Next generation e-billing in North America

It is approximately 12 years since the internet and e-mail began its significant impact on our lives. In that time, there is almost no aspect of our daily activities that has not been influenced by this all-pervasive technology shift. In the US today, over 80 percent of all Americans between the ages of 10 and 70 access the internet multiples time a week, the vast majority doing so every day with some (as high as 35 percent) doing so many times a day.

A subgroup of internet and e-mail is electronic billing – the ability for a consumer or business with access to the internet to be able to view and pay their bill or invoice through their personal computer. It’s an emerging trend that is still in its infancy; the majority of consumers, over 95 percent, still receive almost all of their bills in paper form. Although it is becoming more common to pay some bills either through a bank’s billpay service or at the biller’s own website, the primary driver of electronic billing – paper suppression – is still not being realized.

There is a massive and growing awareness of the environmental impact of paper production. For every 38,500 bills produced, one ton of paper is used, two tons of trees are destroyed, 16,450 gallons of water is used, 1941 pounds of solid waste is generated, 60 pounds of air emissions are spewed out and 5058 pounds of greenhouse gases are emitted. Utilities in the USA produce, at a minimum, 14-16 pieces of paper and as many envelopes, per customer per annum. That is 7.5 million pieces of paper per year for a mid-market utility with 500,000 customers – or in green terms, 400 tons of trees.

The industry average for paper turn-off for North American utilities is currently under five percent and is barely growing at all year-on-year. This is a stark contrast against the 80 percent of Americans who have the capability to view and pay their bills electronically. After seven years of trying, it is safe to say that the average utility has failed dismally in their efforts to encourage the customer to turn off their paper bill.

Let’s take a moment to examine why that is. Right now, the consumer does not need to do anything; the paper bill arrives without them having to perform any action. It is the way it has happened all of their lives and there is currently no compelling reason to do it any other way. The electronic billing offerings that are prevalent in this industry all involve the following:

• The utility needs to, and in most cases has, built a self-service website (i.e. a location on the internet where a consumer can go and view and pay their bill). However, the consumer does not know it is there unless expensive marketing is undertaken. Sadly, there is neither incentive nor compelling reason to visit these websites. In all cases, it is quicker and more convenient to write a check and drop it in the USPS mail, even at a 41 cent cost.
• The best websites require a consumer to register, choose and remember (yet another) username and password. They require between 6-14 clicks to view and pay the bill. At very best, it takes 3-8 times as long to do so than writing a check.
• They require consumers to learn different navigation for each biller’s website.
• A copy of the bill is available online, but in every case it is not the first thing that the consumer sees. So the familiarity is lost and the consumer feels that something has been taken away from them. The result? Even if they do pay online, 95 percent still get a paper bill too.

To make matters worse, now that the ‘innovators’ and a portion of the early adopters are paying online, it is becoming progressively more difficult (and increasingly more expensive) for billers to attract their consumers to their self-service portals. From the biller’s perspective, most are now on second or even third-generation websites after three to six years. Thousands of dollars have been spent on building, servicing and supporting these initiatives and the ROI is nowhere in sight.

Our take on this? The model is completely wrong, fatally flawed and will never result in significant paper suppression. Before I give you our view on the next generation of consumer electronic billing, let’s return to basics and review the business drivers behind solutions and strategies to turn off paper bills and convert payment to electronic. There are four main reasons why companies offer electronic bill presentment and payment, both to their consumer and business customers:

• Cost take-out: The biggest impact that electronic bill presentment has on any organization is that of significant, instant and measurable cost reduction. It is volume dependent, however conservative hard cost take out ranges from 60 percent to over 90 percent. These savings are derived from paper suppression and include: printing, insertion, folding, paper, envelopes, and postage. Additional benefits can also be attributed to ‘soft’ savings such as manpower, exception handling and general business process improvements.
• Instant delivery: A fully automated processes involved with delivering your bills electronically, allow for completed delivery within one to three hours of completion of your daily billing run. Thus enabling a customer to receive their bill on average, four working days earlier. Our studies have further shown that +/-75 percent of e-bill recipients will open and read their e-bill within 48 hours if delivered electronically in a convenient manner.
• Quicker recipient response: Unless the document delivered is a statement or some other document type that does not require a response, there are typically two response types: electronic payment and form completion/submission. Receiving payments electronically is a meaningful requirement for all electronic billing initiatives. Whilst almost all the cost savings are gained from the presentment side of the equation, there are many reasons why electronic payment is very desirable. These include dramatically quicker payment activity and reduced days sales outstanding (DSO), total reduction in expensive lockbox exceptions and dramatically improved reoccurring payment adoption. On the other hand, many electronic document delivery projects (policy documents, bank statements, commission statements, etc.) do not require any payment. Technology exists to append pre-populated forms for customer completion and submission with just a single click. This solution is particularly cost-effective in updating customer records and taking manual intervention out of any form completion requirement.
• Improved marketing capability: Inserting marketing material into paper bill envelopes is expensive, extremely challenging and expensive to personalize. Unfortunately, response rates have been declining to a point where they are now negligible. For the majority (65-80 percent) of customers, a biller’s only touch point with them is the monthly bill/statement.

One of the key advantages of an electronic bill delivery solution is the personalized marketing opportunity. Due to the very nature of this billing medium, billers are able to store a range of marketing messages and apply these to the delivered electronic bill in conjunction with a set of predetermined business rules. Thus allowing for the recipient to receive fully personalized, targeted and relevant messages. Furthermore, the e-bill has new, unavoidable marketing ‘real-estate’ that is many more times effective than a bill stuffer. The largest advantage however, is that these marketing opportunities can be harnessed at almost no cost at all.

The future of electronic billing: your inbox

Within the realm of internet-driven technology, the single most pervasive application is that of e-mail. Let’s take a few steps back and think about the time before e-mail. There were four kinds of paper mail: junk mail, business/work-related mail, personal mail and of course, your bills.

These days, in the e-mail era, three of the four mail types have made their way directly into your inbox. The one type that is conspicuously missing are your bills. Now why is that? There is no clear answer that we can come to. We can only guess that it was easier for the biller to try and ‘pull’ you to his website than to electronically deliver you your bill.

However, recent Jupiter Research tells us that the average internet user is spending 96 percent of his online time handling his e-mail (just think about the amount of time you personally spend handling e-mail communication as opposed to visiting websites). Billers now have access to efficient systems and technology that securely deliver your bill, and take payment, directly from within your inbox. The difference from a customer’s perspective is dramatic: two clicks to view and pay your bill.

E-mail has become the ubiquitous business and personal communication medium. Significantly improved anti-spam and antivirus tools are going a long way to ensuring that unwanted and malicious emails are kept out of your inbox. Such advances will and are cleaning up email, thus ensuring that it remains a critical part of everyday life.

Our take on the future of electronic billing: There is no logical or practical reason why your bills are not in your inbox, and it is only a matter of time before they are. Billers are going to combine both ‘push’ and ‘pull’ electronic bill presentment and payment strategies to ensure maximum customer adoption.

Imagine getting all your bills directly into your inbox. Imagine that paying each bill took less than 30 seconds. Now that’s delivering true electronic billing convenience.

The many benefits of e-billing and e-statements are very appealing to billers and financial institutions alike. They key of course is to get maximum customer adoption: Here are some of the lessons that we have learned over the past nine years:

• Sign up all new customers for your e-bill program. Do it automatically and with no action required from the customer.
• Use an e-mail matching service to collect up to 20 percent of your customer’s e-mail addresses at very low cost.
• Initiate an automated welcome e-mail telling the customer what to expect.
• Then just begin delivering the bill electronically. A small percentage will opt-out, but the vast majority will accept it. Adoption therefore becomes equal to the number of email addresses you have.
  
• Offer simple bill presentment via secure email as the first step. It’s not necessary to try and ‘pull’ the customer to your website to achieve successful e-bill presentment.
• Take it one step at a time. Achieve bill presentment and paper truncation first. Then drive payment as the next step.
• Replicate your paper bill into a digital format – familiarity drives acceptance. You can add additional functionality later.
• Replace customer choice username and passwords with a partial ‘shared secret’ between the biller and the customer (for example, partial social security number, account number, pin code.)
• Use opt-out rather than opt-in strategies. Customers expect you to bill them.
• Automatic paper truncation with the ability to revert to the paper option. When your customers are familiar with the e-bill, turn off the paper automatically – you will be surprised how few requests you will get to reinstitute their paper bill (on average, less than three percent).

In order to drive significant e-bill adoption you need to actively strive to make it as easy as possible for your customer to receive and pay their bill electronically. By dramatically reducing what the customer has to ‘do’, your e-bill adoption will soar.