Consumers Prefer Electronic Payments

An Opportunity for Growth, Increased Customer Loyalty and Differentiation

by Mathias Lilja, MasterCard Worldwide

Consumers enthusiastically have embraced an expanding array of electronic payment options.

Increasingly they are choosing electronic alternatives over cash and check whether buying things in stores, over the Internet or paying bills.

This trend is largely a result of the convenience and ease of use electronic alternatives offer.

For utility companies, electronic payment programs hold tremendous, untapped potential to enhance customer service, streamline operations and attract new customers.

Shifting Consumer Preferences

Growing preference for electronic payments is being accompanied by a decrease in the use of checks to pay household bills.

From 2001 to 2008, paper-based payments decreased from 78 percent to 38 percent of all bill payments, according to a 2008 study by Hitachi Consulting, while electronic payments grew from 22 percent to 62 percent.

This shift to electronic payments has been driven primarily by more consumers turning to online channels to pay their bills.

According to Forrester Research, the number of households with online access is growing rapidly and will total more than 94.5 million in 2011.

The Edison Electric Institute estimates that Americans spend some $214 billion for utilities and services, yet 52 percent of utility bills are still being paid by check. A significant untapped opportunity exists for the industry.

In addition, consumers increasingly are embracing electronic payments for the convenience, security and added benefits they provide.

According to MasterCard research, 69 percent of consumers who sign up to make card-based bill payments do so to help ensure their payments are made on time.

The other most cited reasons are to save time by not having to mail in a monthly payment (42 percent), to earn ongoing rewards (38 percent), and to receive incentives or bonuses for signing up (34 percent).

Electronic Payments Benefit Utility Companies, Customers

Electronic payments and presentment options offer a significant opportunity for utilities to increase customer satisfaction, drive operational efficiencies and grow the bottom line by incorporating electronic payments into existing payments models.

By accepting electronic payments, utility companies can keep up with changing customer demands and drive benefits for themselves to gain a competitive advantage over their peers.

Payment card acceptance can help increase customer satisfaction. Through online account access and payment capabilities available anytime, electronic payments enable greater self-service and easier account management, or greater flexibility for customers.

This can enhance existing relationships and improve retention, and it attracts new customers.

For utility companies, increased flexibility for customers also translates into a reduction in the volume of customer service calls and costs associated with handling paper-based payments.

This reduction allows utilities to service more customers and reduce customer attrition.

Another benefit of electronic bill presentment and payment for utilities is that it offers greater operational efficiencies, eliminating hassles and costs associated with rendering paper bills and processing paper-based payments.

Utilities also can reduce exposure to bad checks, write-offs and disconnects and reduce costs and time spent processing queries via call centers.

A card acceptance program for electronic payments also means greater delivery of on-time and in-full payments for utility companies. As a result, there is an improved cash flow and faster revenue recognition.

Recurring Payments Can Drive Additional Value for Utilities

When accepting electronic payments, a utility company can drive even more benefits by setting up recurring payments. Recurring payments can add exponential benefits for utility companies’ electronic payments program by providing streamlined billing, more secure transactions and increased customer retention, as well as a stable revenue stream.

For customers, recurring payments offer capabilities to set up bill payment once, avoid the hassles of missed or late payments and track their utility expenses easily.

MasterCard research shows that 43 percent of credit card holders and 54 percent of debit card holders say they would consider adopting recurring payments. Most important, 30 percent would switch utility service providers if a competitor offered recurring payments.

Beyond a payments tool, recurring payments also provide utilities with a key customer relationship-building tool by being an additional, regular touch point through which utilities can market and reach consumers with key information and messages related to products, special deals or service-related enhancements.

Building and Marketing Electronic Payment Programs

Banks and payment card companies are working with utilities to build and market effective, comprehensive and secure electronic payment programs to meet customer demands for greater flexibility and drive benefits to the business.

A good example is MasterCard’s Utility Industry Program, which offers targeted incentives to utility companies through special merchant interchange rates, reduced fee structures and specialized service industry support services.

The program delivers broad operational benefits, meets customer demand for payment choices and demonstrates how participating utility companies can minimize operational expenses through card acceptance.

Working with banks and payment card companies, utilities can drive card payment awareness and usage among customers by outlining advantages of paying bills with a payment card.

While regular pay-by-check customers have been slow to adopt electronic payments, this seems to be changing.

Contributing factors include education on electronic payment benefits and strategic turnkey marketing campaigns by issuers and payment card companies to broaden awareness and increase usage.

With a new, on-the-go generation demanding enhanced banking and payment capabilities, electronic payment acceptance is not a should have, but a must have for all service providers.

The future embraces electronic payments, and working with banks and payment card companies can help service providers keep up with the ever-evolving economy, which involves more choices for bill payments and increasingly savvy consumers.


Mathias Lilja is vice president, U.S. commerce development, at MasterCard Worldwide. Reach him at


More Electric Light & Power Articles
Previous articleCS Week Rose to the Challenge
Next articleThe Buck Starts Here

No posts to display