Paul D. Flanigan, Fort Knox National Company
The paper check may never be erased from American households, but electronic payments and expedited payments, commonly known as convenience payments, are gaining in popularity.
The reason U.S. consumers have turned to expedited payments, however, has more to do with their hectic lifestyles than financial issues. Recent research into consumers’ online payment preferences has determined that 49.9 percent of survey respondents said they “forgot” or “simply ran out of time” when asked about conditions that cause them to make late payments. Other reasons why some of those bills are relegated to the back of the drawer-or the back of one’s mind-are, in this order, cash flow, travel, illness, holidays, disorganization, disputes with the biller and difficulty managing bank accounts.
The independent research, conducted by Edgar, Dunn & Company for Fort Knox National Company, reveals a series of unique insights into online payment patterns. The implications are broad and the information critical and timely as billers turn to electronic payment processing solutions to enhance cash flow while improving their billing, payment and remittance processes.
too many bills
The typical American household receives about 15 bills per month, a number that continues to grow. Consider the number of new bills that are commonplace today but did not exist even a few years ago, such as those from cell phones and Internet service providers. Due to the sheer mass of bills, consumers are demanding alternative payment options that offer convenience while helping them organize their finances. The findings dispel the popular myth that consumers who pay late do so only because they don’t have the cash. Consumers are making late payments because they’re either too busy, ran out of time or some other priority emerged.
To their credit, savvy consumers are turning to the web and other channels to play an electronic form of biller catch-up, according to the research. Out of all online bill payers surveyed, one in four has expedited a payment over the last year using some form of convenience process to get a bill paid before a late fee is assessed or his or her credit rating is damaged.
Of that group, a whopping 73 percent say they are using expedited payments at least once every six months. A dedicated, hard-core group of consumers, representing 9 percent, make at least one expedited payment every month, and 4.5 percent are using expedited payments more than once per month. Furthermore, almost 19 percent of consumers are taking advantage of billers’ grace periods by expediting the payment after the bill’s due date, but before a late fee is assessed.
Consumers are demanding a wide range of choices for expedited payment options, but, unfortunately, many billers have not factored these consumer demands into their electronic payment strategies. Billers need to have mechanisms in place to accept payments in a variety of ways, whether it’s a credit or debit card, PIN-less or signature debit, or a straight automated clearing house (ACH) transaction.
If they’re going to attract and retain these convenience-craving customers, billers must address four fundamental issues to determine what type of electronic payment solution they should adopt. Implementation can be cost-effective, and even a source of revenue, if billers ask themselves the following questions:
Do you fully understand your customers’ needs and pain points? Knowing who your customers are, and specifically what payment methods and channels they prefer, will help organizations serve customers better. By varying billing practices based on customer segmentation, billers can discover greater value in their own remittance processes-increasing revenue, accelerating collections and reducing costs.
Do you charge your customers a convenience fee for expedited payments, or provide the service as a value-added proposition? Most banks and credit card companies offer a free e-payment service, but many payment processors charge a nominal fee, a scenario the consumer has embraced in return for convenience and control.
Is your current infrastructure capable of adding and integrating additional payment channels, balancing the consumer’s desire for more payment options with your need for cost savings? While the phone is still the consumer’s preferred channel for making payments, billers should seek to incorporate less costly self-service channels, like automated speech recognition IVR and web payments into their existing payment strategies, to deflect billing and payment inquiries that put a strain on customer contact centers.
Does your system possess sophisticated reporting and remittance capabilities designed to capture and disseminate consumer payment information across the organization? The benefit of a single, integrated provider is back-end processing, reconcilement and reporting across all payment channels that can be presented in one consolidated view. Doing so gives billers greater visibility and insight into customer-facing, internal management and reporting activities, while also providing customer service agents with real-time access to account information for greater service and support.
The niche space of expedited payments is no longer uncharted territory. Embracing a fully integrated, consolidated strategy that takes into account all payment methods and channels is a very real opportunity to turn a “cost of doing business” into a new line of business.
Paul Flanagan is chief marketing officer at Fort Knox National Company, a leading processor of consumer-to-business electronic payments.