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Billing & Payment Options in the Digital Age
An extract from our research report
A lot has happened in the last ten years. Internet access has grown from 42% of U.S. households to 79%. Better bandwidth and more broadband Internet connections have resulted in better user experiences. Smart phones and mobile phones have expanded Internet access. According to global telecom equipment provider Ericsson, the number of mobile broadband subscribers reached 500 million in 2010 and that number should double in 2011. The rate of technological change is increasing. In six short years YouTube has racked up 2 billion videos per day and facebook has 600 million active members.
Payments too have expanded from the days of walking in-person and paying by check or cash or mailing your paper check through the U.S. Postal Service. Now customers can pay by cash, check, credit/debit card, electronic fund transfer, ACH transfer using ATMs, IVRs, mobile phones, and the Internet. In a few short years customers have been offered and have come to expect many billing and payment options. Online banking has grown from 11 % to 63% — meaning 2 in 3 people are now banking through the Internet. Online bill payment has grown from 4.5% to 31%. Many consumers now understand the benefits of online bill payment.
The rush to accept online payments has been a major driver of Electronic Bill Presentment & Payment (EBPP) programs for many. The focus appears to be shifting. Bill presentment has expanded from paper bills delivered through the U.S. Postal Service to email, mobile phones, and the Internet with the option to receive bills on company websites, at banks, or special payment portals. Electronic bill presentment is now being pushed more urgently, in the hopes of reducing printing and mailing costs, and saving a few trees.
Companies are also trying to tap into the mobile banking services market which is expected to increase 10-fold by 2011. While the greatest growth in mobile transactions is predicted in China and the Far East, Western Europe and India are also expected to grow quickly. While acceptance has been lagging in the U.S., a growing range of new mobile banking products and services are being introduced, such as bill payment and presentment, funds transfer, and account management, which should help entice customers into the fold.
The Ascent Group recently conducted research into billing and payment practices. We asked companies about billing services and payment plans, including Electronic Bill Presentment and Payment (EBPP). While we confirmed that companies from many industries are actively implementing EBPP options for customers, we also confirmed that customer adoption (based on volume) for paperless billing and electronic payment is growing slowly—averaging 10.2 percent for eBill (of total bills issued) and 19 percent for ePay (of total payments received) for all industries. While electronic payment transaction volume is still quite low, the number of customers paying through the Internet has doubled since our initial study in 2004 (from 6 percent to 13 percent).
These EBPP options are there for customers, as nearly all of our participants accept payments through the Internet (up from 38 percent in 2004) and nearly three-quarters now offer paperless billing (up from one-third in 2004). We just have to wait for more customers to make the switch.
Mail is still the most popular channel for consumer bill payment among our participants. On average, 42 percent of customers pay by sending a check in the mail. However, this percentage has been steadily declining over the past 5 years. In our 2004 survey, mailed payments represented 68 percent of consumer payments.
Our study participants indicated that most customers still prefer to pay with paper check by mail—both business customers and consumers. Surprisingly, many consumers and business customers still pay face-to-face—more than 12.6 percent of consumers and more than 9.2 percent of business customers.
However, the percentage of payments received through electronic means is growing and slowly displacing the paper check payment. A study by the Federal Reserve Bank, NACHA, and the TowerGroup noted that check volume is decreasing, mainly because of the growth in acceptance of alternative payment methods.
When EBPP was first introduced, most companies offered online payment options while continuing to send paper bills to customers. Now, companies are looking for ways to encourage the adoption of eBills and eliminate paper statements.
While many consumers are eagerly paying online, they are not quite ready to give up the paper bill. A study by Forrester revealed that only 16 percent of consumers have opted to eliminate the paper statements. These findings are consistent with our study’s findings—only 10.2 percent of customers have signed up for electronic bill presentation.
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