Consumers are steadily moving to electronic payments, drawn by the convenience of being able to pay bills online, as well as a desire to cut down on the amount of paper they use. This shift also can benefit the companies that offer these services.
In 2010, about 50 million households paid a bill through a biller's online service, up from about 15 million just eight years earlier, according to the 2010 Billing Household Survey by Fiserv, Inc. Another 35 million paid their bills through a financial institution's bill payment application, or about three times the number that did so in 2002, also according to the Survey.
A recent study of bill payment practices at Consolidated Edison, Inc. (Con Ed) a provider of electric power to most of the city of New York and some of the surrounding areas shows that companies also can gain when their customers receive their bills and pay electronically.
The company has been offering electronic payment opportunities since the mid-1990s, and electronic billing for about a decade, says George Roach, a systems specialist for electronic billing and payments with the company. However, it became clear about five years ago that e-billing hadn't really taken off, he adds. “We realized that many consumers were not aware of (the capability). While they were paying electronically, they still were getting their bills via the U.S. Post Office.”
Roach and his team set out to change that, and initiated marketing campaigns by placing ads in local papers, on radio shows, through signs at Yankee Stadium and across New York's subway system. Many emphasized the environmental benefits of going paperless, Roach says. “We wanted to make people aware of the advantages of migrating to electronic bills and payment.”
Con Ed also partnered with Fiserv, Inc. to drive e-billing. Fiserv offers outsourced e-billing and payment services, says Eric Leiserson, senior research analyst with the Brookfield, Wisc.-based firm. “The bills are beamed to customers from cloud.” While any implementation will require the calibration of some communication specifications, it's essentially plug-and-play, he adds. As a result, getting going is generally not capital intensive.
These efforts appear to have had an impact. Of Con Ed's approximately 3.2 million customers, more than one million currently pay electronically, either through the company's website, voice-response system, or via a recurring direct payment. Another 500,000 Con Ed customers pay electronically through an online bill consolidator, such as their financial institution or a company like Fiserv; thus, about fifty percent of the company's customers now pay electronically.
That's led to several benefits, Roach says. For starters, e-payers are more likely to pay on time. A recent study of the company's customers, conducted on behalf of Fiserv, found that customers who received e-bills via an online financial site were 22 percent more likely to pay on time than those who received paper bills. Customers who paid via ConEd.com were six percent more likely to pay on time.
The ease of paying electronically probably is behind these numbers, says Leiserson. Customers using e-payment applications often can set up reminders and alerts to let themselves know when a billing date is coming up. And, they don't need to worry about scrounging up a stamp and getting to the mailbox.
What's more, electronic billers are much less likely to call customer service, the study found. Households that receive their electric bills through a financial institution's website were 64 percent less likely to call Con Ed's customer service department than those who continued to get paper bills. Households that paid their bills via Con Ed's website were 39 percent less likely to call customer service.
While these findings focus on just one company, they show that e-billing and payment can lead to clear business benefits. Receiving millions of payments more quickly than they otherwise might boosts Con Ed's cash flow, while the drop in customer service calls means less demand on employees.