The best bill is no bill at all. But if you have to pay bills, you want the process to be clear, quick and easy. Get real time Payment Confirmation would be nice too.
As bill payment technology has become more sophisticated, these are exactly the kinds of features that consumers have come to expect.
BillGO, a fintech aiming to become America’s bill payment platform, confirmed these findings through two national studies it commissioned in 2020 and 2021.
To learn more about this research, PaymentsJournal spoke to Daniel HawtoffSVP of Bill Pay Product at BillGO, and Sarah CaveDirector of Debit and Alternative Products Advisory Services for Mercator Advisory Group.
Introducing Bill Pay
Consumers worry about paying bills and need to know that payments will reach the biller on time. They know that if they don’t pay their bills on time, late fees, penalties and damage to their credit ratings are all very real possibilities.
“According to FICO, if a person misses a single bill, it can trigger up to [a]180 point drop in their credit score,” Hawtof said.
It means that someone who has quite well missing credit only one invoice may end up being labeled as high credit risk. Consumers know this and want to avoid late payments. Banks and fintechs are trying to help their customers make timely payments, but to do that they need to innovate beyond the old bill payment platforms that still play an oversized role in many organizations..
For example, in an ideal bill payment system, the FI could predict consumers’ cash flows based on their account activity.
“It would really help alert the consumer when they might be having a cash flow problem and risk paying a late bill,” Grotta said. “And I think if we can come up with those kinds of solutions, we’re really going to reduce the level of consumer anxiety.”
Adoption of bill payment
Years ago, banks were the main place where consumers went to pay their bills. However, in recent years banks have lost this share of bill paying as consumers have opted to pay billers directly. However, the tide could turn again as around half of consumers now use their bank to pay some of their bills online.
A central problem in paying bills is organizing all the websites and passwords needed to do so. Consumers often need to create spreadsheets at consolidate and forecast their bills.
“According to our research, consolidation is something users really want,” Hawtof said. “And banks have a great opportunity to work with innovative companies to bring all of this information together.”
Grotta agreed, noting that the best modern bill-paying experiences she’s seen in the marketplace are where financial institutions team up in the industry.
Incentives to switch bill payment methods
Inertia is king. Without incentives, most consumers are unlikely to change their bill payment methods.
Microloans could be an incentive to change the bill payment system. Hawtof said this is backed up by research from BillGO. “In our studies, we asked consumers about microloans, and about 20% [said]they would be interested in getting a microloan to help them bridge the gap between payday and bill due dates,” Hawtof said.
Historically, payday loans have filled this gap. But payday loans often charge exorbitant interest rates, have fees, and can sometimes be predatory.
Banks have a relationship of trust with their consumers and could offer microloans to support them. This is a major concern not only due to the current economic situation, but also due to the scrutiny that overdraft and NSF fees are receiving at this time.
“Financial institutions are trying to figure out how to help consumers, but at the same time, also avoid sky-high overdraft fees,” Grotta said. “So I think having a microcredit service kind of intertwined with paying bills makes a lot of sense.”
Indeed, a microloan can offer a better interest rate than a credit card company.
Subscription management, with a subscription manager
Once a customer has registered a credit card for a given website, if anything changes, it’s a headache.
Hawtof explained, “And if you want to use a different map, or if you want you to have to update a map, because lets go say that the expiration date has changed on your credit card. first, you to have to understand, ‘what am I subscribed to? What are all my subscriptions so that I can going to change this credit card?’ And then you to have to log in to each of them and make a change.
There are solutions that help manage all customer subscriptions and send new card information to everything subscription services at the same time.
“Let’s say I want to change my HBO, my Netflix, and my wine.com subscription all at once,” Hawtof said. “Once they give permission to do so, we have credentials to be able to enter and update the credit card on behalf of a consumer, saving them time.”
Grotta noted that Mercator’s research shows not only do consumers want the ability to have their bills paid automatically, but they also want the ability to use debit card, credit card and checks.
“Consumers are looking for the flexibility to handle these payments on their terms with the payment product that meets their needs in this particular instance,” Grotta said.
Additionally, with the advent of real-time and faster payments, consumers now expect more of their payments to be instantaneous, or at least processed within the same day.
According to BillGO studies, over 30% of consumers believe that when they pay a bill, it should be instant. Hawtof noted that this contrasts with public opinion even two years ago. “Fewer consumers really felt instant payments were needed. But with the advent of things like P2P transactions that are done instantly, it is now becomes an expectation.