Despite the fact that electricity is an essential part of modern life, most consumers don’t think much about it until a power outage occurs or they get a high utility bill. Fortunately in the United States, power outages are relatively infrequent and short in duration. Electricity bills, however, are frequent, unavoidable and, unfortunately, not always paid. To deal with this issue, utilities must have a well-maintained, advanced billing and collections system in place.
In the past 10 years, the process of collecting on bills has evolved, and many more payment options have surfaced. While mailing payments is still the most common method of paying utility bills, consumers are increasingly comfortable making payments electronically.
As a whole, across all industries, electronic payments exceeded check payments for the first time in December 2004. Western Union Payment Services in conjunction with TowerGroup sought to learn more about the U.S. payments marketplace, including the utilities payments landscape.
electronic bill paying will increase
Why are researchers anticipating that bills will increasingly be paid electronically? Because billers and banks want consumers to write fewer checks to reduce the high costs associated with accepting and processing paper payments. Utilities are trying to entice their customers to pay bills electronically to save on disconnect and reconnect costs and to reap the benefits of customer self-service options like Interactive Voice Response (IVR) systems and the Internet. These options have had a significant impact on utility call center operations, reducing call volume and supporting the “one call” service philosophy. Utilities are reducing operating costs while focusing their efforts on what they do best: maintaining power and providing superior services.
From the consumer perspective, electronic bill pay allows consumers to schedule payment of their bills at any time, 24 hours a day, seven days a week. In addition, some consumers view electronic bill pay as more secure than sending bills in the mail. The consumer can schedule single or recurring payments far in advance and doesn’t have to worry about paying bills when traveling. With no need to purchase stamps or go to the post office, the consumer saves time and money.
Electronic payments also offer consumers the flexibility to pay bills at the last minute if necessary and in a manner they can control more closely. Predicting paper check float time can be tricky, while paying electronically can give consumers the confidence of knowing exactly when the payment will be received and deducted from their account.
some survey results surprising
Several factors play a role in the timing of bill payments, including income levels, the degree to which the consumer wants control over the money management process, and level of education. Essentially, consumers with higher incomes prefer to pay their bills when it is convenient for them or as close to the due date as possible since they are less inclined to worry about covering the expenses.
Contrary to popular belief, consumers in lower income categories with a higher preference for controlling their own finances tend to pay their bills as soon as they receive them. This allows them more control: Before they are able to determine their discretionary funds, they ensure that all expenses are paid.
In general, consumers with higher education levels and a higher household income tend to make more informed and strategic decisions with their finances and practice better money management as it relates to timing and payment of bills.
Of the survey respondents, 31 percent of consumers surveyed said they pay their bills as close to the due date as possible, while 27 percent said they pay their bills as soon as they received them. For the remaining 42 percent, answers included paying their bill on the due date, paying the day they receive their paycheck, or making late payments. Of the consumers who responded that they pay their bills close to the due date, most belonged to the $50,000-and-over income group. The majority of consumers who pay their bills right away belong to the $50,000-and-under income group.
Twenty-six percent of respondents say they are late making a payment once a year, while another 26 percent say they miss a payment once every few months. Of the people making occasional or monthly late payments, a higher percentage belonged to the less-than-$50,000 household income group.
TowerGroup expects that electronic payments will continue to grow in the next few years. Consumers will become increasingly comfortable with electronic payment functionality as concerns regarding security and privacy diminish. And, because the younger generation is more apt to pay bills over the Internet, as they replace the older generation online payments will become commonplace.
Offering electronic payment options is helping the power industry control the receipt and management of cash flow while increasing on-time collection rates and customer choice.
Lauren Mesch is a new business developer for Western Union Payment Services. She can be reached at (800) 252-9638, ext. 141.