In recent years utilities have dramatically increased payment channels offered to customers – from automated payments by phone, to kiosks, to 3rd party payment locations at convenience stores, utilities continue to invest in new payment channels. Realistic or not, utilities are forced to compete with payment experiences provided by Fortune 500 companies, who are known for 1-click payment functionality and recurring payment transactions.
In the general payment market, customers are increasingly moving to electronic channels. The 2013 Federal Reserve Payments Study cited an 8.1% increase in credit card payments, a 5.1% increase in automated clearing house transfers (ACH), and a 9.2% decrease in checks. These payment trends are mirrored in the utility industry; an Ascent 2013 benchmarking study reported a 23% decline in paper checks, and a 12% increase in electronic payments. Recognizing that customers increasingly use these payment channels, how can utilities minimize cost while delivering a robust customer experience?
First, utilities should analyze their individual payment channel volumes and trends. This type of analysis can help utilities understand what payment channels their customers use, and which are falling behind. Below is a sample 5-year payment channel volume analysis that West Monroe performed for a large municipal utility:
Second, once utilities understand their payment channel trends, utilities should rationalize their payment channel costs. During this assessment, utilities frequently discover hidden costs, such as salary expenses for live-agent supported payments (e.g. in person payment center, payment by phone), merchant costs, and/or check imaging machinery expenses. Below is a sample 5-year payment channel cost analysis, performed by West Monroe for the same municipal utility, which factors in salary of payment channel support staff, transaction fees (i.e. merchant processing fees, remote capture fees), and equipment/maintenance costs:
The results of this analysis are sometimes startling; of particular note is the high cost per payment of agent-supported channels, such as pay-by-phone and in person service centers. Payment channels that are often scrutinized for fees (i.e. credit cards) are almost always lower-cost than live-agent supported channels.
Once utilities understand their payment channel trends, combined with actual payment channel costs, they can begin to move investments toward low-cost and customer-preferred payment channels. Best-in-class utilities have extensive marketing campaigns for these payment channels, and potentially waive deposit fees for customers who enroll in an automatic, recurring payment transaction (credit card or ACH draft). For utilities, this type of payment channel can reduce cost, while increasing customer satisfaction through a competitive payment experience.