Today’s consumers are writing the rules of how, when and where they want to pay their bills. This “preference-driven” behavior, along with developments in technology, has compelled utility companies to expand the channels through which payments are accepted. As a result, utility companies must offer a broad array of payment options, including check, auto debit, online, walk-in, kiosk and phone via interactive voice response (IVR) or customer service representatives (CSR). When managed properly, these evolving payment options present an opportunity for companies to deepen the customer relationship while reducing costs.
For most customers, decisions involving payment options are almost always tied to convenience, choice and control. They want to pay their bills how they want, when they want and where they want. For utility companies, consumers’ increasing use of the online channel has created the opportunity to capitalize on evolving customer behavior to achieve fundamental business goals. Utilities that are in tune with their customers’ changing payment preferences can strategically drive customers online for payment, guiding them toward the adoption of electronic bills (e-bills) presented online, then to voluntary suppression of paper bills. In doing so, these utilities will be able to accelerate cash flow and reduce costs.
Every bill received, payment made, or visit to the company website should be used as a valuable opportunity for companies to promote strategic adoption of the online channel. A positive payment experience strengthens a company’s brand and increases the potential to transition customers to paperless billing.
Three Questions Every Utility Company Needs to Ask About Their Billing Processes
1. How can I turn customer interactions into profitable relationships? Utility companies need to deliver payment solutions that are reliable, secure and functional. The key to improving customer loyalty while reducing overall costs and improving profitability is to promote adoption of the online channel. In a survey conducted by Fiserv in 2008, 27 percent of consumers who received bills online reported that the experience improved their relationship with the company from which they received the bill, and 30 percent said it made them less likely to switch to a competitor.
Industry data suggest that nearly 50 percent of calls made to customer care are billing and payment related. The ability to direct customers to online self-service options can dramatically reduce customer care costs. In addition, paperless electronic bills can significantly lower the cost per billing transaction, as seen in the chart below.
2. How can I deliver choice while maintaining operational control? For utility companies, providing billing and payment services is not a core competency. Many utilities would like to maintain control over how their bills are presented, and the appearance of the bill itself, while handing payment processing duties over to a third party. Utilities should strive to achieve a balance that allows them to deliver top-notch payment options, but does not require them to surrender operational control, by partnering with respected providers of billing and payment services.
3. What channels do I want and need to support to meet the payment preferences of my customers? It is important to offer a variety of payment options for your customers. Some consumers prefer walk-in bill payments; others want to pay online at their financial institution website. With mobile phones on the rise, mobile payments are another option to consider. Evaluating and understanding your customer is a key factor in guiding the types of payment options you should offer.
Leveraging the Online Channel to Optimize Customer Interaction
Once these three questions have been answered, utilities will likely find that it is worthwhile to focus on developing and delivering a robust online billing and payment experience, and encouraging customers to adopt the online channel.
Utility companies have a significant incentive to improve their online billing and payment capabilities in order to influence consumer payment behavior. While the imperative is to address the customer’s payment preference, the end goal is to optimize the speed and method by which payments are collected – an objective that can be accomplished by driving customers online. The ultimate business objective is to guide customers away from higher cost service channels to lower cost-to-serve online billing and payment options: Internet usage, online enrollment, online payment, e-bill and paperless billing.
Customers have high expectations for online payments, based on the robust capabilities they have experienced when they view and pay bills issued by pioneering online billers such as credit card issuers and wireless phone carriers. However, the experience of paying utility bills online has historically left much to be desired. Leading industries in this area issue electronic bills (e-bills) that are rich in content and integrate added functionalities, such as the ability to view billing history or initiate an online chat with a customer service representative. By contrast, e-bills issued by utility companies have historically been difficult to navigate and contain essentially the same information the customer would receive via a paper bill. Utility companies must look to implement billing and payment solutions that provide users with an intuitive experience and more robust capabilities than they can find offline.
The Preference-Driven Payment Interaction
When customers choose how, when and where to view and pay their utility bills, they are initiating a payment relationship that can provide advantages to both parties. Customers are looking for convenient methods, types and times of payment that fit their lifestyles. While a Gen-X customer may prefer to pay through a consolidated bill payment website such as a bank, credit union or brokerage, their Gen-Y counterparts may prefer to pay at the utility’s website or by phone.
In any case, when customers have a question about their bill, they want speedy and responsive support. Utility companies that view billing and payment as more than a passive collection function have the opportunity to deepen the customer relationship by implementing solutions to provide a positive experience for each customer. To accomplish this, utilities must reinvent the way consumers think about them.
This reinvention may begin with an integrated online payment function, and can then progress to include all online self-service transactions: viewing bills, analyzing usage trends, making emergency payments to avoid service disconnects, etc. Only then can utilities change the way they are perceived by their customers, which will ultimately drive satisfaction up and drive costs down.
Optimizing the Revenue Cycle
Whether the challenge is maximizing return on the investment, accelerating cash flow, reducing postage and paper costs, streamlining or automating payment processes, or improving customer satisfaction and loyalty, the focus always seems to fall on the areas of billing and payment. These functions drive such a large percentage of the interaction with the customer that they are core in determining the status of the customer relationship. Utility companies can optimize the process of collecting revenue by implementing a solution framework that supports consumer payment preferences across all payment channels — and that minimizes the overall cost to serve the consumer.
Strategically, the right solution framework will also allow a utility company to capitalize on the wealth of transactional data inherent in payment processing systems. Transactional data can provide a complete view of customers — who they are, how they pay, when they pay and where they pay. This “transactional intelligence” can be used for strategic advantage by enabling a unified view of payments across all payment streams, allowing utility companies to identify and promote high-value options, such as cost-effective online payment channels.
Encouraging Adoption of the Online Channel
The marketplace now includes customers at varying levels of “tech savvy-ness” — from the non-PC user who frequently calls customer service representatives, to the regular online payer capable of navigating a robust online self-service.
In a 2008 report, Javelin Strategy & Research1 predicted that 83 million households will be banking online by 2013, with 45 million paying bills through banks and credit unions. Javelin also forecasts that 56 million consumers will view bills at the billing organization websites, while 54 million will pay bills there.
Clearly, the online channel will only continue to gain in popularity. The optimal business strategy will educate customers and move them through a continuum of lower cost-to-serve online capabilities, beginning with online payment and progressing to electronic billing, paperless billing, and self-care.
Focused marketing campaigns to help drive paperless adoption can assist with this effort. For example, by utilizing customer segmentation, research, and analytical support to drive a local conservation campaign promoting the environmental benefits of going paperless, Progress Energy realized an increase in its electronic billing adoption rate of more than 200 percent among targeted customers.
Similarly, Con Edison experienced a 65 percent increase in e-bill activations in twelve months after implementing a ubiquitous marketing campaign promoting a “green” paperless billing message. Examples of the marketing tactics used by both Progress Energy and Con Edison can be seen in the illustrations.
Conclusion
Electric utility companies who serve their customers across all payment channels with strategies for evaluating and optimizing the mix of payments they receive – including driving customers from offline to online - will emerge as market leaders. They will enjoy a complete view of their customers — who they are, how they pay, when they pay and where they pay — allowing them to enjoy improved service levels, cash flow and internal efficiency among traditionally disparate systems. And, by transforming the entire revenue cycle into a highly efficient, cost-effective, profitable revenue stream that helps to grow business, utilities are able to control their payment streams that will best grow the bottom line.
About the Author
Michelle Flint is General Manager for Online Billing & Payment within the Biller Solutions division at Fiserv. Flint is responsible for the overall strategic direction and business unit operations that enable clients to meet key business objectives and optimize the customer interactions through the facilitation of bill delivery and payment products and services. Prior to joining Fiserv (CheckFree) in 1998, Flint spent ten years in key management positions within the banking and credit card industry.
