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.

Will Mobile Phones Become the Dominant Channel for Bill Delivery?

There are now a multitude of channels available to customers to pay their bills. These channels include:
1. Print and mail (paper-based)
2. Fax
3. Email with embedded data
4. Data interchange (system-to-system)
5. Email with PDF and/or link to on-line
6. Customer Web Portal
7. Mobile (MMS; HTML; WAP; USSD)
8. Mobile via App
9. Mobile Tablet
10. Emergent technology (via cable TV etc)

Only print and mail on the above list existed as an option until around 30 years ago when fax arrived and 25 years ago when email came along (both of which still have quite a strong following today). Data interchange options were mainly evolved and used in the B2B rather than direct Business to customer or B2C space but again are still around today as a strong channel, supported in the main by large international software companies, who have sufficiently large installed volumes to want to protect their position in the billing market.

Web based technology has driven the greatest change in the billing space in the last 10 years or so and seen the emergence of both consumer and merchant portals (for presentment and payment) and the use of mobile technology as 3G and 4G have made the internet available to mobile phones.

Even though each of these channels presents a new and perhaps better and more convenient choice to a given customer (and are often presented as the channel to replace earlier channel choices) in reality, they are often just additional options. In other words, consumers have shown time and time again that they like the extra choice but do not necessarily want to be driven too quickly to only one channel (however “efficient and effective” it is presented to be).

The implication of customers wanting lots of channel choice to both view and pay their bills is that the same bill may need to be presented and rendered possible to pay in several channels, at least for now.

Today’s challenges
Some technology experts are starting to say that customers will be move rapidly away from e-billing to m-billing (m for mobile of course) in the next few years. Modern mobiles can certainly handle very complex tasks today - just look at the hundred of thousands of Apps available for all different platforms. These Apps can do complex tasks, even generating bills “on-the-fly”. A mobile can also handle a simple task such as bill presentment with ease today – in some cases on quite a detailed basis (even though reading it may present quite a challenge!). However, viewing a PDF bill attachment on a mobile (as opposed to a tablet) is often a long scrolling exercise, making it impractical in most cases. There is a solution to this but it needs the biller to solve the problem of displaying their bills in more flexible ways according to the kind of mobile platform to which it is being delivered. In this way, a customer can see a simple version of the way and then “drill into the detail” as they wish when they want to see itemisation. 

However, perhaps all of this is a false dilemma. In the final analysis, customers do not care if a bill is delivered to their computer, their tablet or their mobile (or even all three). In fact, many want to see it delivered in as many ways as possible to allow maximum flexibility, including by email or by PDF attachment and even in the physical mail or fax on some occasions. This multi-channel approach is therefore a customer centric approach. The challenge for billers then is how to provide as many of these channels as possible at the lowest cost possible. In the end there is only one solution to this –use a full digital bill presentment and payment portal, such as PaySwyft for example. This not only means that a bill can be sent in all nine of the current channels above (and can be paid at the same portal) but means that a biller would be well-placed to take advantage of the new emergent technologies that will come along in the near future.

Do large organizations spend an average of $25 per invoice to issue a bill and collect payment?

Almost a year ago, one of our blog articles reported that the leading research companies who look at international billing and payment issues on an ongoing basis, (including perhaps the leader in the field of billing research -Billentis) said that on average, the overall cost of sending out a bill or invoice and then collecting payment from the customer, is £17 per invoice or around $25 (based on data in Europe for the year 2010). We also pointed out that many merchants were disbelieving of this figure, suggesting that they spend nowhere near that kind of money on such a mundane and clerical activity.

Although individual merchant data is often difficult to come by, a private study of the billing and collections practices of three very different organizations was made available recently and the data sheds some light on the real costs that are experienced. These three relatively large organizations were an electricity utility, a city/council organization and a regional telecommunications enterprise. All of these are US based and currently bill their customers with a physical bill in the mail. All three offered payment via their web site but take-up is less than 5% of the combined customer base (a total of 540,000 customers across all the organizations that are billed each month).

What did the study show?
These organizations classified their costs of issuing bills and collecting payment into “direct” and “indirect”. Direct costs included:
• Invoice bill/file preparation time
• Bill printing
• Envelopes
• Postage/Franking
• Payment type fees (fees on credit/debit cards etc)
• Bank fees

The estimated average direct cost for these companies was $6.50 per bill

Indirect costs included:
• Customer service manpower to handle calls/queries or take phone payments
• Accounting/Reconciliation time
• Lost invoices (and the time taken to deal with this)
• Undelivered bills (and the time taken to deal with this)
• The cost of bill storage (space rental or fixed costs)
• Bill query handling time
• Additional or extra payment transaction fees that were unexpected
• Invoice/billing run or payment processing errors
• The need for a higher than wanted or necessary financing to cover outstanding receivables
• Slower than expected bill settlements
• Extra costs associated with compliance/regulatory issues

Of the above, the first two items (call-centre and account reconciliation costs) accounted for about 80% of the indirect costs, which on average were stated to be $18.00 per customer invoice.

So in summary, these three companies suggested that their real costs were a total of $24.50 per bill, based on real internal data from the year 2011. At least for these large merchants therefore, the Billentis estimate looks to be pretty accurate and it is even more reason for merchants of all types and sizes to look very carefully at finding ways to reduce these costs. One immediate solution, of course, is to adopt  online digital billing and payment practices by partnering with a third-party bill presentment and payment portal such as PaySwyft (where these costs can be cut in half very quickly).

Security Protection is the Online Billing World

The use of online billing continues to grow but with this growth comes security risks which need to be managed, especially as far as the consumer is concerned. There are a number of useful steps or measures that can be taken by an individual customer who uses online banking or an online bill presentment portal. A few of these measures include the following:
 
1. Use a strong password- Too many people use their birthday or address for passwords that can be readily discovered. It is therefore better to come up withy something unique. A strong password is at least 7 characters long and contains both upper and lowercase letters. It is also helpful to include a number in the string of possible. This reduces the ability of anyone else guessing a consumer’s chosen password and thereby effect any illegal transactions.
 
2. Keep login data hidden away- Account information, such as a login or password or anything else that will help a person trying to commit fraud, should be kept in a very safe place. This is not on a “post it”, note or scrap of paper on your desk, where others may see it, but in a locked draw or a diary that you carry with you at all times. Even in the latter case, you may want to record the data in a way that you understand it but will confuse a third party person.  

3. Review transaction history- Just as we should check our bank account pages for errors and oversights, so we should apply the same level of scrutiny to our online transactions. This should include not only the most recent transactions but also the history to make sure that a fraudulent transaction is not “buried” in the list. Most fraudsters like to steal quietly and invisibly (one line item that is similar in value) so you need to take extra care to spot that purchase you never made or bill you never got.

 
4. Protect your computer- However careful you may be in your online effort to take security seriously you need to keep your hardware secure through the use of up-to-date antivirus software and firewalls to bar intruders from accessing your network or computer. The greatest risk here is file attachments sent to you on email. Always therefore make sure that any files from people you do not know (that make it past your firewall and spam catcher) are deleted (and attachments from them are never opened).
 
5. Sign out- when operating any online accounts, it is highly advisable that when your online session is complete, you sign out immediately and close the browser window you are done, as double security. If you do need to leave your desk in an office unattended for a few minutes, also make sure that you have locked your computer or password protected it so that others cannot log in to an open session.
 
6. Avoid public computers- Although it is often convenient to be able to log in remotely to your account (and this can certainly be done from your own smart phone or tablet computer for example) you should ideally avoid signing into your online billing portal on a public computer like the ones at cyber cafés. This is simply because they may not have good security and may have software on computers which record your login and password information for later use by someone wanting to commit fraud.
 
7. Beware of Email scams- Many fraudsters try to steal the identity of a bank or other financial services institute and send emails requesting personal and confidential information to be provided. Here it is best to simply avoid putting any login or password data into emails.
 
8. Select a trustworthy Portal- before using any online billing and payment system, be sure to check the credibility of the organization you are dealing with. Check that they are certified and check that they have secure socket layer (SSL) payment certificate etc. You can also read user reviews, blog postings and even “Google” the company to see what you can find that may give you any cause for concern.

If you follow these simple guidelines, you will protect your confidentiality and your account and enjoy the many benefits of using an online billing system.

Optimizing the Customer Experience when paying online

Any business, no matter what size or type, needs to pay careful attention to the customer experience when they are asking individuals to visit their web site and pay online (whatever products or services they may be offering).  The focus should therefore be on giving the best possible customer experience and converting first-time visitors in particular to become happy and repeat customers. There are several ways in which businesses can improve things and in this brief article we will be looking at six of the most critical ones.

1. Every site needs to be easy to navigate. Fundamentally, any site structure should be what customer needs, not how the organization wants it to look like for internal purposes. Simple, clear and clean page design (with as little clutter as possible) focused on moving customers toward completion of their goal should be the focus.

2. Make it easy for the customer to pay. Many web sites offering products and/or services seem to be almost embarrassed to mention payment and both hide prices in obscure pages within the site and fail to give site browsers and easy way to check out. And there is no excuse for this approach today. If this is not available as a direct part of the web site design, a redirect or hosted page at which customers can view a bill digitally or make a payment in many ways is available from multiple sources.

3. Communicate product or service offers clearly. Companies need to use clear, concise wording to describe what they are offering. Once again, clear prices are critical, including any extra costs that may be applicable. If this is not the case site browsers are much more likely to abandon the site’s shopping cart (a massive problem for many organizations when they have already done so much work to get a customer so close to buying!).

4. Implement methods to improve your site conversion rate. Conversion rate is the measure how many browsers become buyers.  Conversion rates average 2.5%-3% but rates that reach 8% are not uncommon and some sites report conversion rates of even 20%. The very informative article "How To Sell More on the Web: 30 Tips To Increase Conversion Rates For An Ecommerce Site" will give you several ideas to improve your conversion rate.

5. Manage customers when they are about to abandon their shopping carts. By the time an organization has got a customer into its site shopping cart, they have done the hard work and need to close out with losing them at this last hurdle. Assuming the payment checkout experience has been designed to be a smooth and painless one, one extra step to be taken is to offer direct incentives if a customer still wants to abandon his or her purchase-this may be a further price decrease or more benefits or features (or even additional product or service).

6. Provide incentives to register (and come back). Even the most established web sites are struggling with increasing their goal of building a large pool of repeat customers. On average, it is estimated that 95-97% percent of those who visit sites on average never return, even when they have paid.  To prevent this, provide as much incentive as possible for customers to register so that future emails and alerts can be sent to visit the site again.

Summary

Ultimately, any businesses aiming to succeed online must rise above their resource constraints and strive to provide quality e-service. The above 6 actions sound easy to implement (and they are) but very few organizations bother to spend the time to do so. Any organization that takes the time and makes the above changes to their web site will therefore reap considerable commercial benefits.

Innovation in On-line Billing

Last month the Javelin E-commerce research company released its annual report on who they see to be the “innovators” in the on-line Billing space (at least as it relates to US experience). These are many of the companies that are not the Billers themselves (or merchants with the facility to render a bill directly at their own web site and to readily accept online payment at the same site) and the Banks and/or Credit Unions (or what Javelin calls FI’s) who offer an online BillPay service to their customers.

Let’s start with a few quotes from the report:
“A number of innovative companies are seeking to overhaul and streamline the chore of paying bills with services that potentially could steal market share from the dominant models of paying bills at Financial Institutions (FI)s or directly at biller sites. Success for the upstarts will not come easily or soon, however. These innovators not only are competing against one another in a crowded field with piecemeal offerings, their survival will depend on changing entrenched consumer habits for paying bills at FIs, at biller sites, and by mail.”

“Billpay innovators have the potential — at least on paper — to offer a package that combines or exceeds the strengths of FI bill pay and the biller‐direct model. Those strengths include the ability to view and pay all bills in one place, oversee all account balances in one place, pay from any account at any FI, and file away documents from all sources.”

“BillPay Innovators lack the necessary four-part combo: money management, bill‐pay capabilities, archives, and mobile access. To convince consumers that they are a compelling bill‐pay alternative, innovators must offer a package that combines the control of money management, the practicality of bill pay, access and control via mobile devices, and the convenience and security of electronic archives.”

In summary then, Javelin concludes that independent online billing companies may have a possibly disruptive influence in the future, but it’s not yet happened, it will take a long time, the impact will be small, consumer habits will be difficult to change, the new functionality that will be available is not that compelling and there is a lot of competition rendering the effort relatively unprofitable. In other words, this is not a very positive outlook. Unfortunately, this overall conclusion is based on faulty assumptions leading to spurious and incorrect forecasts and in this article we will briefly suggest why this is the case and take each of these four overall objections one by one.

1. The market penetration of a well-run cloud-based online billing business will take a long time and the impact will be small. The argument here is that Bank Bill Pay and “Biller direct” has already “locked up” much of the market and the small innovative online billing companies now have only the “crumbs from the rich guy’s table”. This assumes that both merchants and consumers are happy with these two currently available options. For a start only the largest billers typically have an online presentment and payment solution and even it may be slow and not easy to navigate (and creates a different user experience for the consumer for every merchant that has such a site). On the Bank/FI side, online bill payment is offered but presentment is either not available at all in most cases or is only at summary single line level (so the consumer can’t view a full digital bill). The consumer may also only be able to pay bills for large merchants and only from their checking account. Both of these parts of the market are therefore only “technology interludes”. They will be quickly swept away by a full and integrated digital portal-based technology and this is available from several of the innovators right now.

2. Consumer habits will be difficult to change It is true that consumer behavior is hard to change but it is not impossible. Look at the significant shift to internet banking in the last decade (which is what has mainly driven online bank bill pay in recent times). However, more significantly the pain is not essentially on the consumer side in the bill presentment and payment area-it is on the merchant side of the equation. Merchant pain here is considerable and long standing. Many merchants have been sending out paper-bills for decades and collecting payment by offline means (like cheque and cash) for as long. Even where they can take credit and debit cards they need to have a response team or call-centre, which is costly. But perhaps most significant (and this envelopes even those merchants that have switched to emailed invoices), the big merchant challenge is reconciliation, most of which is done manually and may require two, three or even four sets of data-keying. Online billing reduces this task to almost zero time and therefore on-going cost. And with a sophisticated cloud-based online billing and payment solution it also means no up-front capital cost and the avoidance of the months of time it may take to integrate with the local accounting software being used. This is a very big win for merchants and allows them to offer incentives to customers to switch to online payment or face extra costs if they do not. From a consumer perspective this not only quickly changes the thinking but if the online solution allows them to also get a bill on the phone as a text message, as an email or they can still print it if they wish, the resistance is likely to fast melt away.

3. New online bill presentment and payment functionality will not be very compelling Javelin are magnanimous enough to recognize that some of the innovators technology is “impressive” but then fail to draw the conclusion that it will be valuable. Once again, we have to look at the value to both consumers and to merchants themselves and when this is done, the benefits are substantial. There is insufficient space in a short article such as this to list the range of features offered by many individual innovators technology companies but if we look at Payswyft as one example, the consumer has the ability to see full bill detail instantly, 365 days of the year and 7 days a week, pay by almost any method (including cash remittance) can calendarise payments and set up automatic debits, can receive customized alerts, and track all bills (which they can progressive see from multiple merchants in one place under one login and password). And for the merchant, bills or invoices can be securely sent immediately they are ready in digital form (which cuts down delivery time and lost or undelivered problems), increased payment options are offered to consumers and accelerated cash-flow is created (as consumers on average pay earlier with an online transaction). This is not to mention the call-centre and reconciliation cost savings mentioned above. Even these few features are worth huge amounts of time and money for consumers and merchants and are therefore anything but trivial.

4. There is too much competition amongst these small innovators making substantial profit making unlikely Much of the payments industry see so-called “innovators” as either non-bank businesses trying to get into the payment space (like accounting software companies) or businesses that are supplying online billing software of some kind (which will always face a high integration hurdle). What they miss is the few companies that are neither of these-truly focused e-commerce, billing or payments companies that are mainly offering a cloud-based or hosted solution. Apart from a large company like PayPal who are trying to offer this kind of service in this sphere (and they have the financial muscle to be highly disruptive without facing much in the way of competition), most companies that are competing here are relatively small at the moment and there are not that many of them. This means that there is a chance to offer quite a differentiated service in particular geographies and within certain market verticals. In addition, there is potential for one or two of these to emerge as a market leader very quickly (most likely in the next 12-24 months) and create a “sea-change” in attitudes and behavior at all levels.

As if the counter-arguments to Javelins conclusions above are not enough to convince us that a big change is coming soon, there are many other compelling benefits that are available right now that will mean the innovative cloud-based bill presentment and payment company will make large inroads into this very large market. This includes the immediate availability of an e-commerce version of bill pay on any merchant web site that wants it, the scope to offer the same service for B2B transactions (and not just B2C which is often the only focus if research in this area). In addition, the ability of the innovator to now offer secure document delivery is not just a more convenient storage option (for consumer and merchants) but means that all online payment related documents like credit card statements and payment confirmations and notices can all go online and be delivered at a fraction of their current cost. Last but not least, all of this technology is available in the mobile sphere too, meaning that merchants can render electronic bills on a smart phone or tablet computer anywhere they have a connection and consumers can pay them on the same devices wherever they are (any place and at any time).

In conclusion, the world of bill presentment and payment has changed little for more than 50 years. The innovators are going to change this world dramatically and the time for this to happen is now.

What to Look for in an Online Bill Presentment and Payment Service

Online bill presentment and payment services are offered by not only many major billers and large banks nowadays but also by a range of smaller innovative financial services companies. All of these services claim to be broadly equivalent, with each of them offering a variety of bill presentment, management and payment features to make a consumer’s life apparently simpler and more efficient. However, these different services vary greatly in what they offer and in some cases the features they claim to have are not at all equivalent. A consumer therefore needs to take care to ensure that he or she selects the service that is most likely to fill his or her needs and in this brief article we therefore offer some hints on what to look for.

Below are what we see to be the main criteria by which any consumer should ideally evaluate any online bill presentment and payment service.

Bill Presentment
Bill presentment means the ability to see a bill in an online system of some kind. For most services this means either being able to see the bill in an email attachment (usually as a PDF) which is not really an online rendering at all (as it is just an electronic version of a paper bill). Some services offer a single line item bill view ahead of paying it. This is useful but far short of a full bill presentment. As a result, the most advanced services are offering a full digital bill which is one that is not only supplied in its entirety (even if it runs to several pages) but can be saved, sent on/forwarded or clicked on to effect payment.

Bill Management
Bill management features aim to keep a consumer on target for paying bills on time (or even early). A good service–provider should offer different alerts (ideally both email and/or SMS texts) that tell a consumer when his or her bills arrive, are due, are paid and are overdue/late (and in some cases the consumer can choose when and how to get these alerts). In addition, the consumer should always be able to view the details of the bill regardless of its format. Other useful features to look out for include a bill payment calendar and online notes. In the most sophisticated services bill storage is unlimited meaning that the consumer can store his or her bills indefinitely.

Payment Features
Good online bill paying services will often include a variety of payment features. However, many banking services may only offer bill payment from a checking account and large billers with online bill pay portals may only allow ACH and the major credit cards. The independent services are therefore more likely to offer much greater payment choice, and in some cases payment by online wallet, instant bank transfer and even cash (as well as almost all available credit and debit cards). A good service may also allow a consumer to choose which payments he or she wants to make each month individually and which he or she wants paid automatically (with a controlled payment like a direct debit).

Ease of Use/Setup
Apart from the site being user-friendly, online bill presentment and payment services at a given portal should be easy to setup and use, otherwise they don’t provide the convenience they promise. This should ideally mean the ability to pay a bill as a guest or first time visitor without registration on the service. And if a consumer does register, the system should remember as much data as has already been entered and the consumer should not be required to enter his or her payee and/or account information more than once.

Admin and Reporting convenience
Although consumers mainly pay their bills one at a time, they may want to more than this. A site which allows this functionality (and needs only one login and password for many bills) therefore has an advantage. This should include lots of analysis and reporting capabilities, looking at historical cumulative bill payments, aggregate data and even overall spend totals that may well be useful when it comes to end of year tax returns.

Service availability/Help/Support
Look for a service that is available 24 hours a day 7 days a week because most consumers will wish to pay bills outside normal office hours. There should also be good customer service support offered, both with available documentation and FAQ’s and a free call number when a consumer needs to talk to a customer service representative.

There are clearly other criteria that may well apply to choosing an online bill presentment and payment portal but these are the main categories under which a consumer can evaluate each service that is offered.