Billing and Payment Profiles & Best Practices 2013

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1 Billing and Payment Profiles & Best Practices 2013 Research Summary With postal rates increasing and the U.S. Postal Service considering reductions in service, it has become even more critical for companies to invest in online billing and payment services. In the U.S., online banking accounts for 53 percent of banking transactions. While online payment options were a major focus a few years ago, most companies are now focusing on paperless billing, in the hopes of reducing printing and mailing costs. 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. In the U.S. today, two out of three phones purchased is a smartphone. The growth in smart phones is placing pressure on companies to introduce mobile apps and options to receive bills and make payments via text (SMS). 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, remote deposit, and account management, which should entice more and more customers. Additionally, talk of mobile wallets, cloud-based proximity payments, and near field communications is increasing as key players in the payment industry test new technologies and payment options. Gartner predicts more than 1 billion smartphones and tablets will be purchased worldwide in The future looks promising for mobile billing and payment options. 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 growing slowly averaging 15.4 percent for ebill (of total bills issued) and 16.5 percent for epay (of total payments received) for all industries. While electronic payment transaction volume is still quite low, the number of customers paying through the Internet has doubled since our initial study in 2004 (from 6 percent). These EBPP options are there for customers, all of our participants accept payments through the Internet (up from 38 percent in 2004) and three-quarters now offer paperless billing (up from one-third in 2004). We are now just waiting for more customers to make the switch The Ascent Group, Inc. 1

2 Mail is still the most popular channel for consumer bill payment among our participants. On average, 44 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 20 percent of consumers and 18 percent of business customers. However, the percentage of payments received through electronic means is growing and displacing the paper check payment. In addition, companies and third-party payment processors are converting in-person check payments to electronic payments through back office conversion and remote deposit. The adoption of payment consolidators, or E-Lockbox services, has also helped to streamline electronic payment receipt and reduce system integration needs. An e-lockbox serve as a funnel for all payments processed mail payments, home banking payments, credit and debit card payments, other third-party payments, and in-person payments made through authorized and unauthorized pay locations. E-lockbox services further boosts the percentage of total payments received electronically by the biller. 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 eliminate 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 15.4 percent of customers have signed up for electronic bill presentation. How Does It Work? There are two primary models for delivering Internet bills to consumers Biller Direct and Consolidator. Biller Direct Model Companies make customers bills and statements available on their own Web sites where customers log-on to view and pay their individual bills. From the company s perspective this is a good model because it allows tight control of the user interaction and customers can be 2013 The Ascent Group, Inc. 2

3 exposed to other utility marketing efforts on the same Web site. From a consumer perspective it might be less appealing to have to visit every service providers Web site to pay all their bills, each with their own log-on procedures and account numbers and PINs. It s really the equivalent of driving all over town to pay all your bills in person. Consolidator Model A third party is responsible for presentation of the bill and/or processing of the electronic payment. Consolidators receive and store statement data from a number of billers. Consumers go to the Consolidator s Web site to retrieve and view their billing statements. This model is more convenient for consumers, but it s also more complicated for billers. Companies selecting this model have to interface their systems with the consolidator s systems, downloading statement data in a specific readable format. Seventeen percent of participants offer EBPP through both a consolidator and as a biller-direct. Sixteen percent rely solely on a consolidator. Sixty-seven percent of participants offer EBPP services solely as a biller-direct. Our participants are currently leaning towards the Biller-Direct model. There are two basic models of electronic bill presentment: Push delivers electronic bills directly to customer via . In some cases a link is embedded in the message. When a customer clicks on the link they are taken to the appropriate web page to view the bill. Other times, the bill is delivered in the , along with a secure method to pay, totally eliminating the need to visit a web site. Pull bills are posted on a secure web site that requires a user to login to view and make payment. Push Expands Paperless Billing Adoption Companies, including many 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. 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 Ascent Group, Inc. 3

4 Benefits 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. 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 billing and payment web presence, however, probably does the most 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 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 The Ascent Group, Inc. 4

5 Direct debit (recurring ACH) is seeing a renewed interest among companies. While direct debit has been offered for many 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 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 companies participated in the research. A list of participants is included at the end of this report. The following pages summarize the study s objectives, findings, and recommendations. We also include a list of innovative and winning practices for your consideration. Study Objectives 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. 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 The Ascent Group, Inc. 5

6 Study Observations Study participants range in size from 16,000 to 4.8 million customers. Our participants included companies from the Service Industries, including Insurance and Government, and Utilities electric, gas, water, and multi-service utilities. The majority of study participants are based in the United States (85 percent) The Ascent Group, Inc. 6

7 Study Findings & Recommendations Companies are actively pursuing ebill, epay, and 3 rd Party Payment Networks. Seventy-five percent of our participants present bills electronically and 100 percent accept web payments. For our study participants, Paperless Billing and 3 rd party pay locations are the most popular recent billing and payment enhancement. When asked to identify the last billing or payment option added, the most popular initiatives were 3 rd Party Paystations (25 percent), Paperless Billing (25 percent), Web Pay (19 percent), and Direct Debit (13 percent). Clearly electronic billing and payment services are a key emphasis for new product or service offerings. 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 EBPP Adoption is Gaining Speed. Mail is still the most popular payment channel among our consumers (44.2 percent) and business customers (54.9 percent). Surprisingly, quite a few consumers still pay face-to-face averaging 20.5 percent 10.7 percent at a company location, 9.8 percent at a pay station. Most of our participants accept walk-in payments through a company location (33 percent) or a 3 rd party pay station (11 percent) or both (56 percent). The next most popular payment channel for business customers is direct debit / bank draft (25.4 percent). Business customers also like to pay in person 18 percent pay either through a company or 3 rd party payment location. On average, only 15.4 percent of total bills are paperless and 16.5 percent of total payments are electronic. EBPP adoption is still quite low but gaining year to year The Ascent Group, Inc. 7

8 Forty-five percent of participants present bills electronically. Those presenting over the Internet or by range from.6 to 100 percent bills presented electronically customers averaging 15.4 percent as a group. The majority present less than 5% of total bills electronically. All participants reported accepting Internet, Web, or other electronic payments epayments averaged 16.5 percent of total payments received. The majority of participants receive more than 10% of payments from customers electronically. While companies are clearly emphasizing electronic presentment and payment, EBPP has yet to achieve a significant level of participation. Many customers are wary of turning off the paper bill they are primarily concerned with missing a payment or not having the paperwork when they need it. The more traditional payers have long-established processes for paying bills that includes filing the associated paper bill ebills deviate from this process. Other customers are concerned that online payment information is not secure. There is still a large segment of the population that simply does not pay bills online. 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 and make it easy for customers to see or get their bills and make their payments. It should be easy to enroll in an electronic billing and payment option, and easy for customers to 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. 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 with paperless billing. Let customer choose their 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, and debit cards 2013 The Ascent Group, Inc. 8

9 Actively Promote Electronic Billing and Payment 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 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. 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. A recent study by NACHA (The Electronic Payments Association) found that companies with highest rates of direct debit adoption have a defined budget for promoting recurring ACH, and have had success in increasing direct debit coupled with paper statement suppression campaigns. These billers also actively communicate with customers about direct debit options during service onboarding. The billers report that faster, easier and convenience-related campaigns for direct debit work well, and that green messaging continues to have positive results. 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. Another option that has proven effective is a trial period that allows customers to get comfortable with paperless billing before suppressing the paper bill. In addition to promotions, many companies are finding that proactive customer notifications are key to increasing paperless billing adoption. Most consumers want to receive text or reminders and alerts when a bill is due to help avoid a late or missed payment. Proactive communications can remove the angst of not receiving a paper bill every month. Maximize Participation through Biller Direct & Consolidator Options 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 2013 The Ascent Group, Inc. 9

10 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. Providing ebills through both channels will increase customer satisfaction with the bill payment process. Fiserv s research shows that most customers visit company (biller direct) websites to make payments and that 40 percent will visit company websites when they need to make a last minute payment to avoid fees or termination of service. For these reasons, biller direct website should offer the ability to accept last minute payments. In contrast, 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 paperless adoption rates. Offering electronic bill presentment and payment services through a consolidator is yet another way to increase paperless billing participation. Extend Self-Service Options While EBPP programs continue to be popular, companies are looking towards IVR technology and kiosks to further expand self-service options. Look for ways to extend self-service offerings to take maximize ACH payment, both recurring and non-recurring. ACH payments are one of the lowest cost payments to process. Since 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. Accept Debit and Credit Card through Self-Service Options Nearly all participants accept credit or debit card payment (75 percent) The IVR (self-service) is the most popular channel to accept credit/debit card payments. Debit and credit cards continue to interest customers, especially consumers. 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, they provide convenience and tend to increase customer retention. Poor Customer Experience As typical of many self-service options, electronic bill presentment and payment options can lead to a poor customer experience. This hinders promotion and growth. Early web implementations were plagued with online registration issues and difficulties logging in, in some cases two sets of log-ins were required to make a payment. Phone-based self-service has been 2013 The Ascent Group, Inc. 10

11 also been challenging, with many utilities just now getting around to focusing on the customer experience. A recent billing study by Forrester Research revealed that half of consumers will leave a website in less than 8 seconds if they do not find what they are looking for. Another study of customer preferences shows that most customers prefer to make a quick payments rather than logging into an account, primarily as a result of password fatigue. These consumer preferences should be factored into biller-direct offerings. Fiserv s research shows that most customers visit company websites to make payments and that 40 percent will visit company websites to make a last minute payment, reiterating the need to provide easy to use payment options. For past due customers, there are concerns that online payments will not post quick enough to avoid service termination. These may be valid concerns, especially for companies relying on third-party web payment processing. Web epay options that do not post for 1 to 2 days are useless for last-minute payers. Poor customer experience can be attributed to a lack of focus and planning as well as difficulties with implementation and system integration. Many different vendors, in many different flavors and features, as we ve found in this report, offer electronic billing and payment solutions. Solutions can be difficult and expensive to implement, resulting in a patchwork of options. This makes it challenging to provide a consistent customer experience across all payment and billing options. Companies interested in improving the customer bill paying experience should tap into their customer s experiences, through focus groups, usability testing, and other customer research. 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. Additionally, customer payment patterns change over time with the economy, personal financial status, and through the introduction of new technologies. Make sure you stay in tune and make sure it is easy for customers to pay. Ensure PCI Compliance Recent regulations introduced by payment card vendors (MasterCard, VISA, and American Express) are making it critical to protect consumer credit/debit card information. It is a requirement that is proving expensive, challenging, and confusing for many utilities. PCIcompliance is a major consideration in evaluating electronic payment offerings. If you are accepting credit or debit card payments make sure you are in compliance with PCI data security standards. Companies out of compliance can incur penalty fees from the payment card vendors The Ascent Group, Inc. 11

12 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 First Call Resolution. 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. 12