Utility bills are changing — unfortunately in many cases they are rising — but bill payers’ expectations are changing too, especially around how recurring bills, including utilities, are paid. From seeking more convenience and transparency in the bill payment process to improving overall financial health through budgeting, there is rising consumer demand for real-time bill pay, driven largely by the benefits of other real-time applications, like Zelle® for person-to-person payments. In fact, according to a recent white paper from Fiserv and Javelin Strategy & Research, 54% of consumers surveyed said that real-time payments would help avoid late fees, and 41% cited making electronic payments, rather than paying by mail, phone, or walk-in, as a benefit of real-time payments.
In response, utilities providers must meet these new consumer requirements and continue to evolve in step with individuals’ needs. The good news? There are tangible benefits for utilities, too – from happier customers to an improved bottom line. Let’s take a look at how real-time payments are a growing “win-win” for customers and utilities alike.
For Customers, Real-Time Means Real Benefits
As consumers, we’ve tolerated slow payments for years – back to the Pony Express days. Historically, payment networks were set up for multi-day settlements so intermediaries could lower risks – and thus the costs – of payments. Today, we can reduce risk and keeps cost low for merchants, but consumer appetites are evolving. In our digitally-enabled world, with high-speed internet at our fingertips, we have no patience for any transaction that takes too long. This is especially true of the speed of payment remittance and settlement, which has been previously designed around the biller or the merchant. Now, it should be focused more squarely on the consumer through the addition of real-time payments.
The benefits of real-time payments can be significant for utility customers, helping them pay exactly when they know they have the funds, and giving them the confidence that their gas or other utility bill has been paid on time—even if they remember at the last minute. This can also help prevent late fees, or worse, service shutoffs for late payments or non-payment. By providing more control, real-time payments can even help customers with budgeting, so they can earmark funds for utilities and other bills. Additionally, for those customers taking advantage of options to pay by credit card, any “convenience fee” that comes with that option can be eliminated by paying in real time. Slow money movement, on the other hand, can amplify financial problems, leading to late payments and, in turn, late fees and damaged credit. According to the Fiserv and Javelin white paper, nearly one in three consumers owed late fees even though they submitted payments on or before the due date.
Utilities Double-Down for Higher Customer Satisfaction and Lower Costs
One of the foundational benefits for utilities—especially in today’s world of increasing competition—is happier, more confident customers. As consumers expect to be “one-and-done” when they click the button to pay, utilities must meet that desire for fast, efficient payments. Ease of payment can drive higher customer satisfaction scores when they are asked about billing and payments.
Real-time payments can also provide substantial cost savings to utilities offering pre-pay.
Getting Started with Real-Time Payments
How can utilities adopt or evolve real-time payments to meet or exceed these new consumer expectations? The first step is thinking about current use cases and how to add value from a customer’s perspective. From there, offering customers a range of payment options to make it as convenient as possible for them to pay how they want, where they want. These options might include mobile bill presentment, where the utility bill is delivered through a customer’s digital wallet. It could also come to life with something like Request for Pay (RfP) which is an option for billers that matches payments to available funds; meaning that the transaction won’t happen without the funds being available. That can help prevent late fees, non-payment, and risk of shut-offs.
As the billing world – including utilities – moves towards real-time payments, leaders in the industry should keep three things in mind. 1. Real-time is coming, so plan for it now. 2. Be deliberate in aligning your use cases to your customer journey. And 3. Brainstorm with your team — who are all bill payers, remember — to help identify shortcuts, use cases and plan proofs of concept.
Overcoming Barriers to Enabling Real-Time Payments
Utilities have a great deal to consider as they strive to innovate, due in part to a complex regulatory environment from a billing and payments perspective. There are boards to report to, and often, for non-investor-owned utilities, a vast number of items to comply with and permissions to obtain, all of which can slow the pace of innovation. However, utilities have found ways to innovate through smart meters, tracking data within their infrastructure, hardening systems and more.
At the same time, that strict regulatory environment can also reward utilities for identifying new ways to enable customers to pay their bills through original modes of access and new payment destinations. Although utilities may have been relatively late adopters, it’s an opportunity to learn from those who pioneered in this area (telecom and banking partners, for example – and demonstrate to regulators that payment innovation can be implemented in accordance with nuanced regulations, while showcasing tangible benefits. There is an opportunity to demonstrate that these use cases are ones that rate payers are interested in engaging with; that convenience and choice can be extended for consumers, and that there is benefit to the utility in the form of faster cash movement, faster payment acceptance, and guaranteeing funds, which most real-time networks enable.
Everybody Wins: Less Customer Friction, More Utility Confidence
While many utilities want to offer customers a choice of convenient payment methods, they may also be encouraged to offer new and innovative ways for consumers to pay their bills at a low cost. Real-time payments can enable consumers to make a frictionless payment – from the device or platform of their choosing – at a low cost, and in a way that can be instantly verified by the utility. On top of the other benefits to both sides of real-time payments, that’s a true win for customers and utilities alike.