by William “Bill” T. Kinnelly, Online Resources Corp.
Change, progress and innovation, we hear all the time. They carry different meanings for almost everyone. But there’s one aspect of change that most reasonable people will agree on: The best change is evolutionary, not revolutionary.
Worthwhile progress doesn’t tear down existing structures and practices; it builds upon the good already present. It takes advantage of incremental improvements in technology. It catches and rides waves of growing acceptance of new approaches to old tasks.
Take, for example, the recently announced electronic payments program for utility companies offered by Online Resources Corp. and Visa. The program allows utilities to reap substantial savings through lower interchange for Visa payments that do not include a customer convenience fee.
Some trends make this program attractive to utilities, even as the federal government contemplates more pro-utility change.
Consumer Outlook in the Payments Space
The 2008 recession still lingers. Consumers have been skeptical and angry about the government’s handling of the financial crisis, and they are especially unhappy about the bailouts of banks and financial institutions. One effect of all this has been a pause in electronic payments.
The percentage of consumers who used debit and credit cards for bill payment more than doubled to 29 percent between 2003 and 2008, a Visa study shows. In 2009, that share stayed flat as many people hunkered down, spent less and relied more on cash for payments and displayed caution when using credit cards.
But that trend seems unlikely to last. Most consumers of all races and age brackets except those 65 and older told a Visa survey that they expect to be better off financially next year than this year. JPMorgan Chase reported that in the fourth quarter of 2010, their consumer credit card business grew for the first time in several quarters. The underlying confidence is there, and further growth in debit and credit card use for bill payments is a reasonable expectation.
Utilities, Payments They Receive
For almost any organization that issues invoices, the more customers who pay their bills electronically, the better. It is efficient, less costly and it presents another opportunity to serve customers well. Utilities already lead in electronic bill payment and presentment (EBPP), but enormous room for improvement remains. That improvement can come through available technologies and by exploiting opportunities that the marketplace and changes in regulatory matters present. Utilities can build upon what they’ve already accomplished and effect worthwhile change.
According to recent Aite Group LLC research, some 4 billion utility bills are generated each year. It’s a quarter of all bills produced and more than twice the number of phone bills, the next-largest category. After issuing these invoices, utilities take in some 50 percent more electronic payments than the next-highest bill type. This is what’s meant by the utility industry’s leadership in EBPP space. Most prominent are the use of debit cards, checking accounts and credit cards at utility websites or by phone—23 percent of all electronic payments—plus the 15 percent that come from the consolidated billing sites of consumers’ banks.
The millions of e-payers have various preferences in payment methods. For utilities to maintain their EBBP prominence, they should make all methods available, whether through the Web, mobile devices, walk-in, customer service reps, interactive voice response (IVR) or other channel. These methods must work together through a single payments warehouse rather than in operational silos to derive the most benefit and deliver the best customer experience.
Thirty-nine percent of utility bill payers still pay by check, according to Visa’s debit-tracking research. More than half of these check-writing customers also said they are open to switching to another method, but they need to be persuaded. It is worthwhile for any business, not only utilities, to engage in the ongoing missionary work that will result in a move from paper. It costs 25 cents to process a check payment. That comes to $250 million paid by the utility industry, which handles some 1 billion consumer checks annually.
The Visa Utility Interchange Program: ORCC Preferred Eligibility
The Visa Utility Interchange Program is available through eCom Advantage, a suite of EBPP services made available by Online Resources. Utilities are eligible for the program in each payment channel where they accept Visa without a consumer payment fee: in person, online, by phone or mobile phone. The interchange fee paid by the utility is reduced some 80 percent on a $200 bill payment.
Participating utilities benefit from the program because they save money, reduce risk, bring more efficiency to their collections processes and can offer another desirable payment channel to most of their customer base. Of all utility customers, some 60 percent already have Visa cards.
Customers like it because they have an additional, convenient option to pay for important services: electricity, gas, water, sewer and waste disposal. In addition, with every passing year, consumers become more comfortable paying bills electronically rather than mailing paper checks. The program gives them another set of options for making such payments.
The March of Technology—Relate to Customers, Control Costs
Don’t forget the rapid rise and ubiquity of social networking. Facebook, Twitter, LinkedIn and other virtual communities have spawned a new way for people to connect and belong. People get advice on what to purchase and with whom to do business from their extended interest groups. Good and bad news can spread in the speed of an epidemic. A positive consumer experience—which includes satisfaction with payment interactions—communicated through the social network sphere has tremendous power.
Additional technologies for utilities to consider include enrollment solutions in which customers have a username and password for online access. That username is the gateway for customers to let utilities know their preferences for billing and payment methods and to bring them into a closer relationship by sharing personal and account information. This is particularly valuable for utilities and their consumers because an integrated e-payment infrastructure allows for a great consumer experience. The payment a consumer makes today through a utility’s website should be seen by the utility’s agent in the call center if the consumer calls and heard by the consumer on the IVR. Customers’ payment preferences would allow utilities to reach out to e-payers through voice and text messages, for instance, before taking the costly step of interrupting service.
Utility companies should consider some incremental, yet clearly meaningful, changes in how they deal with customer payments. The Online Resources-Visa Utility Interchange program will bring immediate and long-term benefits to the bottom line and to relations with customers, banks and regulators.
Bill Kinnelly is senior vice president of product marketing for Online Resources Corp., a payment solutions provider to financial institutions and billers from the financial services, utilities, health care, insurance and other industries. He has a bachelor’s degree in finance and computer science from Georgetown University and an MBA from The Wharton School.
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