Electric companies can teach Gen Y responsible financial behavior, build lifelong, satisfied customers.
by Randy Vyskocil, Western Union Payments
Amidst one of the worst financial crises of our lifetime, Gen Y, those folks born between 1979 and 1991, have exhibited traits that make them welcome customers to an electric utilities industry seeking ways to grow revenues, efficiency and customer relationships.
A cloud, however, comes with this silver lining. Gen Y has been harder hit than most segments of society during the recession. Yet, they possess a lively interest in technology along with bill-paying habits that could be a boon to the utility industry.
Let’s meet Gen Y in all their complexity and see how their financial dilemma and technology derring-do partner to make these customers welcome ones for the utility industry. But utilities must understand how to work with them.
Gen Y constitutes a larger segment of the population than baby boomers. Although they are riding the same economic roller coaster as everyone else, they are feeling the effects of the economic twists and turns more than their conservative forebears.
Financial responsibilities are impairing the confident swagger of this millennial generation. In a 2010 Western Union Money Mindset Index survey conducted by Javelin Strategy & Research, half of Gen Y respondents reported feeling increased stress about financial obligations. One in three said their financial situation has worsened in the past six months.
Much of this might be because of Gen Y’s high unemployment rate. In March, the Bureau of Labor Statistics showed that Gen Y’s unemployment is nearly double that of the national rate: 19 percent vs. 10 percent.
This financial cloud hanging over the more than 87 million Americans ages 18-34 affects how they pay bills. Only 58 percent of Gen Y pays their monthly bills on time, according to a 2010 National Foundation for Credit Counseling survey. The Money Mindset Index backs up these findings, discovering that in the next six months:
- 39 percent of Gen Y will prioritize which bills get paid first,
- 28 percent will make only the minimum payment on bills,
- 18 percent will wait longer to pay their bills,
- 15 percent will pay more bills after the due date and 17 percent will use rush or same-day payments, and
- One in 10 will default on their bills.
They are having a hard time paying their bills. Combine this with a December 2009 study by the National Energy Assistance Directors Association, which states that 4.3 million households had their utilities shut off in fiscal year 2009, up from 4.1 million in 2008.
When utilities are shutting off power, news about customers’ struggling with bill payment can’t be good, or can it? For an answer to that question, let’s examine how Gen Y pays bills and how utilities can use this information to build a better relationship while getting the bills paid on time.
How Gen Y Pays Bills
Gen Y prefers to pay through bank or credit union sites (36 percent vs. 28 percent who prefer going straight to billers), according to the Javelin study on banking and bill pay. Despite this preference, Gen Y consumers pay more bills at their individual billers’ websites (53 percent vs. 39 percent who pay through their banks’ sites).
The study goes on to say, “Once consumers become habituated to certain financial behaviors, it is much more difficult to get them to change, and they typically come to prefer their habits as easier and more familiar. In behavioral finance terminology this is called the ‘status quo’ bias.”
This could mean that despite their professed preference for online payment through financial institutions, Gen Y will remain as direct payees to billers as long as companies make their bill pay services easy, intuitive and cutting-edge.
How to Raise Loyal Gen Y Customers
To significantly increase customers’ use of electronic payments and eBills, utilities must raise their Gen Y customers on electronic billing statements and payments. Gen Y expects utilities to have a full suite of electronic billing and payment options. If utilities don’t offer these options, they risk alienating these customers. Even if utilities enjoy a monopoly with customers, offering a comprehensive suite of eBill services and electronic payments will keep Gen Y happy and will mean fewer complaints for customer service departments and more money toward the bottom line.
Gen Y believes in managing their finances electronically. Convenience, security and helping the environment are three of the biggest reasons for their abandonment of paper processing, according to PayItGreen, a nonprofit seeking to reduce paper’s impact on the world by promoting electronic billing, payments and statements.
Gen Y’s comfort with online processing makes them good candidates for streamlined processes including starting the sign-up process online, storing documents online, receiving eBills and paying bills online. They respond to incentives for automatic bill payment, use of eBills and switching to electronic statements.
Gen Y leads the move to business transactions through mobile phones. More than half of smart phone users are younger than 35 and capable of high-level, interactive transactions. They also respond more favorably to text promotion vs. paper-based marketing, according to Javelin Strategy & Research’s 2009 survey “Gen Y Acquisition Strategies: How to Woo, Win and Keep Them.”
This connected generation grew up with technology. They like, trust and use it as their main source for information, communication, entertainment and money management. This could play to electric companies’ advantage by using their electronic preferences to save money and valuable environmental resources.
When it comes to Gen Y, it pays to be trendy. This generation pushes the trend toward the speed, convenience, environmental impact and cost savings offered by online and mobile technologies. Gen Y is the first always connected generation, according to the Pew Research Center’s February survey, “Millennials: A Portrait of Generation Next.”
How Gen Y Can Make You Money
Electric companies are looking for ways to get customers to pay electronically and opt for electronic eBills and statements. In the case of Gen Y, utilities are preaching to the choir.
Every paper statement converted to electronic will save a utility an average of $1 in postage, paper and labor costs, according to Javelin Strategy & Research’s January “Green Billing 2010” study. Electronic billing and payments save the environment and create efficiency, and the cost savings are significant, too.
How About the Financial Silver Lining?
Although the Money Mindset Index has captured Gen Y’s financial struggles, survey findings also indicate that Gen Y’s creative, independent and tech-savvy traits might be their saving grace.
Gen Y boasts a collective income of some $1.43 trillion in 2008 that is expected to grow to $2.28 trillion in 2013, according to “Gen Y Acquisition Strategies: How to Woo, Win and Keep Them.”
Despite the economy, Gen Y’s smart financial behavior might help build a better future,” said David Shapiro, senior vice president of Western Union Payments.
“Our Money Market Index shows Gen Y is using tools such as online banking and online bill pay to manage their budget and credit standing,” Shapiro said. “This high comfort level with Web-based programs and budgeting tools lays a solid foundation for Gen Y to get their finances on track.”
Playing to Gen Y’s strengths will make them more engaged in the financial process and committed to timely bill payment and will make the entire experience more accessible to them.
How to Get Gen Y to be Responsible Customers
- Introduce them early to budget billing. Gen Y is impulsive. Knowing what their bills will be each month will help them prepare early for the payment.
- Use mobile marketing to warn them when their payment due date is getting close, and text them with confirmation after they pay. The Javelin study shows that 38 percent of Gen Y consumers value alerts notifying them when a bill is due or has been paid.
- Get them signed up for direct payment or automatic deduction. Encourage them to use this to improve their credit score at a young age. If payments automatically come out of their accounts each month, they will be on time, every time.
- Work with them to save on their electricity bills. Give them tips on how to save. According to the Javelin study, more than 75 percent of Gen Y uses Facebook. Establish a Facebook account and post tips to stay timely on bills and to save energy, and announce any new technological offerings.
- Share your passion about the environment. Use this to encourage electronic transactions and to make your Gen Y customers supporters of your company.
- Use brief, simple information on new products. Reach Gen Y with texts or through Facebook and Twitter. Keep your communications simple.
- Use technology to appeal to their desires. Get involved in things that matter to Gen Y. Sponsor events they frequent, give money to charities they support, and hire employees from this generation. Gen Y employees can be the best information sources. They know what they like, and they’re vocal about it.
Randy Vyskocil has been in the information technology and payments business more than 14 years. He is responsible for all business development for Western Union Global Business Payment’s Utility Market focused on providing biller direct and online banking, billing and payment solutions to utility providers. Reach him at firstname.lastname@example.org.
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