Payment & Collection Newsletter May 2011

Billing & Payment Experiences Drive Customer Satisfaction
Utilities can increase customer satisfaction by easing enrollment in recurring payment programs. Billing and payment is the 2nd most important factor in utility customer satisfaction. J.D Power & Associates' model for utility customer satisfaction weights power quality and reliability 1st, billing & payment 2nd, corporate citizenship 3rd, price 4th, communications 5th and customer service 6th. J.D. Power breaks billing & payment satisfaction into its components: length of time to pay without penalty, usefulness of options to pay bill, ease of understanding information on bill, usefulness of information on bill, ease of finding payment due date and ease of finding exact amount to pay. J.D. Power's survey of utility customers found that those paying with recurring payments had the highest satisfaction with the utility. When a customer makes a one-time payment at their website, utilities can store their payment info and give the customers the option of enrolling in recurring payments with just one click.
Source: J.D. Power & Associates, February 10, 2010

Customer Satisfaction & Cost Savings with Cash Payments
Companies can satisfy customer demand for cash payments while cutting their costs by accepting cash payments at retailers. Card and ACH payments account for the majority of bill payments, but some customers still prefer to pay with cash. Cash payments have consistently accounted for 4-5% of payments at most companies, but the recession lead to an increase in cash payments. A weaker economy probably lead to a move away from credit card usage, both for demand and supply reasons. Accepting cash payments at a company's office costs $2 per payment on average. For this reason many companies have stopped accepting cash payments at their office and now only accept cash payments when their customers walk in to a retail store, like Wal-Mart. With this model, receiving the payment is free for the company and convenient for the customer. Companies that do not accept cash payments at their own offices see an average of 6% of their customers making cash payments at retailers.
Source: Federal Reserve, Chartwell, April 2011

Most Customers Don't Know If There's a Fee for Payment
Most customers do not know if they pay an additional fee (convenience fee or service fee) for making a bill payment. 90% of customers surveyed right after they paid a fee to make a bill payment mistakenly said that they did not pay a fee. Charging an additional fee for customers to make a payment is commonly done by companies to help them offset the cost of accepting credit and debit cards. For example, 90% of investor owned utilities charge customers a fee for paying their bill with a card. Because most customers do not know whether they are paying a fee, customers are not likely to complain about the fee. A large telecom company found that they could offset the cost of accepting cards without hurting customer satisfaction. They found that when they began charging an additional fee for bill payments they did not see an increase in customer complaints and did not see a decrease in payment volume.
Source: Chartwell, Forrester Research, May 18, 2011

New Payments Mantra: Interoperability
If the tangled web of payment options causes slow payments and manual intervention then interoperability could be the answer. "This is my new payments mantra and it should be yours, too. International transactions, B2B remittance data, supplier networks and all kinds of other payment enablers depend on interoperability. I've been harping on this theme for a few years now (within the context of B2B payments) so I was heartened to see evidence of it gaining traction in a wide range of settings at NACHA," writes Erin McCune of Glenbrook Partners. Whether it's piecing together multiple payment files from online banking bill pay providers, delivering bills through multiple channels or adding a mobile payments option, creating a payments system with interoperability to existing systems can decrease costs.
Source: Payments Views, April 6, 2011

Innovation Reduces Collections Hassles
BillFloat has found a new way for companies to get paid even when their consumers don't have enough money. When consumers don't have enough money to pay their bill, they no longer have to go to a pay day loan location, pay a high interest rate and then go make their payment. BillFloat is a more convenient and lower cost alternative for consumers. Companies get paid immediately with BillFloat, reducing their collection hassles. When a consumer goes to the website to pay their bill, BillFloat pays their bill for them, providing the consumer a real-time short-term loan. The consumer then pays BillFloat back when they have the money. BillFloat was one of 64 innovative companies who presented at the Finovate Spring conference. "A seismic shift is underway in the way financial products services will be offered to people and the way in which people will use them. The surge of innovation here in the Bay Area in fintech will radically and permanently change norms around transacting, saving, spending and investing," wrote Ben Mangan of the Huffington Post after attending the Finovate Spring conference. Source: Finovate Spring, Huffington Post, May 12, 2011