the switch. Mail is still the most popular channel for consumer bill payment among our participants. On average, 40.7 percent of customers pay by sending a check in the mail. However, this percentage has been steadily declining over the past 5 years. In our 2004 survey, mailed payments represented 68 percent of consumer payments. Our study participants indicated that most customers still prefer to pay with paper check by mail both business customers and consumers. Surprisingly, many consumers and business customers still pay face-to-face more than 21.1 percent of consumers and more than 16.7 percent of business customers. However, the percentage of payments received through electronic means is growing and slowly displacing the paper check payment. A study by the Federal Reserve Bank, NACHA, and the TowerGroup noted that check volume is decreasing, mainly because of the growth in acceptance of alternative payment methods. According to Aite Group, paper checks and money orders share of bill payments are projected to fall from 54 percent in 2006 to 37 percent in When EBPP was first introduced, most companies offered online payment options while continuing to send paper bills to customers. Now, companies are looking for ways to encourage the adoption of EBills and discourage paper statements. While many consumers are eagerly paying online, they are not quite ready to give up the paper bill. A study by Forrester revealed that only 16 percent of consumers have opted to eliminate the paper statements. These findings are consistent with our study s findings only 5.3 percent of customers have signed up for electronic bill presentation. Push Expands Paperless Billing Adoption Companies, including most of the participants in our research, are now offering fully featured web sites that allow customers to view bills, access billing and payment history, as well as accept electronic bill payment. Several companies in this year s study have also added options to securely deliver bills and offer payment options via , hoping to expand ebill participation. While bill presentation has been around for a while, it was pushed to the back burner in the rush to deliver EBPP via the web. However, it s getting another chance thanks to several vendors that have found clever ways to deliver bills and offer secure payment options without the need to log-into a web site The Ascent Group, Inc. 2

3 bill delivery pushes the electronic bill to the customer, eliminating the need for a customer to log into a web site to view and pay a bill. This is easier for many customers and often speeds up payment of the bill. Companies are taking a second look at this option, especially as web-based EBPP adoption rates stall. The Benefits are There EBPP offers significant cost reduction opportunities for companies, especially as companies move to a paperless billing environment. Internet payment offers opportunities to streamline payment processing as well as remove paper from the processing. More companies are moving more and more payments to electronic format, thereby speeding processing time and receipt of funds. Electronic bill presentation and payment is an attractive opportunity for high-volume billers. While electronic payment does offer some savings and the elimination of many manual processes, it s really electronic bill presentment that offers the biggest savings for companies. Some analysts argue that EBPP can build loyalty, enhance customer service, and improve customer communications. EBPP certainly offers customers the convenience of paying bills when they want to without writing checks. A well-designed web presence, however, probably does more to impact customer service and improve customer communications. Web bill presentation offers the opportunity for companies to target audiences and cross-sell and up sell. Through artificial intelligence, the computer can recognize who is logging on to pay and then make some determinations about suggesting additional services. Anyone who has shopped at Amazon.com, a popular Internet superstore, will recognize how the Internet and the computer can be used to remember past purchase and profile a consumer s taste in books, music, and other merchandise. These are just a few of the obvious benefits that can be realized through electronic billing and payment services. All that is needed now is an audience. Getting it Right Companies are expanding electronic payment and electronic billing options offered to customers, in hopes of increasing the likelihood that they will choose an electronic billing or payment service. Most companies have the ability to accept electronic payments. However, not all have the ability to deliver electronic bills. But there is a growing interest in this now, especially since it appears that consumers are getting more accustom to electronic payment options, Companies are also actively looking for ways to move more and more traditional payments to electronic, leveraging ACH and moving to Back Office Conversion (BOC) and Accounts 2008 The Ascent Group, Inc. 3

4 Receivable Conversion (ARC) (convert paper checks to ACH). More companies are implementing self-service payment services through IVRs and Web sites that accept check, credit card, and debit card. Others are offering options for recurring payment through a credit card, recognizing that many consumers are paying with credit cards to maximize loyalty points or consolidate bills. Direct debit (recurring ACH) is seeing a renewed interest among companies. While direct debit has been offered for 10 to 15 years in many industries, many companies are now emphasizing this as an option to customers. Consolidators also offer the option to set-up recurring ACH payments to service providers, thereby encouraging a higher participation rate among consumers. The point is that customers are interested in paying for services in a variety of ways, as long as they are convenient anytime and anywhere. Do the research to understand how your customers want to pay for services and align your payment options to meet customer expectations. Make it easy for customers to pay your bill. Make sure your billing and payment processes, both the people and technology-driven processes are effective and efficient. Review work tasks, route standards, and systems periodically to identify opportunities for improvement, with a keen eye for those customerfacing processes. Make sure your company develops the ability to transfer payments through check image exchange and the ACH network. Benchmarking performance is an effective technique to understand your department s level of performance and opportunities. Be sure to compare cost and service for a balanced view of performance. You can actively participate in the Ascent Group s benchmarking services to monitor your billing and remittance performance and improvement. Contact Christine Kozlosky at the Ascent Group for more information Benchmark Study of Billing and Payment Practices To better understand how companies and different industries are approaching billing and payment services, the Ascent Group conducted a benchmarking project to evaluate billing and payment performance and practices. Twenty-four companies participated in the research. A list of participants is included at the end of this report. The main objectives of the study were to evaluate the various tactics and strategies used today to bill customers and provide options for payment. The study also identified best practices and opportunities for improvement. Secondary objectives included understanding: Adoption rates of various billing services and payment offerings; The range of performance by company and by industry segment; The use of technology to reduce costs and improve customer satisfaction The Ascent Group, Inc. 4

5 Participants were asked to share management tactics and strategies, as well as identify any improvement in performance. The study also asked companies to include lessons learned, successes, and plans moving forward. Study Findings & Recommendations Study participants range in size from 8,000 to 25 million customers. As a group, participants average 2.1 million customers. Consumers represent the largest segment served by all participants. Our participants included companies from the Financial Services, Insurance, Services, Telecom, and Utilities, with the majority of participants from the Utilities industry (71 percent). Participants issue between 32,000 and 300 million bills annually to customers, averaging 20 million as a group.seventy-one percent of participants reported presenting customers bills on a monthly basis. Companies are actively pursuing Electronic Bill Presentment and Payment. Forty-two percent of our participants present bills electronically and 83 percent accept web payments. For our study participants, EBPP as represented by Electronic Bill Presentment, Internet Payment, and Paperless Billing remains the top plan for the future and the most recent implementation effort. When asked to identify the last billing or payment option implemented, the most popular offerings were Internet Payments (26 percent), Credit Card Acceptance (26 percent), Electronic Bill Presentation (21 percent), and IVR Payments (16 percent). Clearly electronic payment and credit card acceptance are a key emphasis for companies offering new payment options. Companies are implementing Internet payment and electronic bill presentment, together and separately. Some companies are adding ebill Presentment after having an epay service for a year or so while others are implementing EBPP at the same time. Clearly electronic payment acceptance, whether Internet or ACH, is a key emphasis for companies implementing new payment options for customers. ACH debits cost as little as 25 to 35 per item, providing a cost-effective method to process a payment. ACH payments usually clear within one day, representing a significant opportunity to improve cash flow over other non-electronic payment channels. Most Customers Still Pay by Mail Slow growth in EBPP Programs. Mail is still the most popular payment channel among our consumers (40.7 percent) and business customers (51.8 percent). Surprisingly, quite a few consumers still pay face-to-face 2008 The Ascent Group, Inc. 5

6 averaging 21.1 percent 12.8 percent at a company location, 8.3 percent at a pay station. Most of our participants accept walk-in payments through a company location (28 percent) or a 3 rd party pay station (5 percent) or both (50 percent). Business customers also like to pay in person 16.7 percent pay either through a company or 3 rd party. The next most popular channel is through direct debit / bank draft (15.4 percent). On average, only 5.9 percent of total bills are paperless and 6.9 percent of total payments are electronic. EBPP adoption is still quite low when compared to other payment channels. Forty-two percent of participants present bills electronically. Those presenting over the Internet or by range from 1 to 18 percent bills presented electronically (total customers) averaging 5.9 percent as a group. The majority present less than 10% of total bills electronically. Eighty-three percent of participants reported accepting Internet, Web, or other electronic payments epayments averaged 6.9 percent of total payments received. The majority receives less than 5% of payments from customers electronically. While companies are clearly emphasizing electronic presentment and payment, EBPP has yet to achieve a significant level of participation. Offer Biller Direct & Consolidator Bill Presentment To Maximize Participation To meet the needs of all your customers you should consider offering electronic billing and payment options at your own website (biller direct) as well as a consolidator s website. Some customers prefer to go directly to a billers website to make a payment while others prefer to make all their payments at one time through a consolidator. Forrester predicts that the majority of online payment growth over the next five years will come from users paying on bank websites (consolidator). Providing ebills through both channels will increase customer satisfaction with the bill payment process. Additionally, research into online payment behaviors reveals that customers who pay through consolidators are twice as likely to sign up for paperless bills than ones who pay at a biller s website. Consolidators frequently promote paperless billing to customers paying through their site, thereby increasing your chances of improving participation rates. Most Companies Rely on Traditional Approaches to Promote EBPP Options Companies are promoting billing and payment options primarily through billing inserts, bill messages, and website advertising. A smaller number are looking to direct mail, outbound 2008 The Ascent Group, Inc. 6

7 calling, or campaigns to promote usage. More and more participants are eliminating fees or waiving deposits for customers who sign up for electronic billing, direct debit, or electronic payment. Companies are also jumping on the green bandwagon, offering promotions to customers to go green by signing up for electronic billing. Some are giving away hybrid cars, green home makeovers, and eco-vacations. Others are planting trees for every customer that signs up for paperless billing. Not only is this timely and attractive to customers, it also helps to emphasize the savings that be achieved if more customers switch to paperless billing. Actively promote your EBPP options. Use traditional and non-traditional means to introduce options and expand adoption. Print reminders on the bill, on the insert, as well as on the return envelope. Promote ebill and epay options prominently on your web site and in your on-hold messages. Train customer service representatives to refer customers to electronic billing and payment services. Ask new customers for addresses during service initiation, and if they d like to receive electronic billing statements. Aggressively target direct debit/bank draft customers (recurring ACH transfer) to sign-up for paper less billing this is the lowest processing cost combination. Consider offering incentives to encourage EBPP participation. Incentives and discounts do increase participation. Make sure the incentives are fair and worth the effort. Conversely, transaction fees discourage participation. Make sure your fees and discounts are pointing customers to the lowest cost channels. Research has shown that the way customers receive their bill has a significant impact on how they pay their bill. Customers who receive their bill in the mail are more likely to pay by mail or in person, while customers receiving their bill through a consolidator are more likely to pay through ACH deduction from their bank account. Bills delivered on a company website (biller direct) tend to lead to non-recurring credit or debit card payments. Direct Debit Program Participation Exceeds EBPP Program Participation Excluding paper check or cash payments, the most popular payment method for customers was through a recurring ACH payment, frequently called direct pay. Customers paying through direct pay submit banking information to the company so the amount due can be automatically debited from their bank account to pay the balance each month (or a budgeted amount). This approach has been very popular with utility companies for many years. Customers receive a notice of the amount that will be automatically deducted from their bank account each month. The good news, it s also one of the lowest-cost payment processing options, and the optimal combination with paperless billing. Companies are Extending Self-Service Options While EBPP programs continue to be popular, companies are looking towards IVR technology and kiosks to further expand self-service options. After EBPP, accepting payment through the IVR was the most often mentioned newest billing or payment option or billing payment option under consideration The Ascent Group, Inc. 7

8 Look for ways to extend self-service offerings to take advantage of ACH transfers. Most customers pay their monthly bill with a check. Introduce payment options to accept check-byphone, check-by-ivr, and check-by-web to make it easy for customers to pay their bill by check. Non-recurring ACH payment options capture ACH information each time the customer chooses to pay the bill over the phone, IVR, or web. The amount due is then transferred using ACH. This is also one of the lowest cost payments to process it s a win-win all around. Credit and Debit Card Acceptance is Key to Self Service Offerings Debit and credit cards continue to interest customers, especially consumers. Nearly all participants accept credit or debit card payment (91 percent) The Internet is the most popular channel to accept credit/debit card payments. Debit cards are readily accepted in the retail industry and consumers are becoming accustomed to swiping a debit card in lieu of writing a check. Additionally, loyalty programs have increased credit card spending. While credit card payments have stalled slightly in the depressed economy, it s still smart to expand your payment options to accept debit and credit cards. Make it easy for customers to pay with a debit or credit card. Vendors offer many solutions to process credit and debit card payments by phone, through the IVR, on the web, and in person. Consider accepting recurring credit card payments. Although these payments tend to have a higher processing cost, they provide convenience and tend to increase customer retention. Billing & Payment Preferences Change Over Time Customer spending patterns change over time with the economy, personal financial status, and through the introduction of new technology. Conduct periodic customer research to better understand customer billing and payment preferences, by customer segment. As demonstrated in this study, consumer and business payment preferences vary. Customer research will arm you with the information you need to match service offerings to preferences. Eliminate EBPP Adoption Hurdles Like any customer-facing system, it s all about the customer experience. Make sure your selfservice billing and payment options are user-friendly make it easy for customers view bills and make payments. It should also be easy to enroll in an electronic billing and payment option, turn paper bills off/on, and enable account notifications and reminders. Encourage representatives to enroll new customers while they are signing up for service. Make sure your online experience provides the necessary account billing and payment history. Customers who have access to a year s worth of billing and payment history are less likely to feel the need for paper bills. In addition, bills presented on the website should look exactly like the paper bill, to eliminate confusion and unnecessary billing inquiry calls. This will also help customers feel more comfortable moving to a paperless bill. Let customer choose preferred payment methods as well as specify multiple sources for payment. Provide as many payment methods as possible scheduled, one-time, recurring, and automatic payments and accept multiple sources checking accounts, savings accounts, credit cards, debit cards 2008 The Ascent Group, Inc. 8

9 About The Ascent Group, Inc. The Ascent Group, Inc. is a management-consulting firm that specializes in customer service operations and improvement, performance benchmarking, competitive benchmarking, work management, and industry research. Research reports published by the Ascent Group include: Call Quality Practices Credit & Collection Practices Achieving First Call Resolution IVR Improvement Strategies Reward & Recognition Program Profiles & Best Practices Improving Frontline People Processes: Recruitment, Training & Performance Billing and Payment Profiles & Best Practices Meter Reading Profiles & Best Practices Call Center Strategies Improving Field Services These research reports can be purchased online, through our secure order form at or by phone at (888) The Ascent Group offers many opportunities for your company to participate in benchmarking and best practice discovery through its online benchmarking services: Call Center Operations First Call Resolution Call Quality Monitoring IVR Technology Field Services Credit & Collection Billing & Payment Services Remittance Processing Field Services Meter Reading Frontline Recruitment, Training Reward & Recognition Program The Ascent Group is currently researching Billing & Payment Programs and Field Services. If you are interested in participating in our research, please contact Christine Kozlosky at ckk@ascentgroup.com or (888) The Ascent Group, Inc. 120 River Oak Way Athens, GA (888) The Ascent Group, Inc. 9

10 2008 The Ascent Group, Inc. 10