Posted by Wayne Brown on 14 Nov 2014
There was a time when the primary means of paying a bill was stuffing a check in an envelope and going to the mailbox. We allowed a number of days before the payment due date and immediately adjusted our checkbook to reflect the disbursement. Although this is still the practice for many, millions have opted out and changed their method of paying bills. The motivation to change behavior is attributed to convenience, saving time and reducing expense.
But remote banking and bill payment have made significant leaps over the years. I recall a time when customer service representatives handed out free floppy disks on the street corners of New York City to anyone who would accept them. Whether they had a computer or not, people grabbed these disks because they were free. Armed with a computer and a modem, people could connect with their bank remotely to obtain information about their account balances and even pay bills. Of course, this would be considered the early days and only a few billers were enabled to receive electronic remittances while the vast majority of payments were sent via check and list or separate checks representing a single payment.
I have been an eye-witness to the vast changes that took place in the electronic banking and bill payment space. The involvement of the Internet and higher modem speeds along with banks offering the service for free had a significant impact to adaption. Banks got involved and provided incentives to their customers to use the product. Comparing “free” with getting stamps and running to the post office is a no brainer. The volume spiked liked a hockey stick as banks found new ways to create stickiness and build customer retention. After all who really wants to change their bank and start setting up new payees somewhere else?
The expansion of electronic delivery channels for the bank customers resulted in larger profits for the bank. Whether they outsourced to a vendor like most or ran the application in-house, they figured out the economics to make money. However, even with all this effort and technological improvements, there remains an opportunity for banks to better manage the customer experience and expectations.
There was a time that a customer that use a remote banking and bill payment product did not know if the payment was sent via paper or through an electronic channel such as the ACH. That is not the case today. The informed customer knows the delivery channel of their payment. However, despite this, banks send a significant amount of payments via individual checks. Imagine that, I am paying a bill through my computer or mobile device and the provider is sending out the payment via a check. How innovative is that?
In my last blog post, I mentioned the recent NACHA Bill Payment and Exception Item Research that indicated the bill payment exception items costs the industry upwards of $800 million dollars annually. Although there are opportunities to enhance the current process and provide innovation, who is taking the lead? The consumer suffers because the payment is still being sent as a check, without the remittance stub someone at the biller location has to handle this as an exception payment. This is a manual process and can take time before the payment is posted.
I enjoy working on puzzles because they challenge my mind. The remote banking bill payment industry is a big puzzle and all the pieces include the names of the banks and the billers that have enhanced their systems to accept electronic payments. But the puzzle is not complete because not all the pieces are available. Who really is concerned about the consumer experience? These pieces are missing.
When banks work to resolve the exception payments on their end, this could reduce their operating costs and perhaps free up funds to make additional enhancements to a system that has been absent of innovation. Furthermore, billers can challenge the industry to innovate as well, since their mutual customer is impacted. However, there are opportunities to innovate and the failure to make these improvements causes consumers to become more cynical, and they begin to wonder about the real value they are getting.
We are stakeholders and have to continue to monitor the industry and applaud the organizations that continue to make a difference for the customer. We continue to hear fascinating news about MCX, Bitcoin, Allipay and the remote banking bill payment Industry exceptions items costs the industry upwards of $800 million dollars a year. Where is the innovation?