Consumer Bill Payments Shifts & Strategies Jim Gilligan, CTP, FP&A Assistant Treasurer, Great Plains Energy Incorporated Kansas City Power & Light Company Kellie Thomas VP, Product Management, Wells Fargo Payments 2016
Agenda Objectives C2B payment trends Mobile Innovation in C2B billing and payment Discuss trends, new technology, and solutions for consumer billers in the electronic bill presentment and payment space Tapping into the receivables revolution Key takeaways 1
6 billion people on earth 4.8 billion have a mobile phone 4.2 billion own a toothbrush Sources: Mediabistro, Dream Systems Media, AdAge 2
C2B payment trends
Online payments trending upward Consumers migrating from checks/cash to cards Millennials and Households making between $100K - $149K report highest mobile use Change In Usage From Last Year Decreased NET Increased NET Difference in Change (NET Increase NET Decrease) Online payments 6% 4% 2% 67% 19% 8% 27% +21 Credit card(s) 18% 10% 9% 57% 17% 8% 25% +7 Debit card(s) 13% 7% 7% 66% 15% 6% 21% +8 Cash 21% 5% 15% 63% 13% 3% 17% -4 Mobile payment(s) 13% 10% 2% 72% 12% 4% 16% +3 ATMs 22% 9% 13% 65% 10% 4% 14% -8 Checks 28% 12% 16% 63% 6% 3% 9% -19 Significantly decreased Slightly decreased Stayed about the same Slightly increased Significantly increased High net worth individuals and Late Millennials are the most likely to say they ve increased use of all payment methods Source: Fiserv 2015 Expectations & Experiences: Household Finances quarterly trends survey
Bill payment channels usage growing with Movement mostly toward online/mobile channels Percent of Online Households Using Payment Method or Funding Type Last Month Online Biller's site 53% 66% Auto-debit checking account 36% 66% Check 50% 51% Online FI's website Via a mobile phone Both Biller and FI site 31% 33% 27% 31% 18% 48% 2015 2014 Online non-banking website 7% 25% In person at a check cashing store 11% 24% In person retailer's location 13% 20% Calling biller 13% 13% Source: Fiserv Inc., 2016 Eighth Annual Billing Household Survey
Bill pay fragmented and channel switching increasing Average number of bill payment methods consumers use monthly 3.6 Number of bill payment methods consumers use monthly as a percent of all US households One, 10% Six or more, 15% 2.9 Five, 14% Two, 18% Four, 19% Three, 23% 2014 2015 19% of Households Change How They Pay Bills from Month to Month (21M Up from 15M Last Year) Source: Eighth Annual Billing Household Survey, Fiserv Inc., 2016
Models for online bill presentment and payment Online banking Generally offered by banks or credit unions All bill payments made in one place Can be recurring or single payment Closely tied to account balance information May include summary or detailed bill info Biller direct Biller websites with bill payment capability Usually includes summary or detailed bills Can be recurring or single payment Allows for cross-sell and customer service Mobile Extension of biller direct and online banking May include responsive design or an app Bill view and pay functionality with reminders Third-party providers have entered space 7
Generational tendencies toward electronic vs. paper bill pay 2% 3% Senior 40% 16% 33% 6% 3% 4% Baby Boomer 44% 13% 27% 10% Generation X 49% 17% 16% 10% 3% 5% 4% 4% Millennial 47% 22% 14% 9% Online Direct debit Mail In-person Mobile Phone Note: Age breakdowns not provided except for Senior defined as 68+ Source: Aite Group, How Americans Pay Their Bills: Sizing and Forecasting Bill Pay Channels and Methods, 9/2013 8
Of those who pay bills online, where do they make payments? 71% 75% 65% Third Party Bank Biller 53% 46% 28% 23% 33% 1% 2% 2% 1% Millennial Generation X Baby Boomer Senior Note: Age breakdowns not provided except for Senior defined as 68+ Source: Aite Group, How Americans Pay Their Bills: Sizing and Forecasting Bill Pay Channels and Methods, 9/2013 9
GPE Analysis of payment channels 10
29% of bills sent electronically 59% received a paper bill too And 4.2 billion have clean teeth Sources: Mediabistro, Dream Systems Media, AdAge
GPE Paperless Billing Number of customers selecting paperless billing continues to grow Can enroll on-line or calling Customer Care Center Prompted to enroll if sign-up for TEXT on-line Current adoption rate is 30% of total customers Signing-up for electronic recurring payment requires you to go paperless Making a one-time electronic payment on the web defaults your billing to paperless unless you say no 65% of these customers keep paperless billing If you make a move using our on-line service your new bill defaults to paperless unless you Uncheck the Box 94% of customers agree to go paperless 19% of all our customers are douple-dipping (getting a paper bill AND electronic bill) New policy change to eliminate double dippers started in March 12
Mobile 13
Consumer behavior is changing 2005 Today 14
Mobile bill payers growing % of US Online Households Paying at Least One Bill through Mobile Bill Pay 6% 8% 16% 2011 2012 2013 27% 33% 2014 2015 Why did you choose to pay bills using your mobile phone? Easy to do Convenient when I am on the go When I m not near a computer Saves time Like the anytime access When I need to pay last minute 42% 41% 40% 34% 47% 44% Avg. 2.7 vs. 3.3 bills paid via mobile Number of reasons chosen up by 14% Source: Eighth Annual Billing Household Survey, Fiserv Inc., 2016
Mobile bill pay basics Feature Bank/Biller mobile website Bank/Biller app Responsive design Mobile photo bill pay Description Bill pay app within existing bank or biller direct site Application specifically designed for phone or tablet Application detects and delivers right user interface for device Snap photo of bill to enroll payee, snap photo of check or credit card to pay Mobile bill pay almost doubled from 2014. Pay/view bill: #1 and #2 reasons consumers access biller mobile site Nearly 50% of mobile photo bill pay end-users were not previously viewing bills online or making bill payments electronically Sources: Eighth Annual billing Household Survey, Fiserv, Inc., 2016. Bank Systems and Technology: How Mobile Photo Bill Pay is Helping Community Banks Appeal to Mobile Only Customers., January 2014 16
How GPE is thinking about mobile By Text Message to your mobile phone Get notified when your bill is ready Schedule a reminder 1-14 days before your bill is due Make a payment from a designated bank account Mobile can also mean access with phone, tablet or laptop Notifications by e-mail with links to bill presentment Pay-by-phone On-line payments Be notified when we process your payment Send quick text commands to KCP&L to know BAL due, BILL amount and due date, LAST payment, PAY your bill 17
Ways to increase electronic C2B Payments
What are your key objectives? Treasury / Accounting Improve DSO Enable e-billing and e- payments and encourage adoption Reduce paper billing costs with e-billing Reduce bank and third party fees Streamline the accounts receivable posting process Customer Service Simplify enrollment for e- bill and e-payment Provide customer selfservice opportunities on website Minimize customer channels that need to be supported Marketing / Sales Encourage traffic on website for cross-sell Provide as many online and offline payment options as possible Use paper bill inserts for marketing campaigns 19
Solution #1: Electronic Lockbox
Electronic lockbox and receivables posting file ACH Wires Lockbox Biller Direct Remote Deposit Merchant Card Online Bill Pay Sites BSPs Fiserv FIS ORCC (ACI) ipay Others Bank s Electronic Lockbox Receivables data aggregation service Biller Biller receives a single posting file to load into their ERP Walk-in payment providers ACE Cash Express 7-11 K-mart Walmart Online Decisioning Biller may return or repair exception items via online portal Consolidated settlement Biller sees an ACH credit for all payments processed = Core functionality = Optional functionality/service 21
Success story: Great Plains Energy Objectives Ensuring customer satisfaction was very important - customers expected payments to be posted promptly and accurately Enabling customer choice in the way they make their payment without restriction Before Online bill payments had grown to 25% of receipts Received different files and formats from 3rd party processors, along with a number of lockbox checks for online bill payments IT group was overwhelmed with online bill payments Business wanted to reduce the cost and time needed to post payments and research exceptions 22
Success story: Great Plains Energy Actions taken Sought help from our cash management banking partner to identify the right solution Decided to implement E-Box with Receivables Manager provided by Wells Fargo Bank to consolidate online bill payments electronically for posting Use Commercial Electronic Office (CEO ) for managing exceptions for all online bill payments 23
Success story: Great Plains Energy Results Payments are now applied with quicker due to a single source for consolidation of all on-line bill payments and unauthorized paystations with automated posting to CIS system Reduces collection float Improves DSO Reduces working capital requirements Accuracy of payment posting improved Validation of payment information with ability to repair payments leading to a reduction in exceptions Fewer accidental service disruptions Reduced customer inquiries and improved customer satisfaction Reduced manpower Elimination of IT Resources to handle multiple incoming files Reallocation of two FTEs to other roles 24
Less time spent on reconciliation, balancing, and accounting enabled us to reallocate two full-time positions. Jim Gilligan, Assistant Treasurer Great Plains Energy Incorporated
Solution #2: Biller direct website
Biller direct site overview Print provider QR code embedded in paper bill Online/Mobile presentment E-mail/Mobile notification and alerts Biller Bill/invoice file Biller direct site Biller s customer Posting file Card payment Receivables data aggregation service ACH Wires Lockbox Online bill pay Remote deposit Merchant card ACH payment Walk-in channel for presentment and payment = Core biller direct = Optional functionality/service 27
Success Story: Great Plains Energy s site Redesigned Website Friendlier site with easy links for our customers to pay their bills electronically on a onetime basis Ability for customers to sign-up for automated electronic recurring bill payments Auto payment on due date Fee free payments with cards or bank debit Eliminates any possible penalty charges for late payment Encouragement for our customers to go green and receive bills electronically 28
Tap into the receivables revolution Objective Support multiple online payment channels and cash walk-in payments Tap into mobile payments Streamline posting of online bill payments Solution Electronic processing solution for online banking and walk-in payments Enable e-billing and e-payments Integration option for walk-in cash payments Reduce paper billing costs with e-billing Establish a biller direct site for customers to access from company s main site Improve DSO by streamlining posting Support multiple online and offline payment channels Reduce paper billing costs with e-billing Provide marketing or customer service materials in digital format Appeal to younger demographic Consolidated posting file for all inbound C2B and B2B payments Integrate mobile into your bill presentment and payment strategy 29
Key messages to remember World of consumer billing continues to evolve quickly Consider how new innovative approaches to e-payments and paper shutoff will affect you Work with partners internally and externally to define and agree on objectives for handling consumer bill payments Understanding the benefits and drawbacks of each of the approaches is critical Good luck in achieving your objectives! 30
Thank you 31