bill pay’s new manifesto - aci worldwide · pdf filebill pay’s new manifesto: ......

Copyright 2014© Crone Consulting LLC – The Next Wave in Payments®

Bill Pay’s New Manifesto:

Omni-Channel Strategy Driving

Interactive Customer Engagement

How the Latest Generation of Electronic Bill Presentment &

Payment (EBPP) Can Improve the Customer Experience While

Increasing Profitability for Banks, Consumer Finance,

Insurance, Government, Utilities, Higher Education and other

Recurring Billing Organizations

Research, market analysis and strategic imperatives developed independently by Crone Consulting LLC for ACI Worldwide and its stakeholders

March 2014

http://www.aciworldwide.com/billpay

Copyright 2014© Crone Consulting LLC – The Next Wave in Payments® of 33

Bill Pay’s New Manifesto: Omni-Channel Strategy Driving Interactive Customer Engagement

Table of Contents

List of Illustrations, Graphs and Tables ......................................................................................................... 3

Executive Summary ....................................................................................................................................... 4

Addressable Market for Recurring Bill Payment ........................................................................................... 5

Recurring Billers the First to Support Omni-Channel Service ....................................................................... 6

Siloed Systems Hindered Customer Adoption of Full EBPP ...................................................................... 8

Not all Funding Sources and Channels are Created Equal ........................................................................ 8

Lose/Lose Scenarios Challenge Customers & Billers .................................................................................... 9

Creating Win/Win Customer Relationships: Satisfying, Rewarding & Efficient .......................................... 11

The Mobile Imperative for Billers ........................................................................................................... 12

Interactive Bill Presentment, Marketed Across Channels ...................................................................... 13

Virtual Collection Agents ........................................................................................................................ 16

The Business Case and Return on Investment ............................................................................................ 16

Deflecting Costs ...................................................................................................................................... 17

Adoption ................................................................................................................................................. 18

Customer Satisfaction ............................................................................................................................. 20

Positioning for Future ............................................................................................................................. 20

Going Beyond the Cost Reduction Benefits of EBPP and Managing Payments as a Line of Business ........ 21

The Future of Payments .............................................................................................................................. 25

Preparing for the Future of Payments ........................................................................................................ 28

Customer Enrollment’s Impact on Company Valuation ......................................................................... 28

If We Don’t Study the Past, We are Doomed to Repeat It ..................................................................... 29

Make, Buy or Partner: Considerations for Upgrading EBPP Systems ........................................................ 30

Conclusion ................................................................................................................................................... 31

About Crone Consulting LLC and ACI Worldwide ....................................................................................... 32

Footnotes .................................................................................................................................................... 33



List of Illustrations, Graphs and Tables

Illustration 1: Major recurring billing segments vs. ancillary smaller recurring billing segments

Illustration 2: Consumer bill payment & remittance channel options increase over time

Illustration 3: Processing options include biller direct (pull payments) vs. bank/portal (push payments) compared to Electronic Bill Presentment & Payment (EBPP) vs. One-Time Payments (OTP)

Illustration 4: Example demonstrating the number of permutations and combinations between payments and channels

Illustration 5: In the electronic payment landscape (ePayer) different users have different preferences

Illustration 6: Migrating from high cost, low touch to low cost, high touch with mobile creates a win/win for both customer and biller

Illustration 7: Driving win/win customer relationships

Illustration 8: Mobilizing the billing cycle

Illustration 9: Billing and payment dominate contact center use

Illustration 10: Convert manual payments at branch office into efficient electronic payments

Illustration 11: Search engine optimization & pay per click advertising deliver ROI through higher enrollment

Illustration 12: Cross channel strategy to drive enrollment, usage

Illustration 13: Example of value of displacing attended customer service representative (CSR) calls with EBPP and CSS

Illustration 14: Increasing electronic payment registration is the first step to increasing Paper Turn-Off (PTO) and reaching the ultimate goal of Electronic Self-Service (eSS) for the entire customer service suite

Illustration 15: Spectrum of opportunity for EBPP

Illustration 16: Example of using the “electronic grace period” to generate revenue based on the value of scheduling payment at the last minute and avoiding late fees

Illustration 17: Results of survey of more than 60 utilities charging service and expedited payment fees

Illustration 18: For many billers, the decision for card acceptance is a decision to not charge (absorb) or charge (nonabsorbed) service fees

Illustration 19: A sophisticated bill payment engine can facilitate direct connections between banks, billers, consumers and retailers, enabling “Any to Any” real-time, low cost clearing

Illustration 20: Growth of Starbucks mobile payments



Executive Summary

Recurring and subscription billing organizations that embrace bill pay’s new manifesto: omni-channel strategy with interactive customer engagement will not only cut costs, but enable new sources of revenue and customer loyalty. Customers & Billers Challenged By Lose/Lose Scenarios Billers traded their early dependency on expensive paper-based or in-person remittances for a dizzying array of new payment types. While this created more electronic options for their customers, it also opened the door for consumer confusion and complexity for managers of bill payment operations. Despite all of the billing and payment options, many customers are left in scenarios that are lose/lose for the customer and the biller. Billers must manage:

Frustrated customers who leave and spout off complaints on social media

Customers waiting on hold for the call center searching for answers

Delinquent customers falling behind in paying their bill

Customers who receive expensive paper bills then wait in line at your office to make a payment

Creating Win/Win Customer Relationships: Satisfying, Rewarding & Efficient There is hope! An omni-channel strategy with interactive customer engagement offers an opportunity for the recurring biller to significantly improve the relationship for customers and themselves. Billers can steer customers to mutually rewarding interactions using fees, rewards and recognition of customer preferences. Technology advances such as mobile, virtual collection agents, interactive bill presentment and integrated marketing within EBPP drive win/win relationships. Billers must determine the idealized end-state and develop a strategy to actively manage customers into this win/win relationship. Are You Positioned for the Future of Payments? The world is becoming increasingly networked, where people expect to be able to make payments to anyone, anywhere with real-time settlement. For example, Faster Payments in the UK has reduced the time of payment processing from days to under four hoursi. The U.S. Federal Reserve has solicited opinions on whether the U.S. should make similar moves.ii Progress will continue towards an end state of billers authorizing and settling funds in real-time within the controls and safety of the existing financial system. These “Any to Any” payments will benefit billers by dramatically reducing the cost and time of bill payment processing while giving billers the opportunity to deepen consumer relationships like never before. Choose the Right Path Choosing the right path requires the objective evaluation of new market forces at work and an updated view of the new role that billing and payment can now play in improving the customer relationship. This report provides the initial foundation for updating your strategy and assessing the return on investment from upgrading to the latest bill payment options.



Addressable Market for Recurring Bill Payment

The value of recurring bill payments initiated by consumers to businesses in the USA has grown to about $1.7 trillion or more annually, making it the second largest payment segment behind the approximate $6.2 trillion spent at the physical retail point of sale (POS) each year.

Approximately 20 billion individual bills and corresponding payments are processed across numerous recurring billing segments in the USA, the largest of which include the remittance obligations to financial institutions for credit cards, mortgages, automobile and other lending obligations, accounting for as much as 25% of all recurring bill payments.

Ancillary Smaller Recurring Billing Segments

1. Property Rental

2. Memberships, Clubs & Gyms

3. Newspapers and Subscriptions

4. Equipment Rental

5. Lawn Care/Landscaping

6. Home Security

7. Transportation

8. Parking Garages

9. Exterminator Services

10. Corrections & collections

11. Charities

12. Churches/Synagogues

13. Childcare, Education and Universities

14. Storage Centers

15. Cleaning Services

16. Snow Removal

17. Garbage and Waste

18. Business-to-Business (small regional)

19. Local Gas and Electric Utilities, Water Districts, and Home Heating Oil

20. Other municipal services & local taxes

Illustration 1: Major recurring billing segments vs. ancillary smaller recurring billing segments

Major Recurring Billing Segments

1. Insurance

2. Revolving Cards

3. Electric

4. Telephone

5. Cable

6. Charge Cards

7. Cellular

8. Water

9. Mortgages

10. Other Financial

Services

11. Other Telecom

12. Gas

13. Auto

14. Other

Source: Crone Consulting LLC analysis and categorization.

Historically, recurring billing has been the domain of paper, locked into a batch oriented “billing and receipt” process that for much of the last century contributed most to the growth and primary use of paper checks. The average household in the USA receives and is obligated to pay between 10 to 15 recurring bills per month, from credit cards, loans, and insurance to cable TV, phone, utility bills and more.

Recurring billers as a group were one of the first retail commercial segments to attempt to curb, reduce and outright eliminate the use of paper checks by adopting and promoting the use of automatic direct debit payments from checking accounts using the Automated Clearing House (ACH) network. This payment option remains a low cost form of remittance for recurring billers today and convenient for some consumers. In other parts of the world the automatic direct debit from the checking account, or standing order as it is referred to in Europe, has nearly eliminated paper check remittances in those regions where it has been deployed and adopted. Not the case however in the USA, where even with the advent of Electronic Bill



Presentment & Payment (EBPP) offered directly by billers and indirectly through online banking, a sizeable portion of payments and an even greater proportion of statements begin and end their life with paper. This paper dependency, though eroding since the advent of EBPP, has not declined as fast as the use of paper checks in other payment venues where debit cards have replaced checks as the preferred access method to checking accounts at the physical point of sale (POS). In fact, in some physical retail POS segments paper check payments account for less than 5% of all transactions compared to 25% or more for most recurring billers.

The growth of EBPP in some recurring billing segments and best-in-class billers now accounts for more than 50% of their payments, and has made its mark on the United States Postal Service (USPS), where the decrease in paper statements and check payments, the single largest use of first class mail, has contributed most to the decline in its volume and revenue.

Recurring Billers the First to Support Omni-Channel Service

Few, if any recurring billers have ever decommissioned a payment type. The number of options has only increased consumer choice and biller support requirements over time.

Illustration 2: Consumer bill payment & remittance channel options increase over time

• Checks

• Cash

• Checks

• Cash

• Credit Card

• ACH*, Debit & Credit Card Automatic Payments

• Online Bill Payment (3rd

Party & Banks)

• Biller Direct EBPP**

Consumer Bill Payment & Remittance Channel Options

Time

Source: Crone Consulting LLC analysis, categorization and visualization. *Automated Clearing House **Electronic Bill Presentment & Payment via a biller’s own branded wired desktop Internet or mobile optimized web site or biller branded mobile app.

Payment Vehicle• Checks

• Cash

• Credit Card (Association & Private Label)

• Signature Debit

• PIN Debit (without PIN or Bill Pay)

• Direct Debit (ACH automatic & one-time)

• Alternative Payments (e.g., PayPal)

• Expedited Payment Services (push, pull, mobile, automatic & deferred)

Payment Channels• Mail, Lockbox & Drop Box Processing

• Biller Direct Internet

• Bank and/or Consolidator Internet

• Interactive Voice Response (IVR)

• Branch Offices & 3rd Party Locations

• Mobile via voice, text mobile browser and downloadable applications

All of the channel and payment options can be divided into two broad categories: those where customers register and interact directly with billers (biller direct or pull model) and those where consumers initiate bill payments through financial institutions, Consumer Service Providers (CSPs) and other third bill payment aggregators (consolidator or push model).



Biller-direct EBPP controlled completely by the biller either on

their own Internet Web site, or via email or through mobile channels such as simple message service

(SMS) text, mobile optimized browser or biller branded mobile app

Non-integrated standalone 3rd party BSPs accept card-based &

expedited payments off-line with validated & non-validated batch input charging service fees for

payments via CSR, IVR, Internet, email, text and simple mobilized

optimized web sites

Biller shares statement detail on its own site & cooperates with CSP’s,

BSPs or financial institutions to provide HTML directional pointers, dynamic PDF files and functionality for consumers to retrieve, view and

pay their bills online

Biller shares statically rendered, non-alterable PDF files of statements combined with

automated posting data such as amount due, etc. to facilitate

electronic payments through CSPs, BSPs and financial institutions

Active/Enrolled Passive/Non-Enrolled“P

ull

” P

aym

en

t“P

ush

” P

aym

en

t


Recurring Payments One-Time Payments

Bil

ler

Dir

ec

tB

an

k o

r P

ort

al

Illustration 3: Processing options include biller direct (pull payments) vs. bank/portal (push payments) compared to Electronic Bill Presentment & Payment (EBPP) vs. One-Time Payments (OTP)

As with billers’ original entry into the electronic payments market with ACH-based automated direct debits, the addition of all these options and disparate siloed processing relationships, pursued for the sake of greater consumer choice, convenience and omni-channel support, have exacted a heavy toll on those managing bill payment operations inside recurring billers. Most of these new channel/payment combinations typically required the establishment of separate processing, accounts receivable (AR) posting, settlement and transaction reconcilement processes working in parallel with legacy paper-based in-house and/or outsourced operations. In addition to remittance operations, new options many times required the separate integration with Enterprise Resource Planning (ERP) core accounting systems by outsourced third party processors, further complicating operations and backend processes.

The extension of both new channel and payment options has created a bewildering number of permutations and combinations that must be integrated, managed and optimized in order to reduce costs and achieve the ultimate promise of EBPP. Recurring billers and their corresponding service providers invented what retailers refer to now as “omni-channel support,” the goal of supporting any customer, anytime, anywhere, through any channel.



Funding Sources

Cash

Money Order

Paper Check

One-Time Electronic payments:

ACH

PIN-less Debit

Signature Debit

Credit Card

Recurring Electronic payments:

ACH

PIN-less Debit

Signature Debit

Credit Card

Mobile and Alternative payments:

PayPal

Google Wallet, ISIS, MCX, etc.

Others

Channels

In-Person payments:

Local Office

Third-Party Agent

Kiosk / Pay Station

Mail (U.S. Postal Service)

Phone (mobile or land line) payments:

CSR-Attended

Voice Response Unit

Internet payments:

Bank Bill Pay

Third-Party Provider

Biller Direct Web Site

E-Mail payments

Mobile Phone payments:

Text Messaging (SMS)

Optimized for Mobile Browser

Client-Side Applications

Source: Illustrative example provided by Crone Consulting, LLC.

Illustration 4: Example demonstrating the number of permutations and combinations between payments and channels

Siloed Systems Hindered Customer Adoption of Full EBPP The complexity of accommodating all these different funding sources and remittance channels has created challenges in backend processing support, complexity and overhead. Billers are pursuing ways to consolidate the disparate operations of the past. For example, recurring billers choosing to accept one-time credit and debit card payments by charging service fees (known as the non-absorbed pricing model), typically offered their services on a standalone, non-integrated, outsourced basis through Interactive Voice Response (IVR) units, attended Customer Service Representatives (CSRs) or very simple One-Time Payment Internet web sites. One-Time Payment providers typically did not share registered payment credentials nor encourage ongoing enrollment in the more extensive EBPP offering, thereby wasting the payment registration already completed by the consumer, a critical starting point for gaining a commitment to full EBPP and paper turn-off (PTO) of statements. Not all Funding Sources and Channels are Created Equal For many customers and billers ACH and/or debit card payments are a win/win funding source depending on their strategy and type of debit card. The cost of payment settlement is significantly lower for ACH than all payment cards and debit cards settle at a lower cost than credit cards. The lower settlement cost of ACH makes driving customers to mobile & web enrolled ACH payments a crucial strategy for billers. Offering card payments often makes sense due to customer preferences, satisfaction, regulatory, and competitive concerns. Cards are customers’ preferred funding source for bill payment according to Mercator Advisory Groupiii. In fact customers prefer cards 8 to 1 vs. ACH due to ease and security, according to a Federal Reserve studyiv. In some cases the US Federal Government requires accepting cards, such as its requirement for healthcare insurers to accept all general-purpose pre-paid debit cards. vIn



most industries, accepting payment cards is common and not doing so could even cause customers to leave to find another provider.

Lose/Lose Scenarios Challenge Customers & Billers

Despite all of the billing and payment options, some customers are left in confusing scenarios that are lose/lose for the customer and the biller. The billing and payment experience is the most common touchpoint that many billers have with their customers. When that experience is frustrating for customers it can strain the relationship and put the biller’s brand and reputation at risk. One size does not fit all customers; an experience that satisfies one customer may frustrate another. Understanding customer preferences is key.

eBills

Late

Delinquent

Current andPast customer

ChoiceEco-friendly

Automatic

Consistent

Last-minute

Choice

Online BankerRefund

Receivers

Challenged

Payers

Smart

Phonatics

Relationship

Builders

Convenience

Seekers

Notification

Early adopter

Values a

low-effort

experience

Regular ePayer

Values relationship

& preferences

Behavior geared to

mobile devices

Values complete

anytime/anywhere

experiences

Experiencing

extenuating

circumstances

Values low-

conflict

experience

Can be any ePayer

Values prompt, accurate service

Source: Crone Consulting LLC adaptation of ACI Worldwide model

Illustration 5: In the electronic payment landscape (ePayer) different users have different preferences

Consumers can be loosely grouped into several preference categories:

1. Convenience Seekers - value a low-effort experience and can be frustrated if they have to create a username and password before making a payment. However, after paying they may be incented to enroll in paperless billing and customer self-service.

2. Relationship Builders - value their preferences being remembered from interaction to interaction and become frustrated when funding sources and payment history are not consistent across channels.



3. Challenged Payers - value low conflict experiences for resolving their late or delinquent

account status. They may become flustered when talking to a collection agent over the

phone.

4. Smartphonatics - expect to be able to manage the entire billing cycle from initial notification, to viewing their bill, paying it, turning off the paper bill and if necessary, a due-date reminder from their smartphone or tablet. Non-mobile optimized options and inconsistent cross-channel experiences frustrate them.

5. Refund Receivers - value accurate and prompt payment to them, and may also be any other ePayer at a certain point in time. Frustration occurs when payments are delayed or the customer service staff cannot provide an up to date status of their payment.

Lose/lose scenarios also arise when customers cannot find the answer to their questions and end up on hold waiting for the contact center, which takes up valuable time not only from the customer, but also the biller. The customer interactions that remain paper-based or attended are a lose/lose because they are more expensive and time consuming, such as a customer receiving a paper bill in the mail and driving to the branch office to make their payment. Most billers are missing the opportunity to drive win/win customer behavior, perhaps not recognizing that not all customer interactions are created equal in terms of customer satisfaction, cost to the biller, and opportunity to deepen relationships. Savvy billers know that the biller-controlled channels that steer customer interactions to less costly, more flexible customer self-service can be much more rewarding, creating win/win customer relationships.

High Touch

High Cost Lose/Lose

Customer• Disloyal

• Frustrated

• Time Consuming

Win/Win Customer

• Loyal

• Deeper Relationship

• Low Cost to Serve

Source: Crone Consulting LLC

Illustration 6: Migrating from high cost, low touch to low cost, high touch with mobile creates a win/win for both customer and biller



Creating Win/Win Customer Relationships: Satisfying, Rewarding & Efficient

Omni-channel experiences with interactive customer engagement offer an opportunity for the recurring biller to significantly improve the relationship for customers and billers, a win/win. Technology advances with virtual collection agents, interactive bill presentment and integrated marketing seamlessly integrated into electronic bill presentment and payment drive these win/win relationships. Billers must determine the idealized end-state for their customers and develop a strategy to actively manage customers into this win/win relationship. One size does not fit all customers; billers must meet their customers where they want to be met with billing and payment options tailored to each of the five customer preferences outlined in the ePayer Landscape above (Convenience Seekers, Relationship Builders, Smartphonatics, Challenged Payers and Refund Receivers). Depending on their situation, customers may shift their preference type, necessitating billers to not only offer the broadest spectrum of customer choices, but also seamless integration so customers can easily switch when they desire. An average biller may only have 30% of their customers in a win/win relationship, but industry leaders look to the strategies below to drive 50+% of customers into win/win relationships.

Illustration 7: Driving Win/Win Customer Relationships

The Ideal Customer• Loyal

• Deeper Relationship

• Low Cost to Serve Delinquent / Paper Bill

Walk-In / Paper Bill

Call Center / Paper Bill

Check / Paper Bill

Bill Payment

Engine

Virtual Collection Agents

Integrated Marketing

Omni-Channel Integration

Interactive Bill Presentment

Intelligent AlertsOne-time ePay /

Paper Bill

Source: Source: ACI Worldwide presentation at CS Week, Tampa, FL, April 2013.



The Mobile Imperative for Billers

Adults in the USA are now spending more time using the Internet on their smartphones than on wired, desktop computers, according to The Nielsen Company. This has led to exponential growth experienced by financial institutions (FIs) for mobile banking, which is growing up to five times faster than Internet banking. In a few short years there will be more bank related service interactions through mobile banking apps than through all other channels combined: the wired desktop Internet, ATMs, CSRs, IVRs and most certainly the physical branches. In the very near future, the Smartphonatics will rule.

An essential feature of mobile banking is access to traditional bill payment functions, originally offered on the wired desktop versions of FIs Internet web sites, which are now optimized for mobile access through smartphones and tablets. For some financial institutions, more than one-third of all the service interactions conducted through their mobile banking apps are for bill payment functions.

As with online banking and Internet Bill Presentment & Payment before it, financial institutions and third party intermediaries have launched mobile bill payment features in advance of recurring billers. In a world where “the one who enrolls is the one who controls,” being a fast follower is not good enough to maintain billers’ advantageous position of driving win/win customer behavior that deepens relationships and lowers cost to serve.

Much of the growth in biller-direct is driven by Millennials, who don’t enter the bill payment market with 12-15 bills. Millenials are more inclined to visit the individual biller web (and ideally mobile optimized) sites and apps of the few service providers they rely upon. The growth of the Millennial demographic, more than 77 million folks ages 18 to 30 years old and the single largest segment in the US economy today, and their preference for mobile AND everything electronic, including payments and online services signifies a new opportunity for billers to once again optimize enrollment towards their preferred, low cost and loyalty building tenders and channels in advance of third party intermediaries with mobile.

Source: Crone Consulting LLC adoption of ACI Worldwide presentation “Maximizing the Success of Mobile Billing & Payment,” March, 2014.

Illustration 8: Mobilizing the billing cycle

View

Pay

Confirm

Suppress

Remind

Notify

2

31

46

5



The most effective strategy for recurring billers to thrive in an omni-channel age is to enroll customers for EBPP in their own mobile experience, as a cornerstone feature of the overall Customer Self-Service (CSS) functionality provided to customers. In this way recurring billers really need to think like retailers, using the mobile experience as an extension of the entire servicing relationship. The first step is to mobilize the entire billing cycle driving customer satisfaction and low-cost behavior. To meet customer demands and increase paper bill turn-off, billers can enable customers to receive notifications, view the full bill, pay it, turn off the paper bill and even receive a due-date reminder if necessary, all from the convenience and privacy of their mobile device. Billers that doubt the movement to mobile need look no further than measuring the current connections to their own Internet web sites by mobile devices and tablets. In our consulting engagement experience it is typically no less than 20% for non-mobile optimized Internet web sites and double that or more for those that have carefully streamlined their connections for mobile devices and are offering their own branded mobile app. Billers that enroll customers in mobile bill presentment and payment will set the stage for creating new revenue opportunities discussed in the Future of Payments section below. Interactive Bill Presentment, Marketed Across Channels

When customers cannot find the answer to their questions on their paper or static print definition file (PDF) bills and end up on hold waiting for the contact center, everyone loses. Customers become frustrated when they cannot access information themselves and must wait for an agent; billers have to maintain high attended staffing levels. In every major recurring billing segment the single largest use case driving an attended agent-based (and more costly) service interaction in the contact center is billing and payment related inquiries.

Illustration 9: Billing and payment dominate contact center use

Percent of Calls to Contact Centers

Healthcare

Wireless Telco

Basic

Info

Claims Status, Coverage Questions,

New Replacement Cards & Payments

Marketing &

Promotions

Other

Rate Plan,

Acct. Info.,

Billing &

Payment

Utilities

High Bills

/ SONP

Provisioning

Billing

Payments

High Bills

72%

OtherEquipment

6%24%

16%

26%

Payments

Provisioning

BillingQuestion About Bill

Promise to Pay

Cable TV

22%

12%3%3%

60%

Issue Bill Credit

Dispute No Credit

Payment on Account

40%

28%

15%

85%

17% 55%

12%

16%

Credit Cards

Marketing &

Promotions

Other

Balance,

Payment

Statement

Questions

6%

16%

79%

Large Telco

41%

59%

All

Other

Billing

Balance Due

& Statement

Questions

Source: Crone Consulting LLC Best Practices Benchmark Database™ illustrative example, no public disclosure.



To address this, billers should provide automated information exchange with their customers, or interactive customer engagement, using Interactive PDF bill presentment, for example. Maximizing the benefit of this approach, with attended call deflection cost reduction, can be achieved through:

Interactive PDFs that take familiar customer-facing documents and convert them into intuitive full-color, electronic documents, rich with customizable, interactive content and fully tailored to the unique profile of each individual customer

Embedded response buttons for the top use cases that generate calls to the contact center

Hyperlinks to CSS links and scripts

Embedded videos with audio to further address frequently asked questions (FAQs) and the top use cases driving customer service inquiries at the contact center

Tracking customer activity and collecting relevant data

Long lines at the branch of customers coming to make a payment drain valuable time from customers and billers. Promoting convenient mobile and web options for receiving and paying bills can mitigate the cost associated with walk-in payments. Lee County Electric Cooperative is saving $3 million per year by shutting down their branch offices and migrating those customers to pay via mobile, web, IVR and authorized payment stations. In the process, customer satisfaction increased 10%vi.

Leveraging integrated marketing campaigns is a key component for success in driving interactive customer engagement. Combining consistent and compelling messages across channels can measurably change customer behavior. For example, handing out business cards to customers waiting in line to make a payment at the branch office with the information on how they could pay using their smartphone or online provides a convenient alternative for customers which can expedite payments and minimize office traffic.

Illustration 10: Convert manual payments at branch office into efficient electronic payments

Source: ACI Worldwide; card distributed to customers waiting in line to pay at City of Philadelphia government office



Search engine optimization and pay per click advertising have a proven positive return on investment for driving customers to low-cost methods of payment. Imagine a customer searching for how to make a payment and discovering they do not have to drive over to the branch office to pay their bill, instead they can view and pay their bill electronically.

Illustration 11: Search engine optimization & pay per click advertising deliver ROI through higher enrollment

Source: Google search

The call center channel must also be leveraged to sign up customers for recurring electronic payments and electronic bill presentment. Regularly reinforcing this to front-line contact center staff has proven to be effective in driving above average rates of paper bill turn-off.

Illustration 12: Cross channel strategy to drive enrollment, usage

Source: ACI Worldwide

Broadscale Awareness

Customer Communication

Digital Platforms

All Screens & Apps

Mobile, SMS Text, Social Media, vChat

TargetedChannels

Customer Preferences



Virtual Collection Agents Challenged Payers are not addressed by most web payment sites today, but integrated bill payment engines can be used to extend customer self-service capabilities post due date, with a virtual collection agent. This addresses the lose/lose scenario of customers being late in paying their bills. Virtual collection agents can emulate the intelligence and best-in-class techniques of a skilled collection agent. Post-due date collection capabilities combined with EBPP and CSS services allow consumers to apply for and receive special repayment offers that are privately tailored to their particular situation any time of day via an online or mobile connection. When combined with expedited payment features before and on the due date, the recurring biller encircles the customer with CSS options to ensure they keep their accounts in good standing and the biller can serve them profitably. Large credit card issuers have proven that virtual collection agents reduce charge-offs by 10%, while consumer research from FiSite shows that customers prefer the web to a live agent four to onevii. A win/win for billers and customers.

The Business Case and Return on Investment

The business case and ROI for upgrading legacy biller direct options with new service offerings today centers on the following:

Deflecting costs - Deflecting in-person, attended and/or manual service interactions at contact centers, branch offices and the like by tightly integrating EBPP into the overall Customer Self-Service (CSS) proposition

Adoption - Improving functionality to increase the opt-in registration, adoption and active use of preferred electronic payments and fully interactive electronic statements integrated with other common CSS functions

Customer satisfaction & loyalty- convenient billing & payment options that are consistent across all channels not only increase customer satisfaction but increase longevity and loyalty

Positioning for future – online, real-time any to any payments will deepen consumer relationships while dramatically lowering the cost and time of payment processing

Consolidating – simplifying backend processing, integrating disparate platforms and consolidating supplier relationships

Active management - Using centralized and consolidated dashboard reporting and monitoring to actively manage the payments mix toward lower cost funding sources and channel interactions

The business case will vary based on the individual biller’s strategy to drive win/win customer behavior. Some examples include:

Consumer finance company integrates disparate platforms, increases customer enrollment in EBPP, satisfies more customers leading to repeat loan customers



Insurance company simplifies backend processing, migrates manual service interactions to EBPP and prepares to deepen relationships with any to any payments

Utility focuses on increasing paperless billing and customer satisfaction

Government focuses on annual tax payment efficiency, reducing foot traffic in their office and managing their payment mix to lower cost options

Higher Education institution driven to meet student demands for convenience and consistency

Deflecting Costs The typical EBPP ROI looks at the outbound statement rendering savings and the inbound benefits of converting more paper based operations and payments to electronic. As we have clearly demonstrated above, not all electronic presentment channels and payments are created equal. Those that are under the direct control of the biller, where the customer enrolls and registers payment authorization with the biller and has dynamic access to other CSS features integrated into the statement review and payment process, are the least expensive. Those controlled by others with a static view of the billing obligation and no single sign-on pathway to the biller’s own CSS functions are more expensive, with more overhead and costly infrastructure to maintain and a degraded customer experience. Outbound electronic bill presentment, until now, has generally consisted of distributing a static PDF file of the bill through a third party CSP, financial institution or some other third party aggregator. The benefit of PDF bill presentment was its lower cost than delivering paper bills. The drawback of static bill distribution is that there is no value-added interactivity embedded in the electronic statement. One of the primary ROI drivers of EBPP is not just to electrify the paper statement and the remittance but to displace attended service interactions such as calls to the contact center, preventing lose/lose interactions. Rendering a fully interactive online statement or dynamic PDF bill with embedded Hypertext Markup Language (HTML) links to the most frequented CSS features is the number one priority for upgrading EBPP. Scripting and integrating customer self-service (CSS) functions that address the top contact center use cases yield the biggest ROI, not only in terms of greater adoption and active use of full-service EBPP (not just One-Time Payments) but also in deflecting or eliminating expensive attended, agent-based service interactions. This creates a truly win/win customer relationship that is less time consuming and costly for both the customer and the biller.



Illustration 13: Example of value of displacing attended customer service representative (CSR) calls with EBPP and CSS

In aggregate, billing and payment-related calls represent approximately 50% to 80% of total CSR calls

Balance inquiry and payment requests are not only the most common call, but are also one of the easiest requests to fulfill through mobile, web and Interactive Voice Response (IVR) systems

0.01% $1,216,800

5.0%

10.0% $12,168,000

15.0% $18,252,000

20.0% $24,336,000

30.0% $36,504,000

40.0% $48,672,000

% Calls Deflected: Potential Cost Savings:

1) Balance Due

2) Dispute Specific Charge

3) Unbilled Charges

4) Payment Due Date

5) Billed Charges

Top Five Calls To Contact Center

Potential CSR Savings

36 million calls/year, average cost $3.38/call

$6,084,000

Source: Crone Consulting LLC Best Practices Benchmark Database™ illustrative example, no public disclosure.

Omni-channel support and other market forces dictate that billers support all the available payment types and channels. The statement, whether in paper, PDF, HTML, etc. is a channel. Billers that recognize not all channels and payment types are created equal and manage the mix of options as a portfolio, know that a slight movement in favor of the lower cost, higher loyalty and CSS-driven connections to the biller directly can yield significant cost savings and upside revenue opportunities. Interactive PDF files give billers a significant advantage for motivating consumers to enroll for Paper Turn-Off (PTO) directly in their own Internet and mobile controlled venues. Adoption To maximize the ROI of upgrading EBPP, billers need to have a clear vision to the ultimate goal of tightly integrating the billing and remittance function not just for PTO but also as the cornerstone for full Electronic Self-Service (eSS) with their customer base across the entire servicing spectrum. There are several interrelated steps that hold up the foundation for achieving that goal.



Illustration 14: Increasing electronic payment registration is the first step to increasing Paper Turn-Off (PTO) and reaching the ultimate goal of Electronic Self-Service (eSS) for the entire customer service suite

Electronic Self-Service (eSS/CSS)

Driven first by electronic payment and supported by electronic invoicing & billing (Interactive invoices & bills vs. Static PDF)

Customer Service Representative (CSR) scripts translated to eSS for Web and Mobile

Return on Investment (ROI) & increased customer satisfaction driven by empowering clients to serve themselves faster and more flexibly even beyond billing & payment; eliminating an attended call to a CSR at the Contact Center

Paper Turn-off (PTO) preferred but not required in order to make Electronic Self-Service possible through Interactive Statements

Interactive PDF preferred over PDF static presentation to facilitate CSS and dispute resolution

Electronic Invoicing & Billing

Electronic Payment Enrollment

“The One Who Enrolls Is The One Who Controls”

Biller Direct favored over 3rd Parties and Banks

ACH is lowest cost remittance option

10x to 20x savings, not available

through 3rd

parties

2x to 5x savings over

paper and 3rd

parties

2x to 5xsavings over

paper and 3rd

parties Direct Payment (Automatic Debit) Best

Source: Crone Consulting LLC analysis, categorization and visualization. Crone Consulting LLC Best Practices Benchmark Database™ illustrative example of typical savings, no public disclosure.

For many billers, the first step to maximizing the ROI starts by prioritizing the biller direct registration of recurring payments. For regulated utilities that cannot absorb the cost of card payments, making ACH more attractive through simplifying enrollment; using a tokenized approach that protects customer account information; and promoting this “no cost” alternative in contrast to levying service fees for higher cost card-based payments is the starting point for managing the payments mix in favor of lower cost tenders. Billers in other industries like consumer finance, may elect to accept one-time card payments using the absorbed model. This can be the foundation of enrolling customers with a registered payment type for customer self-service and PTO. The second step is driving more value into PTO adoption by first extending the availability of online statements to match the records retention requirements of the Internal Revenue Service (IRS), namely at least seven (7) years. Additionally, graduating from One-Time Pay and/or static PDF renderings of statements to fully interactive and dynamic online statements assures customers that their billing history is safe and accessible whenever and wherever they may need it. Providing an enduring, accessible and useful representation of current and past billing activity contributes more to the ROI than the obvious cost reductions that come with reduced attended calls and increased PTO. Empowering customers to serve themselves faster and better, whenever and wherever they wish, boosts customer satisfaction, loyalty, and inclination to expand the relationship through new products and services that can be activated as a part of the EBPP service interaction.



Customer Satisfaction Billing and payment is a key driver of customer satisfaction, number one of “three key factors of the new-vehicle financing experience: billing and payment process; website; and phone contact,” wrote Mike Buckingham, senior director of the automotive finance practice at J.D. Power. viiiThis has been proven to hold true across industries. Customers who set up recurring payments and view their bills electronically are more satisfied according to J.D. Power customer research.ix Even better, there is a relationship between higher levels of overall satisfaction and future purchase intent, with 95% of highly satisfied automotive financing customers indicating they are likely to choose their lender againx. Positioning for Future Billers must begin positioning themselves today for future any to any payments that will deepen consumer relationships while dramatically lowering the cost and time of payment processing. The imperative for today is to align with an EBPP system prepared to deliver real-time payment settlement in all channels, thus avoiding having to switch out systems in the future.

Consolidation and Simplification By choosing to upgrade their bill payment engine, billers can now streamline disparate standalone operations and multiple competing vendor relationships by replacing numerous non-integrated siloed systems for different bill payment and presentment channels, payment types and business units with one integrated bill payment platform. In doing so billers would expect to derive cost savings from:

Simplified system configuration requirements where the updating business rules occur on one single platform but are activated across all payment types and channels

One set of interfaces to Merchant Acquirer Processors (MAPs) and ACH networks, not multiple setting the stage for increased efficiency and least cost routing and settlement options

One call center agent interface for responding to customer inquiries not multiple, creating efficiency, continuity and better service

One administrative interface and one posting file each day for all electronic payments, not multiple, creating efficiency in reconciliation and exception management

Only hosting electronic billing files in one place, not multiple, reducing complexity and reducing storage and rendering costs

Replacing multiple regular system integration cycles with one single integration

Higher consumer adoption of EBPP due to seamless cross-channel experiences and greater functionality and capabilities with features such as the same username, password, payment history, funding accounts, electronic statement and CSS user experience



Going Beyond the Cost Reduction Benefits of EBPP and Managing Payments as a

Line of Business

The benefits of managing the payments mix as a portfolio of options goes far beyond the cost reduction opportunities. The opportunity in upgrading EBPP is to extend a new feature set that not only reduces the cost of processing but enables EBPP functionality used across the spectrum to deepen the customer relationship and build loyalty with new features, functions and product opportunities that contribute to revenue growth as a line of business itself.

CustomerService &

Relationship Building

Opportunities

ReducingCost of Doing

Business

CreatingNew Lines of

Business With RevenueContribution

What are the goals for expanding the number of customer self-service and electronic payment options?

Optimization InnovationExpansion


Illustration 15: Spectrum of opportunity for EBPP

Consider the following examples illustrating the upside across this spectrum with a portfolio of options.

Developing new sources of revenue from actionable offers and advertising from complementary businesses

Signing customers up for additional services leveraging the monthly bill for customer engagement

Recognizing the value of expedited payments by charging a fee for speed

Using service fees to optimize the use of more expensive card-based payments

Let’s look first at the immediate opportunity in expedited payments and service fees.

Recognizing the value of expedited payments by charging a fee for speed



An expedited payment is a special remittance authorization initiated in order to post before the due date and quite often to avoid a late charge in exchange for a service fee. The rush payment is typically guaranteed to post in real-time or near real-time with acknowledged receipt by the bank and/or the biller. Bill payment engines can assure the customer receives confirmation that the bill has been paid and thus avoids late fees, credit flags, service interruptions, cancellations and the like. Over the years, and especially during the recent economic crisis, consumers have been inching closer to the due date and paying their bills at the last minute. Longitudinal studies for some time have validated that there is a fairly constant segment of the population that are habitual users of expedited payments, willing to pay a fee for speed to have their payment posted at the last minute in order to avoid the customary late fees imposed by recurring billers for missing the due date. Billers have responded to this consumer payment preference and have increased customer satisfaction ratings by providing expedited payment services. The fee for speed business model is one that we are all familiar with in the various pricing options for mail and package delivery services, where a higher cost is incurred for faster delivery, as in the case of FedEx, United States Postal Service, UPS and the like. This same model can be applied to a recurring biller’s remittance timeline.

Illustration 16: Example of using the “electronic grace period” to generate revenue based on the value of scheduling payment at the last minute and avoiding late fees

Reactive: Penalizes Customers

Payment Due Date

Traditional Paper-BasedGrace Period

Electronic Grace Period*Made possible with electronic payment through a CSR, IVR, Web, or Agent with special A/R posting and settlement risk management

FreePeriod

2 DayFee$5.95

1 DayFee$10.95

0 DayFee$15.95

Customer Segment characterized as 11th hour “Panic Payers”

Late Fee Terminationfor Non-Payment

ReinstatementPeriod

Proactive: Empowers Clients

Source: Crone Consulting LLC analysis, categorization and visualization. Crone Consulting LLC Best Practices Benchmark Database™ illustrative example of typical savings, no public disclosure.

If 3% of a total bill pay customer base of 2 million used the service across the three fee tiers it would yield over $6.3 million in gross revenue (.5% @ $15.95, .75% @ $10.95, 1.75% @ $5.95)

Anchoring this EBPP and CSS capability must be a sound pricing strategy that acknowledges the primary purpose motivating consumers to initiate an expedited payment, namely as a cash management tool for avoiding late fees and service interruptions. What we have found in our consulting work is that the expedited payment fee generally hovers somewhere around 25% of the late fee. As late fees vary by industry, so do expedited payment fees, as high as $40 for some mortgage payments and as low as $2 at some utilities.



Illustration 17: Results of survey of more than 60 utilities charging service and expedited payment fees

Source: Crone Consulting LLC primary research from publically available sources. Sample set of more than 60 recurring billers.

Price Elasticity of Demand for Service Fee/Expedited Payments

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6.00%

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$0.95 $1.95 $2.95 $3.95 $4.95 $5.95 $6.95 $7.95

Service Fee Charged

Ad

op

tio

n R

ate

(%

of

pa

ym

en

ts)

When priced in this manner, the demand for these fees is relatively inelastic, as determined by a survey of more than 60 utilities charging a service fee conducted by Crone Consulting LLC. Javelin Strategy & Research reported in 2009 that 30% of consumers made an expedited payment in the prior 12 months and 32% of those indicated at least monthly usage – and the total annual revenue for Expedited Payments at the time was well over $1 billion annually. xiUpgrading bill payment engines for this pricing strategy for expedited payments is one of the ways to fully leverage the revenue generating opportunities of managing your payments portfolio as a “line of business.” Using service fees to optimize the use of card-based payments Card-based payments, especially credit card payments, have interchange fees that are much higher than the cost to clear ACH or even paper check payments. The full customer relationship must be taken into account when deciding whether to accept cards or not and if a fee should be charged to the customer. Card payments can incent customers to use low-cost customer self-service and also prevent the risk of rejected ACH payments in a due-date or collections scenario. Some recurring billers in regulated markets such as utilities are prohibited from absorbing or charging these fees and thus from accepting credit cards outright. The reason for this is many public utility commissions and regulating bodies don’t believe it is fair to burden the entire rate base with the cost of payment card interchange for the privileged consumers seeking to gain personally from incentives and rewards given by issuers for card payments. This acceptance limitation created an industry by which third parties could charge a fee directly to the consumer for the service of using their payment cards, and then in turn remit back to the billers.



Other billers that did not have such restrictions used the service fee model to manage the payments mix and encourage the use of lower cost tenders through preferred automated channels such as IVRs, Internet and mobile. In some cases, payment processors are willing to provide the addition of IVR, CSR, Internet and mobile payment services for free to recurring billers in exchange for being able to charge the consumer directly a service fee. For this reason, for many billers the decision for card acceptance is narrowed down to two fundamental options: fully accept and absorb the higher cost of card-based payment to meet customer payment preferences or as an incentive to use EBPP, CSS and PTO versus conditionally accepting by outsourcing to third party processors and/or charging service fees.

Illustration 18: For many billers, the decision for card acceptance is a decision to not charge (absorb) or charge (nonabsorbed) service fees

FullyAccept Cards

Conditionally Accept Cards

No Fee = Absorbed Costs, Higher CSS/PTO

Fee = Non-AbsorbedNew Revenue

vs.

vs.

No fee; adoption may be as high as 30% With a fee; adoption may range from 5-10%

1) Absorb the Costs or 2) Charge Convenience Fees

All of these processing options are in response to the growing consumer demand for card-

based bill payments created by incentives from payment card issuers. Payment card issuers

spend approximately $25 billion annually for usage points and rewards, many boosting the

incentives for use by consumers for recurring and subscription billing. According to Aite Group,

LLC “…nearly half of all consumers belong to a financial services rewards program, with 70% of

all credit cardholders owning at least one rewards-based card…” xiiThis has created a uniquely

profiled group we call Points Mongers. Here is a summary of the major groups that prefer card-

based bill payments:

Points Mongers - Consumers who insist on using credit and debit cards for bill payments in order to accumulate rewards points which they can redeem for travel or merchandise

Panic Payers - Consumers who use credit and debit cards for bill payments to make just-in-time payments on, near, or even after their bill is due using automated channels that do not have access or knowledge of their demand deposit account (DDA) and routing and transit numbers of their checking accounts in order to initiate an ACH payment



Card Convenience Customers - Consumers who utilize credit and debit cards for bill payment because they prefer the functionality of a payment card (e.g., ease of use, ability to “float” or carry a revolving balance) or the channel through which it is offered such as IVR, Internet or mobile

Unbanked - consumers using prepaid debit cards. The unbanked represented 1 in 12 households in the U.S. according to the FDICxiii.

It is here through a combination of service fees and third party payment processing relationships that billers can extend acceptance of card-based payments in a cost neutral or profitable basis and still encourage lower cost tenders and payment channels. Billers looking to increase enrollment in customer self-service may choose to absorb card interchange fees and use cards as an incentive to bring more customers to view their bill electronically for PTO and increase engagement with CSS across the entire servicing spectrum before, during and after EBPP.

The Future of Payments

Toll roads increase the cost and delays of cars traveling down the road. Similarly, existing card payment networks exact tolls on recurring billers for the payments traveling on their networks and delay the settlement of those funds by several days. The ACH payment network also delays the settlement and leaves the biller wondering if the funds are good or if there will be an exception or return item. The delayed nature of these existing payment networks stifles customer relationships in what is otherwise a real time world, thus limiting customer satisfaction and increasing the cost of processing. Imagine a world in which payments settle instantly, card association fees are eliminated and billers engage customers in real time interactions that deepen the relationship with the billers beyond just billing and payment. Customers would appreciate the lower cost, instant performance, and accompanying real time rewards offered by real time payments and increase CSS. Customers would have the ultimate control over their money and instantly access it to pay others no matter the time or location. Billers would benefit from significantly reduced costs as they are unhinged from the existing toll roads. Real time payments give them more insight and control into what customers buy, which ultimately leads to increased sales and deeper relationships. By storing purchasing data within the servers connected to apps on consumers’ smartphones and other devices, billers can leverage loyalty program rewards and big data generated through their direct connection with consumers’ accounts. They will benefit from a faster receipt of funds, dramatically driving down the time for collection, delinquencies, and the cost of operating capital. The cost savings from eliminating interchange and service fees would be significant. For example a 100% adoption would result in savings of approximately $5 billion for billers. xiv



Illustration 19: A sophisticated bill payment engine can facilitate direct connections between banks, billers, consumers and retailers, enabling “Any to Any” real-time, low cost clearing

Source: ACI Worldwide

Leveraging a “network effect” wherein billers, financial institutions and their customers can exchange information instantaneously, billers will be able to:

Disrupt - Recognize the large percent of card payments that come from a single bank and set up a direct clearing relationship that disintermediates the expensive and slow legacy payment networks

Save - Lower overall costs by securing direct over-the-top (OTT) clearing relationships with partnering banks

Harness Big Data - Collect the big data that will help billers serve customers in a more personalized way, responding to their history, preferences, location and more

Generate New Revenue - Develop new sources of revenue from actionable offers and advertising from sourcing brands and complementary businesses

Steer - Steer remittance choices to the lowest cost/preferred funding sources and channels offering more robust functionality

Unlock New Opportunities - Consummate prepaid sales from traditional advertisements displaying QR codes, such as television, print, outdoor, etc.; enabling prepaid sales without the need for prepaid accounts by scanning an advertisement

Secure - Protect proprietary customer and sales data from financial institutions and others seeking to commandeer the customer relationship



Starbucks gives a glimpse into billers’ future opportunity to cut out costly toll roads, increase customer loyalty, and leverage payments for advertising revenue. Since rolling out mobile payments in 2011, Starbucks has enrolled more than 109 million customers in its mobile payments program, which now accounts for more than 11 percent of total sales. Starbucks has moved more than 25 percent of its sales onto its total prepaid accounts, which saves interchange costs on each transaction. Starbuck has implemented a compelling loyalty program without having to distribute special loyalty cards or issue statements or emails with point balances or updates. And it actually sells advertising space inside its app to complementary businesses—an entirely new revenue stream rumored to generate more than $1 billion in sales annually.

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Mobile Transactions Active App Users

300,000 transactions/

week

700,000 transactions/

week

2,000,000 transactions/

week

App launchJan. 2011


week = 10% of total sales

100kdownloads per week, 14,300 per day, 10mm

active users 5,000,000, transactions/week


week

Illustration 20: Growth of Starbucks mobile payments

Source: Starbucks Corporation press releases; Howard Schultz, president/CEO of Starbucks, quarterly conference call with analysts 2012,

2013 & 2014; CNN.com and at Sanford C. Bernstein Strategic Decisions Conference, May 30, 2013 and Crone Consulting LLC estimates.

More dollar value loaded on

the Starbucks prepaid gift

cards & mobile payment app

than there is in total deposits

in the smallest 1,000 banks,

accounting for 25% of

Starbucks total sales.

What Starbucks has done for itself, leading merchants in the USA, the likes of Wal-Mart, Target, Best Buy are trying to do through a retailer-led consortium known as the Merchant Customer Exchange or MCX. This consortium plans to leverage the enrollment strength of their trusted brands to develop their own mobile payment capability and direct OTT clearing network. A primary goal of the consortium is to challenge the high cost of card-based payments by developing their own network for direct OTT clearing arrangements using their retailer branded, proprietary mobile “wallet”. Billers can join together to create their own “any to any” platform that will enable them to build their brand and lower their costs into their own mobile offers.



Billers have only begun to explore the possibilities offered by integrating bill payment into their overall corporate strategy. Using the big data enabled by customers providing their preferences and user behavior, truly personalized messaging and promotions are possible, both by the recurring biller and by complementary businesses desiring to reach those profiled opt-in users. Electronically engaged customers can gain benefits more valuable than price discounts and instantly share their enthusiasm through social media. Savvy billers are realizing that the bill is a brand asset to cultivate and protect. A bright future awaits those billers laying the foundation now to achieve “any to any” processing capabilities with banks that dramatically reduce time and cost of payments, while enriching the customer relationship.

Preparing for the Future of Payments

There are many strategic issues that must be addressed today in preparing for the future of payments:

Omni-channel - integration must replace the siloed payment systems of the past; to achieve a single integrated bill payment engine that streamlines operations and satisfies customers

Recognize bill payment is more than payment - it will enable the biller to increase its overall franchise value leveraging the bill as a regular touchpoint to expand the relationship

Enroll customers in recurring payments - setting the stage for future products and services; preventing customers from coming under the control of unauthorized third-party intermediaries whose business models are based on customer churn and competitive advertising, not on building the biller’s brand or lowering the cost of service

Customer engagement - Takes steps towards making the billing and payment process more real time and engaging with interactive PDF bill presentment, notifications and integrated marketing

Achieving a network effect - Leverage a bill payment engine that will be able to connect to the payment switches at the world’s largest banks to enable direct clearing of payments that disintermediate the costly and slow legacy payment networks that have yet to adopt to the demands of a mobile connected world

Customer Enrollment’s Impact on Company Valuation The one who enrolls is the one who can drive win/win customer relationships. Building an enrolled base of mobile enabled EBPP users allows billers to optimize the payments mix toward lower cost channels, decrease costs through a greater adoption of PTO, and monetize for themselves the direct, proprietary and branded connection they have with their customers. But the benefits extend beyond the accounts receivable operation.



Pursing a mobile strategy, using mobile EBPP as a cornerstone, can materially impact the valuation of a recurring biller. In the mobile world valuations are predicated upon enrolled active users. Consider just three examples below:

Whatsapp sells to FaceBook for $19 billion: 450 million users, adding a million new users a day and the largest acquisition of a startup in history. Value per user: $42

FaceBook market capitalization of $175 billion with a user base of 1.3 billion. Value per user: $145

Twitter market cap value per user: $128

Recurring billers have a large and regularly accessible user base as well. Customers enrolled in mobile EBPP become accessible anytime, anywhere marketing targets, potentially opening up new lines of business. The guaranteed habitual contact point is the review, authorization and confirmation of the bill payments, an enviable position to be in, one that should not be taken lightly nor simply abdicated to others without serious study. Smart recurring billers recognize that their content is valuable to their customers and others, and that the bill represents their brand. In the case of utilities and others, it may be the customer’s only awareness of their brand. Even regulated utilities and billers in non-competitive markets will be judged and their market valuations impacted by the total number of enrolled users in their mobile CSS and EBPP services, whether or not they further monetize the mobile touchpoint through other chargeable offers. Based on a biller’s priority, customer enrollment likely is the win/win end state, but not necessarily. Some governments consider a customer making annual tax payments with a credit card service fee charged to the customer (at no cost to the government) a win/win proposition. If We Don’t Study the Past, We are Doomed to Repeat It Whatsapp, FaceBook and Twitter demonstrate the benefits of increasing enrolled customers,

but the risk of not enrolling must also be explored. Before the Internet was mainstream, the

entrance of financial institutions into the electronic bill payment market was anything but

electronic. Without coordination with billers, financial institutions’ first deployments of online

bill payment were submitted to billers as a “check & list” payment via one check and a list of

accounts to credit. The result was that billers had to step back in time two decades and process

these particular entries manually, as if Optical Character Recognition (OCR) workstations were

never invented. Many exceptions to the normal automated workflow caused processing

delays, input errors, customer service problems…and finger-pointing all around. Financial

institutions leveraged the monthly bill payment as an opportunity to sell their services to the

customer, rather than enabling the biller to deepen their customer relationship.

So in applying the historical lesson from above, billers should take a proactive stance to secure their direct mobile and Internet communication with their customers.



Make, Buy or Partner: Considerations for Upgrading EBPP Systems

Developing a compelling mobile user interface (UI) is a competency that few recurring billers possess today. Couple this with the fact that this type of talent is in critical short supply, and it is almost impossible to envision a recurring biller developing a best-in-class mobile capability on its own. Additionally, attaining the synergy that comes from consolidating and streamlining the processing of various payment types and supporting numerous bill channels will require a backend processing function or service provider that can rationalize platforms in order to deliver a true omni-channel experience with interactive customer engagement for EBPP. Billers’ ability to focus on serving and empowering customers with the tools they need to maximize their brand promise is essential. Selecting the right bill payment platform and provider is crucial, and a rigorous evaluation should include these top requirements:

Comprehensive - driving interaction of all the different segments of the electronic payments landscape, maximizing consumer convenience and satisfaction

o Convenience Seekers can pay biller directly without enrolling, but have the option to save that payment information to their enrolled profile; and for those paying at financial institution websites, the biller receives a single deposit and posting file for all payments from all institutions

o Relationship Builders can easily enroll from mobile or desktop computer right after making a one-time payment, enabling them to store preferences, view bill, make recurring payments, turn-off the paper bill and configure intelligent notifications

o Smartphonatics can use their mobile phone to receive alerts, view the full bill, securely pay, turn off the paper bill and if necessary receive a due-date reminder

o Challenged Payers can make last minute expedited payments or if they become delinquent, resolve their delinquency in a no hassle website that emulates the interaction of the best collection agent

o Refund Receivers receive prompt and accurate payments and information

Integrated - single integrated system delivers streamlined operations that cut costs and provides consistent consumer experiences. Integration should be across:

o Omni-channel: mobile, web, IVR, contact center, in-person with Application Programming Interface (APIs) for easy legacy system integration and mobile apps

o Integrated marketing: search engine optimization, pay per click advertising, point of sale, PR, social media, newspaper, radio, billing inserts, on hold messaging and events

o Intelligent notifications leveraging customer behavior

o Interactive bill presentment that address the top use case customer queries for CSS

o Payment from any funding source

o Treasury management



Secure – assuring peace of mind, delivering proven:

o Payment Card Industry Data Security Standard (PCI DSS) compliance

o Independent audits of the payment processor using the Statement on Auditing Standards No. 70: Service Organizations (SSAE 16)

o Disaster recovery

o Money Transmitter Licenses required by each state

o Industry specific compliance, such as FERPA, Gramm Leach Bliley Act, HIPAA, etc.

o Encrypted data transmission that does not store financial or personal info on device

o Privacy policy that prevents sharing customer data without biller consent

Positioned for future – preparing for “any to any” payments directly between billers and banks.

o Technology foundation for switching payments directly between billers and banks

o Global client base of largest banks to build connections

Conclusion

Capitalizing on bill pay’s new manifesto – omni-channel support with interactive customer engagement – will enable recurring billers to not just reduce costs but achieve new revenues through deeper customer relationships. A biller who is positioned to accommodate “any to any” payments will dramatically reduce the cost and time of bill payment processing while enabling customers to not just easily pay bills but access all the services they need and expand the relationship as they are ready. To achieve this, organizations will need a bill payment platform that accommodates the desires and preferences their customers demand while leveraging leading technologies such as mobile to drive win-win relationships. The Bill is the Brand, and the One Who Enrolls is the One Who Controls. The bill embodies customer contact, containing proprietary information, data to be used for the biller’s and customer’s strategic advantage, not to empower third parties and competitors. Directing customers to the biller website is a good first step, but if you expect customers to visit you more than once, (your business model is built on this!) then the new heart of your customer relationship will be connecting with customers whenever and wherever they are, through smartphones and tablets. EBPP is the killer app for connecting with your customers through mobile, providing compelling content that guarantees customers will return and interact with you regularly. While billers want to support all channels, none will offer the same immediacy and robust functionality of mobile, with the power to not only reduce costs, but deepen the relationship before, during and after payment.



About Crone Consulting LLC and ACI Worldwide

Crone Consulting LLC is an independent advisory providing objective expertise on ways to maximize Customer Self-Service (CSS), Electronic Bill Presentment and Payment (EBPP) and mobile payments. Crone Consulting LLC has direct, deep and recent experience evaluating designing and deploying CSS, EBPP and mobile payment solutions, both domestic and international. The firm has developed the CSS, EBPP and/or mobile payment strategy for every major category and size of recurring biller, retailer, restaurant, financial institution, core and payment processor, network, wireless carrier, device manufacturer, consortium, trade association and investor. It has led CSS, EBPP and mobile payment strategy sessions for every major trade association to recurring billers, retailers, financial institutions, carriers, networks, consortiums and processors. Crone Consulting LLC’s unique market insight is also born out of its frequent intensive due diligence work for many of the largest M&A deals and tier-one venture-backed investments in the CSS, EBPP and mobile payments space. The Firm’s payments optimization services have achieved 10 – 30% cost reductions through innovative self-service, alternative and mobile payment strategies. To learn more, please visit www.croneconsulting.com.

ACI Worldwide, the Universal Payments company, powers electronic payments and banking for more than 5,000 financial institutions, retailers, billers and processors around the world. ACI software processes $13 trillion in payments and securities transactions for more than 250 of the leading global retailers, and 21 of the world’s 25 largest banks. Through our comprehensive suite of software products and hosted services, we deliver a broad range of solutions for payments processing; card and merchant management; online banking; mobile, branch and voice banking; fraud detection; trade finance; and electronic bill presentment and payment. To learn more about ACI, please visit www.aciworldwide.com/billpay. You can also find us on Twitter @ACI_Worldwide.

http://www.aciworldwide.com/billpay



Footnotes

i SunGard Blog post titled “The move to real time payments,” by Andrew Owens, senior vice president of enterprise payments in SunGard's corporate liquidity business, July 15, 2013 at http://blogs.sungard.com/fs_paymentinsights/swift/the-move-to-real-time-payments/ ii Opening remarks by Sandra Pianalto, President and CEO, Federal Reserve Bank of Cleveland at the Payments Symposium sponsored by the Federal Reserve Bank of Chicago, September 24, 2013. Transcript from presentation titled “In Pursuit of a Better Payments System,” posted at https://www.clevelandfed.org/for_the_public/news_and_media/speeches/2013/pianalto_20130924.cfm iii Mercator Advisory Group Report, Consumers and Debit 2013: A Shift to Alternative Financial Services by Karen Augustine, December, 2013 at http://www.mercatoradvisorygroup.com/Reports/Consumers-and-Debit-2013_-A-Shift-to-Alternative-Payments/ iv Federal Reserve Bank of Boston 2010 Survey of Consumer Payment Choice, Research Data Report No. 13-2 by Kevin Foster, Scott Schuh, and Hanbing Zhang, November, 2013 at http://www.bostonfed.org/economic/rdr/2013/rdr1302.pdf v “Paying for insurance under health care reform,” by Allie Johnson, contributor to CreditCardGuide.com, September 5, 2013, on CreditCardGuide.com at http://www.creditcardguide.com/creditcards/credit-cards-general/payment-options-on-health-insurance-exchanges-up-in-the-air-1365/ vi Lee County Electric Cooperative submission for 2014 ACI Excellence Award for Electronic Bill Presentment and Payment at http://www.aciworldwide.com/awards vii ACI Champion/Challenger results from top 20 US credit card issuers and Virtual Collection Agent named “Most Influential Collection Product for 2008” by Collection Advisor magazine, November 19, 2008 at http://www.businesswire.com/news/home/20081119005741/en/Online-Resources%E2%80%99-Web-Collections-Named-Influential-Product#.UxvFoPldW_E and FiSite Research survey of 1,000 consumers, October 2004 by Paul Jamieson FiSite President, http://www.businesswire.com/news/home/20041014005457/en/Research-Company-Conducts-Online-Survey-Gain-Feedback#.UxvFPPldW_E. viii JD Power & Associates 2013 U.S. Consumer Financing Satisfaction Study press release, November 13, 2013 at http://www.jdpower.com/content/press-release/4N5HW7N/2013-u-s-consumer-financing-satisfaction-study.htm ix JD Power & Associates 2013 U.S. Consumer Financing Satisfaction Study press release, November 13, 2013 at http://www.jdpower.com/content/press-release/4N5HW7N/2013-u-s-consumer-financing-satisfaction-study.htm x JD Power & Associates 2013 U.S. Consumer Financing Satisfaction Study press release, November 13, 2013 at http://www.jdpower.com/content/press-release/4N5HW7N/2013-u-s-consumer-financing-satisfaction-study.htm xi Report titled “2009 Expedited Payments Forecast: Due to Recovering Economy, Reposition Offerings Around Convenience Rather Than Desperation,” by Bruce Cundiff, Director of Payments Research and Consulting and Mary Monahan, Managing Partner and Research, Javelin Strategy & Research, October, 2009. xii Report titled “Financial Services Rewards Programs: The Quest for Profitability,” Ron Shevlin, Senior Analyst, December 16, 2009, http://www.aitegroup.com/report/financial-services-rewards-programs-quest-profitability. xiii “2011 FDIC National Survey of Unbanked and Underbanked Households,” by Susan Burhouse and Yazmin Osaki, Federal Deposit Insurance Corporation (FDIC), September 2012 at https://www.fdic.gov/householdsurvey/2012_unbankedreport.pdf xiv Report titled “2011 FDIC National Survey of Unbanked and Underbanked Households,” lead authors Susan

Burhouse and Yazmin Osaki, September 2012 at http://www.fdic.gov/householdsurvey/

http://www.businesswire.com/news/home/20081119005741/en/Online-Resources%E2%80%99-Web-Collections-Named-Influential-Product#.UxvFoPldW_E

http://www.businesswire.com/news/home/20081119005741/en/Online-Resources%E2%80%99-Web-Collections-Named-Influential-Product#.UxvFoPldW_E

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