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Wednesday 22 May 2013

Cash-still a key method for consumers to pay merchants

In the last 10 years we would be forgiven for thinking that the use of cash to pay for things has been declining so rapidly that it is now a minor payment method (with debit and credit cards being the dominant force in western society these days). However, even in 2011/12, the figures just do not back these up with cash and debit having about 40% of the total pie, with credit cards a long way behind with only 15%.

The UK Payments Council publishes a full report on “the way we pay for things” as consumers in the economy, in April of every year. In summary, their latest research suggests that cash accounts for about two-thirds of all financial transactions in the economy and about one third of the value of the transaction (meaning that cash is typically used for lower value transactions). In fact, there are around 21 billion consumer payments in cash, but close to 80% of these are below £10. Around two-thirds of these cash payments are made in retail environments (such as supermarkets, service stations, shops and pubs etc).

For our regular commitments (bills etc), cash payments account for about 10% of the transactions and around 7% of the value.

Many individuals choose to use cash to shop on-line (often citing security and risk issues with credit and debit cards as the reason). However, many other have no choice but to use cash when they are trying to purchase goods or services (whether these are on or off line). 

Although the numbers vary, the population of people in the UK who do not have a bank account (often called the unbanked) is around 2 million people or about 1.4 million households. This is therefore around 7.5% of the entire UK adult working population and is therefore hard to ignore if you are a merchant or a payment provider.  Of course, this includes many people who are socially disadvantaged or poor in society but even they have to buy products or services or pay their bills. This is not easy to do without a bank account and can only be accommodated if payment providers recognise their need.

Monday 6 May 2013

Can Merchants really turn off paper bills with digital billing?

Within the billing world, going paperless has been almost like a “Holy Grail” for many merchants, and especially those who are sending out thousands, hundreds of thousands or even millions of bills a month in some cases. And who can blame them? Merchants who send out more than just a few hundred invoices each month are typically spending a great deal of money on printing, putting invoices into envelopes, sending out reminders and/or statements, franking the envelope, having to engage in making sure bills are filed or stored properly and fielding calls from customers who don’t receive a the bill in the mail at all (so it has to be resent) to name but a few things.
 
By adopting a paperless invoice or digital bill only solution, a merchant can technically avoid all of the above and “switch off paper” immediately. However, despite the apparent significant advantages to the merchant, this may not be the best way to go (and it should also not be the driver of the change to digital billing).

Most customers have been getting bills in the mail, or at least ones they can print if they are sent by email, for many years and many want to stick with a process that they well understand. Hence, any merchant that removes the option of receiving a paper bill risks losing a customer’s business altogether. Far better therefore to retain the option to receive a physical bill and either deliver it by cost-effective e-mail or allow a customer to retrieve it and print it for themselves from a central website.

With a cloud-based system such as PaySwyft, not only can any merchant post a digital bill but allow customers to print the bill whenever they like. Even better a merchant can email the bill if they so wish, including follow-up or chase bills. And once customers are using such a fully digital portal they can also use a whole range of convenient technology to manage their bill in more flexible ways. This includes:
 
  • Receiving a monthly e-mail notification when a new invoice is available to view.
  • Decreasing the possibility of mail fraud and identity theft.
  • Automatically calendarising or secheduling payments at a time or date to suit them
  • Set email and/or SMS alerts as they like
  • Store and retrieve all invoice and payment records whenever they like, forever
  • Make payment 24 hours a day, 365 days a year
  • Pay in a multitude of ways at the same portal and get a receipt there and then
  • See all of their invoices and payments when they want
  • Analyse invoice trends and patterns as they wish
This does not mean that they will necessarily “turn off” the paper bill, or stop printing it, but over time the resistance to doing so will clearly lessen. And in the meantime, not only is the customer getting a convenient service for free, that they can use at work or home on their computer (and save themselves time if they were previously paying by cash or cheque in particular), but a merchant is saving money on many fronts, including fielding less phone calls, accelerating cash-flow with earlier online payments and reconciling payments in a much more straightforward way than ever before. Given all of this, getting to a paperless world, if and when it happens, is only a minor bonus.