Is it "Safe" to View and Pay Bills online?

As Internet technology now allows bills or invoices to be presented electronically and then paid at the presenting web site (whether this is a bank’s site, merchant site or third-party site) in this brief article we investigate whether this carries any significant risk from a payee/consumer or merchant perspective.

 

Perhaps the very first test of  potential “riskiness” when using any electronic presentment and payment (or EBPP for short) web site is whether it is secure. The vast majority of web page addresses, also known as URLs, typically begin with "http." However, to pay bills online, the web page should always start with "https," which signifies a secure socket layer or SSL connection (or one in which data is fully encrypted).  This typically means that you can see a padlock icon, usually in the top or bottom corner of the browser window (or in some cases it may even turn the URL address background green or light blue). Clicking the padlock icon will often reveal the site's security certificate (and allow you to read about the particular protection that this affords).

 

Now that a consumer knows that he or she is on a secure site, the next step is to ensure that the login process is secure. A good site will usually give a consumer two options-to pay instantly or as a guest, and to register on the site to use it again and save time on the next occasion the consumer uses it. As a guest, a web site will typically only ask for an email address and then ask a consumer how he or she would like to pay from the options they make available. This may mean entering debit or credit card details for example, which should then give a consumer the option to confirm the transaction (and then as a further security step run the transaction through 3D secure-a process used by major credit card companies as an added XML layer for online credit and debit card transactions. Visa call this process “Verified by Visa”, MasterCard call it “MasterCard SecureCode”, JCB International call it “J/Secure” and American Express call this “SafeKey”. Overall then, a well-constructed site will offer a safe payment system for consumers (and there are card and bank protections on fraud and low limitations on consumer liability in any case). Even so, consumers should also look for extra safety in specific statements on any given EBPP site about PCI compliance (or payment card industry standard adherence) and/or that credit/debit card data or numbers will not be stored or saved in any way (and if they are, that they will be fully encrypted and tokenised as a further protection against theft or fraud).

 

When registering (either before or after a bill had been viewed and paid) a well-designed and safe web sites will ask a consumer to set up a user name and password that he or she can remember and that identifies the consumer every time he or she uses the site in the future. The site may also ask for additional data such as email address, physical address, date of birth, driving license number or even passport number. In some cases, they may go yet further and ask security questions to help validate a consumer’s identity in the case of a future forgotten login ID or password. Although these may seem personal and even intrusive, these steps are all designed to protect consumer security and ensure that only one person is able to see the bills posted and to effect payment of any kind. In other words, this process allows the web site operator (financial institution or merchant) to know the customer (a process they call KYC) and protect everyone’s security to the best of their ability.                

 

In general, research suggests that consumers worry most about using credit and debit cards on online sites of any kind. However, in the world of bill payment (as opposed to online shopping for example)  these risks are not as great. Even a person with a stolen credit card number is highly unlikely to pay a bill for another person (assuming he or she had the bill details to enter) and even if they did, the risk would be with the merchant and not the consumer. So what about merchant side risk?

 

For a merchant, the greatest risk is charge-backs. This is where the credit or debit card holder disputes the transaction anywhere up to 6 months after the transaction date.  Charge backs can either be because the card holder disputes that they made the transaction at all (i.e. it was a stolen or fraudulent), or because they did receive anything in return for the payment that was made. The second reason for chargebacks in the bill pay space is very rare, but the first reason-theft or fraud is obviously quite common (with total estimated costs of just under £1 billion in the UK in 2010). This is why online bill-pay web sites need to take so much care to ensure that card holders (who are not present as they are in a retail transaction) are who they say they are.

 Summary

In the final analysis, for those EBPP sites that have a clear secure socket payment layer (SSL), have clear statements about security of information and sound compliance and a well-structured registration process, consumers face very low levels of risk (with a very low liability even when a rare problem may arise in any case). The merchant however, faces potentially much more risk arising from both debit and credit card fraud (and therefore possible charge-backs), but risk this can be mitigated with good consumer checking processes that are made easy for every customer to the site to use.

Using a Range of more “Active” Incentives to adopt e-billing and payment

With a planned and consistent information-led approach which stresses the many benefits of the transition, as much as 15% of a customer base may adopt your new electronic billing and payment system. This information-led approach is like to use a range of gentle encouragement approaches such as:

1. Letters explaining the new system
2. Short notices about particular benefits
3. FAQ’s on a merchant website explaining the new system
4. Pamphlets/Leaflets/Brochures on the new system
5. White papers (on benefits such as being more “green”)
6. Trials (try using the system but keeping getting paper bills)
7. Offers such as planting a tree (for every 10 customers who switch to e-billing)

However, to get the majority of customers to alter old habits, greater incentives are needed and this will depend on each merchant deciding how much extra pressure to change to apply. This falls into two categories-what we call “active encouragement” and “aggressive encouragement”. Let’s look at each of these in turn.

Active encouragement

Active encouragement uses a range of methods to incent customers to switch but all of these fall short of forcing them to change or imposing new costs on them. Examples here include:

1. Offering donations to charity (for each customer/every 5 customers who switch)
2. Using email campaigns to use e-billing
3. Engaging in planned text messaging campaigns to explain the benefits
4. Educating customers over the phone (via a call-center) on a push basis
5. Running advertisements (print, radio and even cable)
6. Running sweepstakes or other competitions around the new e-billing system
7. Using on-hold messaging to encourage adoption

If gentle encouragement achieves the first 15% to adopt e-billing, the above may add another 25% over a 3-6 month period (with consistent effort).

 

Aggressive encouragement

Give that the first two encouragement approaches described above may convert 40% of the customer base to the new billing system on a combined basis, the last 60% may need to be pushed even harder and this is what we call “aggressive encouragement”. Examples of this might be:

1. Running a loyalty points scheme for prizes (in-house or third-party) for switching customers
2. Offering coupons or discounts for products or services (in-house or external) when switching
3. Offering third-party gift certificates for adoption
4. Forcing customers to opt-out of electronic billing (simply by turning off paper bills for example)
5. Offering discounts on bills viewed and paid electronically  (e.g.1%, 2% or even more off)
6. Charging customers if they want a printed invoice
7. Charging customers a surcharge to call in make to a call center

These more aggressive encouragement approaches need to be carefully discussed before implementation and will also depend on the new system being offered. In the case of using a service such as BillSwyft for example, customers can still print invoices and generate PDF’s, thereby making the switch to no paper rather easier to bear.

Moving Customers from the Paper-based World of Bills and Checks into the Digital age?

To encourage customer to adopt an online billing solution of any kind takes careful planning and creativity and there are several “angles” a biller can take in the general promotion of the benefits of the change to e-billing. A few of these are:

1.          The Informational Angle – simply communicating that the new system is available and is easy and quick to use and should be tried –the more you can get the pioneer and early adopter types to make the switch the better-some of these may even provide testimonials to be published on a web site to the rest of the customer base.

2.          The Green Angle – The fact that the new bill presentment and payment system can save paper (and even save water, electricity and fuel) is a powerful reason for many customers to “do their bit” and make own small contribution to the sustainability of the planet.

3.          The Benefits Angle – In the early stages, customers will not be interested long communications about features of a new system (and may even resist any proposed change). However, by focusing on the specific benefits of the new system (such as speed and convenience, or the capacity to save them time and money in an increasingly busy world) this is often more than enough to get them thinking about making the change.

4.          The Rewards Angle – Merchants can offer specific rewards and incentives (points, gifts and prizes etc.) to customers to get them to switch to an electronic billing and payment solution.   

In some cases, a merchant will want to adopt just one of these angles to get customers to start thinking about using an online bill view and payment solution, but it may also be useful to adopt more than one angle or even switch from one to another progressively over time and therefore use all four of the above options. Of course, for the bulk of customers you may need to use the rewards angle (and actively or even aggressively) to get them to take action.

Taking the First Steps to Getting Customers to Use a New Online Billing Solution

Once a payment strategy has been developed by a merchant and the costs as a proportion of sales calculated carefully the move to a more electronic or digital system for presenting invoices and collecting payments can be planned and executed. 

But merely introducing a new web-based bill presentment and payment service (in any fashion) does not mean that customers will necessarily use it and we therefore need to plan to create reasonable levels of early adoption and conversion to the new online solution over time (so that it eventually becomes the dominant way to view and pay invoices and allow a merchant to realize the full benefits of this). In this booklet we will therefore describe some ways in which this can be done.

Initially Informing All Customers
Once an online billing and payment system is available, the very first step that a merchant needs to take is to inform the customer base that this new “channel” is available to use. Many merchants avoid doing this and expect their customers to almost “stumble across” the option or in some cases, inform customers only once at the outset and then fail to remind customers about the option again in any way. This may be fine for many of the “pioneers” and “early adopters” in the customer base but others will need greater “pushing” and more than one time, of course.

Segmenting the Customer Base

Although the same initial general message about the new online billing and payment system can be sent to all customers (and pretty much in the same language) some later messages may need to be tailored to particular parts of the customer base. For this reason, another important step in getting customers to use the new service at the earliest stages is to analyze and then segment customers so that specific messages to them may then be crafted.

This segmentation may occur in several ways but some examples are indicated in the table below with comments on what could then be crafted as a result, shown on the right hand side:

Segmentation	Specific communication messages
By age (if the data is available)	Although it is always something of a generalization, younger people are usually quicker to adopt internet technology and may like access to a billing and payment system via not only a computer but using tablets and mobile phones. And older customers may appreciate that a service support person will help them to walk through how to view their bill and make an online payment once, twice or even three times, if needed.
By the average length of time it takes the customer to pay	A customer who pays a bill quickly may be attracted to new system features such as bill scheduling or recurrent payment set up (set and forget). Alternatively, a customer who pays slowly or even late may appreciate that they can set up calendar alerts to make payments or even set up their own email alerts as wanted.
By the way they choose to pay their bill (by check, cash, credit card, debit card or ACH, if available)	Some customers like to pay by check, some by cash, some via ACH or direct deposit and some by card. Depending on the electronic solution, a merchant may be able to offer new payment methods (credit cards or ACH for example). The new payment methods are likely to help accelerate cash flow or even bring new customers to the table, in some cases.

 

Electronic billing and payment-a win-win for everyone?

Electronic billing and payment is one of those rare organizational change measures that can create a number of so-called win-wins. The merchant wins on efficiency and effectiveness (and with the right solution on the cost side too) and the customer wins on speed and convenience (and can save a little money as well). Let’s briefly look at why.

For the merchant on the direct or visible cost side, there’s less paper, less envelopes, less ink and less postage when customers elect to discontinue getting a paper invoice. Even though these are often significant in and of themselves there are also even bigger potential cost reductions on the indirect or more hidden side of things...less customer support (handling queries or phone-in payments) and much less time spent on reconciliation and settlement. In addition, online bill presentment and payment has been shown to lead to much quicker settlement by the customer-which substantially aids cash-flow for a merchant. All these savings add up significantly on the merchant side.

For the customer they win by eliminating or simplifying the tasks of organizing bills, querying them, and storing them (in a good online system forever) and being able to make payments in many ways (all being possible both safely and securely and at a single web site, and ideally only with a few clicks). Digitally-based billing and payment means more free time for the bill payer, and less to worry about when dealing with paper (including having to put the bill or invoice somewhere safe, finding it when needed and even losing it occasionally).

And above and beyond the merchant and the customer in the relationship, the environment wins too.  Electronic billing is a simple but significant step that every organization can take with a little focus, effort and determination, and encourage their customers to make a small “green” contribution of their own.  Less paper eventually means less use of trees and less transportation (and gas), reducing a merchant’s carbon footprint. Not all customers will be happy to turn off paper immediately but some will and they will slowly encourage the others to do the same.

So, in summary merchants will save money on:

•                  Printing paper bills

•                  Fulfillment and postage

•                  Undeliverable mail

•                  Chasing as many late payments

•                  Handling manual payments

•                  Archiving paper bills

•                  Reconciliation/bill matching/banking payments

And customers will save time on:

•                  Checking and paying bills

•                  Hunting for previous bills

•                  Checking funds and means to pay

•                  Writing and mailing checks

•                  Waiting for a merchant to be open for business

•                  Paying by IVR or phone

•                  Worrying over lost checks and late delivery

And all this is “green” too.

Sending Bills and collecting payment from customers costs every organisation 5% of Revenue on average!-can this really be correct?

According to several 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) they say, that on average, the overall cost of sending out a bill or invoice and then collecting payment from the customer, is anywhere from £4 to £17 per invoice. Unfortunately, apart from the fact that this is a pretty big range, it tends to create an unnecessary defensiveness in organisations (and often in the finance department in particular) who understandably become very keen to point out that they spend nowhere near that kind of money on such a mundane and clerical activity (although they will often fail to include many of the indirect and hidden costs of the process). Another recently published general statistic, however, could be much more useful and may make a few divisional heads and even CEO’s sit up and think about the efficiency and effectiveness of their billing and payments practices for the first time. This is the statement that on average, an organisation spends 5% of its revenue on issuing its invoices and in collecting payments from customers.  In this article, we will explore this claim and see if it reflects reality for both small and large organisations. To do this we will look at the figures based on two real businesses.

First and foremost let’s deal with the “on average” part of the 5% of revenue claim. What is being done here is to look at many organisations of many sizes and types and simply working out the median or middle value in a range of numbers.  In this case the median cost of billing and collecting payment in proportion to total revenues is 5%. Of course, this means that they are some companies that may be higher or lower than this but statistically, we can say that around two-thirds of all companies would fall into this average of 4%.

The Small Company

The first company (let’s call them Alpha) employs 26 people, has a turnover of £5 million in total revenues per annum. This is earned by selling goods and services at an average of £500 on average each time. Hence their total bills in a year are 12,000 or 1,000 per month. There are two broad cost categories that we now need to look at –staff and transaction costs.

On the staff side, Alpha have one accountant (on a salary of £45,000 per annum, three clerical admin people (at a salary of £21,000 each) and two people answering the phones (at a salary of £17,500 each). Hence, the all up payroll for this group of people is £143,000. The three clerical admin people devote all of their time to billing and payments but the accountant and customer service people devote only 50% of their time to this activity. Hence, we can say the cost of the people’s time which is devoted to billing and payments is £103,000. However, the company has staff overhead costs of 40% (cost of offices, equipment, training etc) which brings this cost up to a total of £144,200.

On the transaction cost side, 40% of the 12,000 bills are paid by cheque, 10% by BACS, 30% by phone (half by debit card and half by credit card), and 20% by cash. For cheques the bank charge fees of £1,200 (£0.25 pence times 4,800 cheques). For BACS, a charge is made of 15 pence per transaction (so £0.15*12000*0.1 or £180). For cash handling the bank charges a flat annual fee of £500 for all cash deposits of this size. For cost of transactions by phone, on the debit side the company pays £0.35 pence per transaction or £630 and on the credit side 2.5% of each transaction value (£500*0.025*1800 transactions or £22,500). Finally, we have to worry about how long it takes to get paid (and the cost of borrowing money to operate and allow for possibly late payments). Given that this small company has average invoice days outstanding of forty, they have to cover this £500 for 40 days or just under 11% of the year. As Alpha is paying interest at 5%, this means the cost to fund the necessary float is £26,027.

There are also a few direct invoicing costs for Alpha to bear including printing invoices, paper, envelopes, stamps and even marketing material (to also design and print). This adds up to a total of £0.90 per invoice (the stamp alone being half of this). We therefore have a total annual cost of £10,800. This makes the grand total on the transactional side of things £61,837. If we total all of the above, we now have a grand total billing and collection cost of £206,037. As a % of the £5 million in revenues this is 4.12% (or what would be £17.17 per invoice). 

The Large Company

The second company (lets call them Beta), employs 525 people, has a turnover of £90 million in total revenues per annum. This is earned by selling goods and services at an average of £58 each time. Hence, their total bills in a year are 1,551,725 or 129,310 per month on average. Once again, there are two broad cost categories that we now need to look at –staff and transaction costs.

On the staff side, Beta have a team of eight accountants (on an average salary of £48,000 per annum each, thirty-two clerical admin people doing bookkeeping, settlement and reconciliation (at a salary of £23,500 each) and a call-centre with sixty people answering the phones (at a salary of £18,500 each on average). Hence, the all up payroll for this group of people is £2,214,000. The Beta company does not keep detailed records but estimates that billing and collecting payments occupies about 60% of the time of this whole team. Hence, the cost of the people’s time, which is devoted to billing and payments is £1,347,600. However, the company has staff overhead costs of 45% (cost of offices, equipment, training etc) which brings this cost up to a total of £ £1,954,020.

On the transaction cost side, 20% of the 1,323,530 bills are paid by cheque, 20% by BACS, 50% by phone (half by debit card and half by credit card), 5% by cash and 5% via Beta’s Internet bank site portal. For cheques the bank charges fees of £52,941 (£0.20 pence times 264,706 cheques). For BACS, a charge is made of 12 pence per transaction (so £0.12*264,706 or £31,765). For cash handling the bank charges a flat annual fee of £15,000 for all cash deposits of this size. For cost of transactions by phone, on the debit side the company pays £0.30 pence per transaction or £99,265 and on the credit side 1.8% of each transaction value (£58*0.018*330,883). transactions or £405,000). Finally, we have to worry about how long it takes to get paid (and the cost of borrowing money to operate and allow for possibly late payments. This company has average invoice days outstanding of 45, they have to cover this £68 for each transaction for 45 days or 12.3% of the year. As the Beta company is paying interest at 5%, this means the cost to fund the necessary float is £553,500.

There are also a few direct invoicing costs for Beta to bear including sending invoices (which Beta does via email not paper unless it is requested by a customer), monthly mailed statements and accompanying marketing material (to also print and design). This is a total of £0.40 per invoice. We therefore have a total annual cost of £620,690. This makes the grand total on the transactional side of things £1,860,054.

If we total all of the above (all staff plus all transaction costs), we now have a grand total billing and collection cost of £ £3,814,074. As a % of the £90 million in revenues this is 4.24%. (or £2.46 per invoice).

Summary

Although the data from these two very different sized companies cannot in any way constitute a statistically significant result, it is nonetheless quite remarkable that both costs of invoicing and collection are so close. At 4.12% and 4.24% respectively they are also only a little less than the 5% average claim made by the research companies. In fact, it is a reasonable assumption that a few more “hidden costs” still need to be added to both sides here (which may completely close the gap). For example, the small company Alpha added no costs for the senior managers (GM and CFO) who both spend some of their time in payment matters, nor for the extra bank charges for bounced cheques, debt collection and writing off-unpaid invoices (issues also not included for Beta also). And, in the large company, there were some system and invoice storage costs that were excluded. This may well have made both % numbers even closer to the 5% figure and possibly slightly higher.

In the final analysis, this is just the data from two individual companies. However, they seem to provide a useful general justification to the claim and serve as a basis for calculating the actual figures for almost any business. This may be especially useful ahead of talking with online digital bill presentment and payment companies that often claim that they can reduce these costs by up to 50%-if this is true, what a great way to lift revenues by up to 2.5%!

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.

What is the difference between “push” versus “pull” on-line billing?

The terms “push” and “pull” are now commonly mentioned when on-line billing is being described, but what do these terms actually mean in this context and what is the advantages of one over the other? 

A “push” based on-line billing process essentially means that a consumer is prompted or alerted directly with a full invoice, statement or other document describing what has been purchased and what needs to be paid. This is therefore what is commonly called a “rich” document. For the most part, push-based on-line billing systems are carried out as e-mail notifications with attachment files (such as a PDF for example).

A “pull” based on-line billing process will still alert a consumer that an invoice is ready to be paid but instead of including the rich document, invites the consumer to go to a nominated web site where they can find the full bill to be viewed and subsequently be paid in digital form.  Both e-mail and text messaging can be used to simply alert the customer, but merchants may elect to use off-line notifications (letters, paper-based invoices etc) as well.

Both push and pull models on online billing offer merchants the opportunity to reduce or eliminate paper invoices over time but each has advantages and disadvantages.

The advantages and disadvantages or Push-based on-line billing
Push based on-lined billing has the advantage of using a very common and familiar system that most businesses and consumers now use with relative ease -their email. Recipient addresses are unique and go straight into an inbox to be read either immediately or when the person opens their email system. In addition, emails are now readily received on mobile phones and other portable devices, allowing for very fast delivery, flexible viewing and (in some cases) access to online payment options.

Despite the above, there are a number of drawbacks with this push-based delivery model. They include:
* An email address may be incorrect or not reach the right recipient directly
* Many individuals and even organisations may have inbox restrictions the size of incoming emails. This will limit the opportunities for presenting invoices (especially when the attachment is large in size).
* Staff turnover in businesses and changes to email addresses by consumers means that it is often difficult to ensure the complete integrity of email addresses.
* Recipients can claim that they never received an email with an attached e-bill
* It is not always easy to differentiate copy invoices from original invoices with push on-line billing.
* An attachment (such as a PDF) is still only a piece of paper. A consumer may just print it and pay it offline and/or a merchant cannot easily reconcile the data (needing to key in the data again).

The advantages and disadvantages or Pull-based on-line billing
In Pull-based on-line billing, an email is more equivalent to a paper-based notification in the physical mail and simply serves to alert the customer that an invoice is available for viewing and processing at the nominated billing website (the biller’s own or a third-party aggregator’s one). As well as presenting the invoice a fully digital and therefore clickable format, web 2.0 internet technology also makes it possible to distinguish between the original and copy invoice. In addition, this fully digital format makes for very simple upload or transfer to an accounting system, thus eliminating any requirement to key in data manually and greatly aiding the reconciliation process. In addition, full digitisation allows the recipients to view their bill and render payments all on-line, at the same web site (which they may choose to do as soon as it is received).

Just as with Push based on-line billing, there are nonetheless a number of drawbacks with this pull-based delivery model. They include:
* Recipients may forget their logins and passwords to the billing web site to which they are being directed
* Recipients may not trust the web site to which they are being sent, or least feel nervous about the security offered (especially where payments are concerned)
* Consumers may be confused with what is likely to be a simplified bill or one which approximates to the one they receive in the mail-it is often similar but not the same.
* The billing web site may not be very user-friendly (leading to consumer abandonment)

So, in summary, we can say that both push and pull on-line billing have many advantages worth considering but also have a range of disadvantages that need to be considered one-by-one according to each merchant’s needs. In overall terms perhaps there are less onerous disadvantages on the “pull” side, and it is this approach consequently has the present advantage. However, as usual in the online world, choice and convenience are always key considerations, and it may well be that offering both a push and a pull-based solution offers the best outcome of all (and most quickly attains the paperless system than many merchants may crave). 

Developing a Payment Strategy-Step 4- Making as much payment choice available as possible.

In exploring what is involved in developing an overall payments strategy, in this article we will look at the fourth phase of five in total, which is making as much payment choice available to customers as possible.

Every organisation wants to get paid (and as quickly as possible) but there are clearly many ways in which this may be done by customers. This creates an interesting dilemma. On the one hand, by keeping payment choices to a minimum, complexity is reduced for the organisation but flexibility of options is decreased for the customer. On the other hand, a wide array of payment options creates high customer choice but with a high degree of handling complexity for the business. In the past, the size of the average transaction, the billing cycle frequency and the volume were the main determinants of strategy here (and may have favoured fewer payment choices such as cheque and direct debit only for instance as a way of keeping things simple and processing costs low) but with the more widespread use of the Internet for payments in recent years, the balance towards greater customer payment option choice has become much easier and therefore compelling. 

Offering a wider choice of payments incorporates not only varying payment channels but also a variety of payment types. Different channels include the traditional ones of mailed-in cheques and direct bank transfer (direct debit or standing order) but these days can often also include operating a central call centre (in-house or outsourced), automated telephone services or payment via the web (at a company built or third-party site). Different types of payment include cheque, cash and bank transfer, but can be easily extended to a wide variety of credit and debit cards, pre-paid cards and e-wallet transfers.

Internet technology now allows considerable flexibility for an organisation of any size to offer most of the above channels with a web site at the hub of the offering. In addition, an e-payment gateway can now be relatively easily added to enable credit side and debit side, options, as well as e-wallet payments to be taken online. Perhaps even more attractive to an organisation is adding a reputable third-party electronic billing and payment aggregation destination site (such as PaySwyft) as an offering in the overall mix. At such a site, an organisation can present all of its bills in digital form and then allow these bills to be paid with almost every available payment type, including cash in many cases. Because the aggregator takes the payments, collects them together electronically and then settles to its merchants online also, this helps to drive down the internal expense of payment call handling and the acceptance and reconciliation costs of handling cheques (and any other paper-based transactions).

Whatever approach selected by an organisation, today’s customers prefer a variety of payment options to be available meet their different and often changing needs when it comes to paying invoices. The reward for making this available is quicker settlement and thereby accelerated cash-flow. A wise business therefore finds the most cost-effective ways to offer as much choice as they can.

In our next article in this series, we will look at the next phase in developing the Payment Strategy- Building a seamless payments process.

Developing a Payment Strategy-Step 2- Focusing on how to issue bills and invoices in a fast and efficiency way

In exploring what is involved in developing an overall payments strategy, in this article we will look at the second phase of five in total, which is how a business can issue bills and invoices in a the fastest and most efficiency way.

There are few businesses that fail to readily appreciate that when a customer orders a product or service, they expect to have it delivered as efficiently as possible (and this usually means fast). In fact, some organisations even seek to gain competitive advantage by doing this effectively. However, this would be costly unless the invoicing process is equally efficient, so that payment can be collected as quickly as possible. Streamlining the billing process is therefore a critical activity.

There are essentially three options available to streamline the billing process:

First, a business can seek to make an existing manual bill process “flow” more efficiently. For example, this might involve looking at the simplicity of the invoice design or layout, reducing or even eliminating wasteful work tasks, or even further automating the delivery process (such as faster envelope stuffing). Although this may help considerably, the danger is that these process improvements need to be “locked in” to avoid slippage and the changes may only go a short way in terms of overall improvement from a customer perspective.

A second option is to automate the manual billing process as much as possible. For example, this might involve adopting an email-based invoice delivery process (saving on paper, envelopes and franking (if the customer can be convinced to accept an email as the substitute of course). This can save considerably in direct costs and gets the bill to the customer earlier than the physical mail. However, the business is still delivering paper and may not experience much in the way of faster payment. In fact many organisations find that they end up maintaining both their physical mailing and emailing process (and storing more paper than they did before).

A third option is for a business is to let a third-party specialist billing organisation help to streamline the process. One possibility here is to completely outsource the process of both billing and payment collection. However, a more popular option is to either buy full bill automation software from the third-party (and pay for its maintenance and use) or to use a digital billing service. The latter choice is likely to deliver the most change from a customer perspective. Here, a customer’s bill is made available to view at the third party’s dedicated web site, where they can then pay it by a variety of means (on both the credit and debit side).

Each of the above options needs careful consideration, as all three involve time and cost. However, in terms of savings in direct and indirect cost, option three is likely to be the most efficient and cost effective.

In our next article in this series, we will look at the next phase in developing the Payment Strategy- Giving customers as user-friendly billing and payment experience as possible.

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.

What is Likely to Occur in the Payments and Online Billing Landscape in the Next Few Years?

Although it is always extremely difficult to make predictions about an industry which changes as fast as online payments (including online bill presentment) there are always a few “clues, trends and patterns” around to draw upon. As a result and as it’s close to the start of a new year, in this article we will seek to make a few predictions about what is likely to happen in the near future. To do this we will use a number of key headings that are often seen to be important in this industry.

The general changes that we can expect
In broad terms, the payments landscape (which is still very paper or physical form-based in so many ways) will continue to switch inexorably to an online environment at many levels with “barcode type” paper to replace physical monetary exchange products like cheques and cash in the next few years and possibly even Card (debit, credit and pre-paid) in the more distant future. The market will increasingly use smart phone and PC tablet as a channel, although the infrastructure required to support this will take as long as 20 years to make the full transition.

Online person-to-person or P2P payments will increase using mobile devices or social network sites as the initiation point. In the early days of this transition, bank account details will need to be known but accessing and using cleared funds (as the way customers want to interact will each) will see more new players emerging outside of the traditional banking community.

While banks are competing with each other for market share, new players entirely are likely to be able to capture payment market share away from their base, by better satisfying the needs of market. PayPal, Google & Apple are good examples of this or it may be entirely new companies that are yet to become well-known.

The cultural shift to perform everyday functions on-line is still in its infancy. While on-line shopping is growing exponentially, other behaviour will move more towards online. For example, full digital bill presentment and payment services.

So, if that’s the general scene, let’s look at what might happen under a few specific headings

TIMELINESS & CHOICE
Customers want to choose when they pay, day or night, 24/7, 365 days of the year and whether to pay ‘just in time’ or in real time. Customers want very wide payment type options and the ability to choose which option best suits each payment activity.

In many cases, recipients of funds prefer real-time or same-day settlement. Surety of settlement in real time will be critical in most cases.

ACCESSIBILITY
Customers want to access the same payment options regardless of the channel by which they pay. For example, this may be the same payment choice regardless of whether they are in a store, at an on-line store or paying a bill.

Merchants will increasingly prefer to receive funds from the same payment options, regardless of channel, to reduce vendor management and improve internal efficiencies.

EASE OF USE
Customer like payment types that are easy to use and one they understand and trust. Mobile, PC tablet & social network usage is making the introduction of new payment processes easier to manage and educate the market, but present other challenges for the payment industry as a whole.

EASE OF INTEGRATION WITH OTHER PROCESSES
Online payments will grow steadily and will ultimately dominate the payment landscape. However, capability and capacity to integrate with internal computer systems will be a barrier that will need to be overcome. Seamless integration with Point-of-Sale systems, on-line store, ERP, inventory systems and billing engines will be a critical factor.

Cloud-based technology will assist in keeping capital outlay lower and at manageable levels while providing high speed access to the payment instruments and associated internal systems.

RELIABILITY
The new payment instruments and channels that arise will need to be ever more reliable. Traditional payment providers can still play a huge role in ensuring that high quality standards and suitable interoperability is maintained ensure the instrument can be trusted.

Convenience can sometimes trump reliability, but both having both is likely to be a winning combination.

PRICING
New payment instruments will have to be cost effective is all cases and this will start to happen slowly.

What is blurring the price aspect is merchants will try to demand low transactional costs even when real demonstrable value is being added. For example, instant bank transfer provides significantly more benefits to both a consumer and a merchant and yet the expectation would be that this should be priced the same as, or even lower than, the transactional cost to write a paper-based cheque.

Another example is that presenting an electronic invoice with a wide range of payment options would be significantly more cost effective than a biller managing their own bill collection, even though individual transaction pricing by payment type may be more expensive in that particular silo.

SECURITY AND ROBUSTNESS
Similar to the reliability heading, secure and robust payment instruments will be increasingly essential, although convenience and ease-of-use are considerations that will often dilute how secure and robust the new instrument has to be in practice.

INTEROPERABILITY
All online digital Payment systems will have a much higher degree of interoperability with other systems than they do now. This will apply to the movement of money (where necessary) and more particularly to data transmission. The intelligent design of this data transition process (nationally and internationally) will be done by at least one large player outside current financial services sector or by a new market entrant.

RISK MANAGEMENT
Much richer risk management tools will be available and these will have sophisticated algorithms that track all payment patterns and provide risk attenuation or control options at every level. This is likely to be a new software-based market entrant.

Summary
No-one has a “crystal-ball” to predict the future, but the online payments space is changing rapidly around us. It will be interesting to see whether, we are still heading in the general direction that this article suggests in 12 months time and whether some of the forecasts are starting to come true or not.

What is the difference between “push” versus “pull” on-line billing?

The terms “push” and “pull” are now commonly mentioned when on-line billing is being described, but what do these terms actually mean in this context and what is the advantages of one over the other?

A “push” based on-line billing process essentially means that a consumer is prompted or alerted directly with a full invoice, statement or other document describing what has been purchased and what needs to be paid. This is therefore what is commonly called a “rich” document. For the most part, push-based on-line billing systems are carried out as e-mail notifications with attachment files (such as a PDF for example).

A “pull” based on-line billing process will still alert a consumer that an invoice is ready to be paid but instead of including the rich document, invites the consumer to go to a nominated web site where they can find the full bill to be viewed and subsequently be paid in digital form. Both e-mail and text messaging can be used to simply alert the customer, but merchants may elect to use off-line notifications (letters, paper-based invoices etc) as well.

Both push and pull models on online billing offer merchants the opportunity to reduce or eliminate paper invoices over time but each has advantages and disadvantages.

The advantages and disadvantages or Push-based on-line billing
Push based on-lined billing has the advantage of using a very common and familiar system that most businesses and consumers now use with relative ease -their email. Recipient addresses are unique and go straight into an inbox to be read either immediately or when the person opens their email system. In addition, emails are now readily received on mobile phones and other portable devices, allowing for very fast delivery, flexible viewing and (in some cases) access to online payment options.

Despite the above, there are a number of drawbacks with this push-based delivery model. They include:
* An email address may be incorrect or not reach the right recipient directly
* Many individuals and even organisations may have inbox restrictions the size of incoming emails. This will limit the opportunities for presenting invoices (especially when the attachment is large in size).
* Staff turnover in businesses and changes to email addresses by consumers means that it is often difficult to ensure the complete integrity of email addresses.
* Recipients can claim that they never received an email with an attached e-bill
* It is not always easy to differentiate copy invoices from original invoices with push on-line billing.
* An attachment (such as a PDF) is still only a piece of paper. A consumer may just print it and pay it offline and/or a merchant cannot easily reconcile the data (needing to key in the data again).

The advantages and disadvantages or Pull-based on-line billing
In Pull-based on-line billing, an email is more equivalent to a paper-based notification in the physical mail and simply serves to alert the customer that an invoice is available for viewing and processing at the nominated billing website (the biller’s own or a third-party aggregator’s one). As well as presenting the invoice a fully digital and therefore clickable format, web 2.0 internet technology also makes it possible to distinguish between the original and copy invoice. In addition, this fully digital format makes for very simple upload or transfer to an accounting system, thus eliminating any requirement to key in data manually and greatly aiding the reconciliation process. In addition, full digitisation allows the recipients to view their bill and render payments all on-line, at the same web site (which they may choose to do as soon as it is received).

Just as with Push based on-line billing, there are nonetheless a number of drawbacks with this pull-based delivery model. They include:
* Recipients may forget their logins and passwords to the billing web site to which they are being directed
* Recipients may not trust the web site to which they are being sent, or least feel nervous about the security offered (especially where payments are concerned)
* Consumers may be confused with what is likely to be a simplified bill or one which approximates to the one they receive in the mail-it is often similar but not the same.
* The billing web site may not be very user-friendly (leading to consumer abandonment)

So, in summary, we can say that both push and pull on-line billing have many advantages worth considering but also have a range of disadvantages that need to be considered one-by-one according to each merchant’s needs. In overall terms perhaps there are less onerous disadvantages on the “pull” side, and it is this approach consequently has the present advantage. However, as usual in the online world, choice and convenience are always key considerations, and it may well be that offering both a push and a pull-based solution offers the best outcome of all (and most quickly attains the paperless system than many merchants may crave).