research paper 2010 billing household survey: consumer survey

Research Paper

2010 Billing Household Survey: Consumer Survey of Offline and Online Billing and Payment Practices

2010 Billing Household Survey

Research Background

In March of 2010, Fiserv sponsored a national online survey to provide insights on how consumers pay and receive bills from companies that send bills on a recurring basis. This survey complements the 2010 Consumer Billing and Payment Trends Survey released May 2010, which was the tenth in a series of national consumer surveys that have been conducted since 2001.

The 2010 Billing Household Survey was designed to identify insights and emerging trends as they pertain to:

• Usage of billing and payment methods and channels • Why consumers visit company websites from whom

they receive a recurring bill• Understanding expedited or one time “on demand”

payments and card funded bill payments• The impact online billing and payment has on

consumers’ satisfaction and loyalty to billers• Paperless billing penetration rates by channel, vertical

and adoption motivators

The survey, administered by The Marketing Workshop, was completed by 2,001 individuals at least 21 years of age and responsible for paying their household bills. The results are representative of the U.S. online population of households, which denotes approximately 90.5M out of 120M total U.S. households.

For billing organizations, the opportunities to optimize the value of billing and payment with comprehensive cross-channel strategies are clear. Effectively managing billing outputs and payment inputs while guiding customers to preferred channels and mediums delivers lower costs, deeper customer relationships, stronger retention, and, ultimately, a business advantage.

New technologies, new generations of Americans, and other macro-environmental drivers bring about new payment complexities to companies while consumers expect simpler, safer and more convenient options and choices – both off and online.

This research gives key insights into the surprising and compelling primary role billing and payment play between consumer and business and offers new ideas on realizing this untapped potential.

institution consolidated sites grew substantially during the same time while other payment channels stayed roughly the same in terms of volume market share. The fragmentation of payments will continue and new segments will be created as technology ubiquity grows – particularly among younger consumers. Most of this electronic payment growth and innovation will be at the expense of more traditional paper-based payment methods such as checks, which are forecasted to decline 57 percent from nine billion consumer-to-business payments in 2009 to four billion in 2020ii.

Bill Payment Channels and Options Have ProliferatedSubstantially Over the Last Ten Years (Volume)

Another way to look at the evolving bill payment landscape is at the household level. When it comes to online U.S. households using each of the payment methods in a given month, the online channel inclusive of electronic payments made at biller sites and through bank and credit union websites are more popular than paper checks. Additionally, consumers are increasingly using multiple channels to pay monthly bills. For example, 19.3 million use both their online bank bill pay service and visit biller-direct sites on a monthly basis – which is 25 percent higher than last year. This is illustrative of consumers’ tendency to utilize and change payment methods, channels and sources as new needs and circumstances arise.

The State of Payments: Volume and Household Penetration

The American consumer now has more ways to pay monthly bills than ever before. Driven by technology and consumer demand, enhanced payments options have delivered convenience, speed, security, lower costs and a host of other benefits to the average household. Service providers, or “billers”, who send customers recurring bills have also benefited from the advancements in payments options and methodologies. Firms that have actively accommodated customer billing and payment preferences have realized real value in terms of lower costs, increased customer satisfaction and retention, deeper relationships and targeted marketing opportunities.

The end result is an ever-changing payments eco-system that continues to fuel itself and expand at a rapid pace.

This dynamic is most evident when considering the intense transition from paper-based payment instruments to electronic formats. With consumers continuing to migrate to online channels for countless pursuits and activities, the digital transformation of payments only grows stronger. Clearly, the biggest driver of this expansive shift over the last ten years is adoption and usage of the Internet. As online penetration levels top 75 percent of all U.S. households, with 65 percent having broadband connectivity, Americans continue to grow more comfortable with transacting online – especially when it comes to online payment of recurring bills.i

In terms of volume of payments, the total number among online households grew by 53 percent in the last ten years with check payment volume dropping by 57 percent. Payments at biller direct sites and financial

i Pew Internet & American Life Project, FCC Broadband and Use in America, 2010

ii Boston Consulting Group, Projecting U.S. Mail Volumes to 2020, March 2010

Auto Credit or Debit Card 6%

In Person6%

Biller Direct5%

Check25%

Check61%

Phone/Other5% Phone/Other

5%Auto Credit orDebit Card

6%

Auto-Debit11%

Auto-Debit11%

FinancialInstitution

Bill Pay24%

Biller Direct21%


Bill Pay7%

In Person8%

Source: Changes in the Consumer Billing and Payment Marketplace 2000-2010, Fiserv

Bill Payment Channels and Options Have ProliferatedSubstantially Over the Last 10 Years (Volume)

January 2000: 600M Bill Payments January 2010: 920M Bill Payments

Source: Changes in the Consumer Billing and Payment Marketplace 2000-2010, Fiserv, Inc.

Fiserv Research Paper

1

Economic Conditions and the Impact on Consumer Billing and Payment Practices

The struggling U.S. economy has had a wide and deep impact on consumers. It has also affected the way in which people pay and receive bills and can serve as a key indicator into the condition of the U.S. consumer with respect to household finances. Prior research from Forrester commissioned by Fiserviv showed that the economic squeeze felt by consumers had a material impact on their billing and payment practices.

Notably, more Americans are monitoring accounts and conducting transactions online – not only because they feel more in control, but also because it helps them organize their financial lives and provides real-time insight of household cash flows. Also at play are new shifts in consumer tendencies to pay bills closer to due dates and utilize both traditional and new technologies to achieve that goal.

Findings from the Fiserv 2010 Consumer Billing and Payment Trends Survey clearly reflect these dynamics. Compared to last year, checks dropped by eight percent while online bill pay at banks and credit unions increased by 11 percent, surpassing auto debit which dropped by six percent as consumers increasingly utilized online financial tools and sought greater control over when their funds are debited for bill payments. While biller direct payments increased by two percent, in-person, walk-in payments at retail locations and other outlets shot up 16 percent, and phone payment increased dramatically by 27 percent. The biggest driver in the increase of walk-in and phone payments is their likelihood to be used in expedited payment scenarios. But the sharp increase in respondents reporting phone channel payments may also be attributed to the rise of smart phones that enable mobile banking with bill payment functionality. Currently 30 percent of mobile finance users have paid or received a bill in the last month on their wireless devicesv.

Bill Payment Adoption by Household (Millions) 2002-2010

It is important to note the difference between volume of payments and percentage of households using particular payment channels. The two metrics can sometimes seem contradictory. For example, a higher percentage of households may be using the walk-in channel than did last year, but total walk-in payments may be comparatively flat as other households shift a portion of their walk-in payments to online channels. Disparity between household usage by channel and payment volume is also impacted by a drop in total households as Americans combine residences – with more young people moving in with their parents and postponing the creation of their own householdsiii. Another downward factor on bill payment volume is the consolidation of bills such as cable, phone and internet services that more companies are bundling and promoting. So, while there may be a decrease in monthly bill payments in a given channel, it does not necessarily affect the percentage of households that use a particular payment channel.

iii What Happens to Household Formation in a Recession? Gary Painter, Research Institute for Housing America April 2010

iv Coping During the Crisis, a study commissioned by Fiserv, Inc. and conducted by Forrester Consulting, Oct 2008

v Consumer Billing and Payment Trends Survey, Fiserv, Inc., 2010

0.0

10.0

20.0

30.0

40.0

50.0

2002 2003 2004 2005 2006 2007 2008 2009 2010

Biller Direct

Consolidated FinancialInstitution Bill Pay

In Person*

Auto-Debit Checking

Phone

Mill

ion

s o

f U

.S. H

ou

seh

old

s

*In Person Data Collection starting 2005


Bill Payment Adoption by Household (Millions) 2002-2010

*In Person Data-Collection starting 2005



2

Number of U.S. Online Households Using Each Method of Bill Payment; January 2009 vs. January 2010

Clearly strapped and savvy consumers are applying stricter controls to their cash flows and finances, especially as it relates to timing monthly bill payments. Many consumers are waiting until the last minute to make payments via the web, (mobile) phone or in person – further driving up the demand for expedited payment options that help customers avoid costly late fees and preserve credit ratings.

Why Consumers Visit Service Provider Web Sites

Visit any utility, telco, cable or insurance website and there will be a myriad of special offers, advice, announcements and other company information. However, the main reason consumers visit their service providers’ website is to conduct billing and payment activities.

In the last six months, 74 percent of consumers have visited a website of a company from which they received a monthly bill.

Most Respondents Have Visited One of Their Biller’s Sites in the Last Six MonthsSource: Changes in the Consumer Billing and Payment Marketplace 2000-2010, Fiserv

Online -Financial

Institutionand Biller

Direct Bill Pay

Check BillerDirect


Bill Pay

19.3 Use Both FI OnlineBill Pay and Biller Direct

(up by 25%)

Mill

ions

of U

.S. H

ouse

hold

s

AutoDebit

Checking

In Person PhonePay

65.0

54.547.9

31.527.2

17.4

36.4

Number of US Online Households Using Each Method of Bill Payment in Past Month (Penetration)

16%11%2% 6%8% 27%

All respondents: In the last six months,have you visited the website of a company

from which you receive a monthly bill (regardless of method)

Visitors: Which companies’sites did you visit?

Cable or satellite

Cell phone

Major credit card

Electricity

ISP

Insurance

Dept. store

Local/LD

Natural gas

Mortgage provider

Most Respondents Have Visited One of Their Biller’s Sites in the Last 6 Months

Source: 2010 Billing Household Survey, Fiserv

No26%

Yes74%

53%

52%

42%

34%

26%

24%

21%

18%

17%

16%

% of Biller Site Visitors


Source: 2010 Billing Household Survey, Fiserv, Inc.


3

Reasons for Visiting Different Sites Are Similar: Billing and Payment

% of Electric Company Site Visitors% of Cell Phone Site Visitors

Pay a bill

Access monthly invoice/view payment history

Shop for productsor services

Contact customer service

Use online self-service

Learn moreabout service

Why did you visit site of cable or satellite company? Why did you visit site of credit card company?

Why did you visit site of cell phone company? Why did you visit site of electric company?

Pay a bill



Pay a bill





Pay a bill




63% 68%

56%

11%

65%

46%

33%

16%

16%

66%

46%

12%

12%

44%

25%

18%

14%

11%



% of Cable Site Visitors

% of Credit Card Site Visitors


Pay a bill








Pay a bill



Pay a bill





Pay a bill




63% 68%

56%

11%

65%

46%

33%

16%

16%

66%

46%

12%

12%

44%

25%

18%

14%

11%






Pay a bill








Pay a bill



Pay a bill





Pay a bill




63% 68%

56%

11%

65%

46%

33%

16%

16%

66%

46%

12%

12%

44%

25%

18%

14%

11%






Pay a bill








Pay a bill



Pay a bill





Pay a bill




63% 68%

56%

11%

65%

46%

33%

16%

16%

66%

46%

12%

12%

44%

25%

18%

14%

11%





Note: Responses below ten percent considered statistically insignificant



4

the opportunities to regularly promote the very programs, promotions and offers that can take up much of the home page real estate are gone with them.

Payment Habits: Auto Pay and Payment Practice Variation

While consumers consistently visit biller websites for billing purposes, the channels and sources of payment can change for a variety of reasons. In fact, almost a quarter of consumers will change their payment practices on a month-to-month basis. These changes stem mainly from availability of funds and payment due dates. Yet, other drivers also influence and impact the consumer’s decision to modify their recurring payment practices.

Use of Payment Methods Can Change from Month to Month

That said, nearly half of all consumers have set up at least one auto payment through their financial institution’s website (49 percent), or at the biller sites (42 percent). This dichotomy of monthly payment variation verses auto payment results from the fact that there are a number of consumer segments in the billing and payment eco-system who utilize billing and payment differently. Another driver is the nature of industry bills themselves,

Online Activities Result in Fewer Calls to Billers

A direct benefit of these site visits is the deflection of costly customer service calls. However, the vast majority of billers across all industries are missing a significant opportunity to engage their visiting customers effectively online. By properly balancing billing and payment information with promotions, products, tips and other content a given company wishes to advance, billers can realize higher adoption rates, fewer abandonments and a more satisfactory customer web experience.

It is critical for billers and their marketing departments and web strategy teams to understand the reasons customers visit their website – along with the implications of not making it easy to do what they came to do. Put simply, if a website makes it difficult to find what they are looking for, they will leave. If billing and payment information is not prominent and requires multiple clicks, or the creation of an online account to access, many customers will go elsewhere to pay and receive their bill and will most likely not return.

Usability research shows most web users skim sites and seldom read more than twenty wordsvi. Requiring the typical site visitor, who is mainly interested in billing and payment, to navigate through content that does not help them achieve their primary goals frequently leads to frustration with the site and the brand, and, ultimately, abandonment. What’s more,

vi Jacob Nielsen, Prioritizing Web Usability, 2006 and www.useit.com

Online Activities Result in Fewer Calls to Billers


Did conducting activities at billers’ sites avoid youhaving to call the billers?

No34%

Yes66%



Pay thesame way

77%

Changeas needed

23%

For individual bills, do you usually pay themthe same way from month to month,

or do you change how you paythem as needed?

What causes you to change?

% of Those RespondingChange as Needed

Availability of funds/account balance

Date payment is due

If payment would havebeen late otherwise

Convenience

Depends onamount owed

Depends onwhich bank it is

Depends on merchant/formsof payment accepted

If going to retailer,will pay there

Use of Payment Methods Can Change from Month to Month


17%

16%

12%

7%

7%

5%

5%

5%


5

as evidenced by the varying rates of automatic payments by vertical. Some bills tend to be more static in monthly amounts than others (insurance and cable), or are perceived to be consistently more accurate (electricity), or viewed as a priority or high payment amount (rent or mortgage).

Recurring Payment Rates Vary by Channel and Vertical

The six percent decline in auto payments and consumer willingness, even the desire, to be flexible with monthly payment practices, timing, channels and sources, is potentially worrisome to billers who clearly see the benefits of auto payment adoption. These benefits include cash flow predictability, consistent payments, reducing delinquency and collections, customer satisfaction and retention.

Card Funded and Expedited Bill Payments

American’s usage of credit and debit cards, especially as they relate to online transactions and monthly bill payments has evolved – particularly over the last few years. Rewards programs, reliance on credit, convenience, merchant acceptance, security perceptions and a host of other factors have driven consumers to

establish new payment habits. This is especially true as it relates to online transactions with 70 percent of consumers paying for an online purchase with a major credit card – a growing habit that certainly bleeds into sub-conscious choice for online bill payment transactions.vii

These dynamics have taken the use of credit and debit cards to new levels – both up and down. According to Javelin Strategy & Research in 2010, 37 percent of U.S. consumers reported reduced use of their credit card, a decrease from 87 percent of consumers in 2007. In addition, 66 percent of the consumers who reduced credit card spending chose to use debit cards, and more consumers say they use a debit card more frequently than a credit card for purchases.viii, ix Clearly, this trend is indicative of consumer desire to rein in spending of funds they do not have.

To be sure, credit cards are different than debit cards. One is essentially a short-term loan, while the other withdraws funds from an account immediately. The key takeaway is that they are now both frequently used to make one-time payments that are normally paid by some other method. Currently, debit card usage outnumbers credit cards to make such on demand payments as shown in the chart below.

One Time Bill Pay Charges to Credit or Debit Card Common

vii Javelin Strategy & Research: Online Retail Payments Forecast 2010 – 2014: Alternative Payments Growth Strong but Credit Card Projected for Comeback

viii Credit Card Spending Declines: Which Card Features Matter to Consumers and Additional Strategies to Stem the Revenue Hemorrhage, Javelin Strategy & Research, March 2009

ix Online Retail Payments Forecast 2010 – 2014: Alternative Payments Growth Strong but Credit Card Projected for Comeback

Recurring Payment Rates Vary by Channel and Vertical

Have you set up any of your recurring household bills to be paid automatically

through your bank’s online bill pay service?

Users of recurring payments through both bank and biller direct channels: which of the

following have you set up for automatic payment?


Insurance

Cable

ISP/Broadband

Electricity

Cell phone

Mortgage

Local or LD telco

Personal or auto loan

Major credit card

Water/sewer

Natural gas

48%

45%

35%

34%

34%

26%

22%

20%

17%

15%

14%

No51%

Yes49%

No58%

Yes42%

…biller’s online bill pay service?



In the past month, did you use a credit or debit card to make a one time bill payment

on the web or through the phone that you normally pay by some other method?

How many of thesepayments did you make?

One Time Bill Payers

One Time Bill Pay Charges to Credit or Debit Card Common


No66%

Yes34%

Four Plus

Two or Three

One

23%

Debit CardCredit Card

14%

25%

20%

31%

25%


6

from a third-party service provider that processes the payments. This survey shows that one third (33 percent) of consumers who make card funded payments paid a convenience fee. As demonstrated in the chart below, consumer rationalization of paying fees to make one-time bill payments at the biller’s site, a biller’s endorsed third party site, or over the phone, can be traced to the reasons consumers elected to pay the fee.

Convenience Fees Paid for Multiple Reasons

Survey respondents chose “Only Option Available” and “Avoidance of Late Fees” as the top reasons they paid convenience fees. Other motivations also seem to apply. For instance, reward points, favored by points “Maximizers”x, security concerns, and online payment preferences factor in. Plus, the convenience and speed of not having to go through a biller’s registration process all compel consumers to utilize, justify and pay the incremental cost of transacting a one-time payment with a credit or debit card.

Certainly, these payment methods, whether they occur at the biller’s website, through the phone channel or elsewhere, are valued by consumers – particularly when circumstances or preferences require one-time payments outside of the norm. This is especially true when it comes to the likelihood of a consumer having late or missed payments. This survey found that 38 percent of consumers paid a bill late or missed it altogether in the last 12 months, with 84 percent incurring the corresponding late fee.

The top reasons cited for missing payments can be attributed to cash flow difficulties and timing.

Late Payments Common, Mostly Due to Cash Flow Difficulties

Given the prevalence for delinquent or missed payments, card funded payments – with their expedited payment posting and capability to act as a bill payment bridge between months – are a valued payment instrument for many households. As more billers across industries offer this option in response to customer demand, bill payers will increasingly come to expect it from all their service providers.

It is important to note, however, that these card and expedited payments incur a higher cost. Billers can either absorb the transaction costs or pass them along to the consumer as part of a convenience fee

x Maximizers: Use credit cards heavily for the miles/points. Consumer Bill Pay Segmentation Survey, Lieberman Research Worldwide for Fiserv, Inc., 2006



All respondents: In the past 12 months,have you paid any bills after the due date

or missed any payments altogether?

Reasons missing apayment due date

Late Payments Common, Mostly Due to Cash Flow Difficulties


No62%

Yes38%

Cash flow difficulties

Forgot whenpayments were due

Tend to wait untillast minute to pay

Simply ran out of time

Difficult/hectictime of year

Was traveling or sick

57%

33%

22%

17%

13%

10%

Convenience Fees Paid for Multiple Reasons

Fee payers: Why did you elect to pay a convenience fee?(choose all that apply)

Only option available

Avoid late fee

Pefer to use creditcard for points

Prefer to use credit cardfor online transactions

Biller allowed option to notrequire me to register

50%

45%

31%

22%

19%



7

Pay By Phone

Over the years, payments taken over the telephone have served as an important payment channel and safety net for both billers and consumers, especially as it applies to expedited payments.

Although inbound customer service calls with a live agent can be expensive for billers, automatic or interactive voice recognition (IVR) systems enable phone-based self-service transactions. Overall, 50 percent of phone payers used an automatic voice response system with very little distinction between age and income. In regards to consumer convenience fees, almost 43 percent of phone-pay consumers paid such a fee – with Gen Y and Gen X paying fees more often than boomers or seniors.

When it comes to the phone channel, the disruptive influence of wireless phones cannot and should not be ignored. In fact, the definition of “Pay by Phone” – whether it applies to industry research such as this or customer facing messaging – now means something very different than it did a few short years ago. Distinguishing between conventional and traditional CSR and IVR based interactions and mobile smart phone-based bill pay transactions will become necessary.

Furthermore, every day, more and more consumers are utilizing wireless phones for all their voice communications and cutting the land line. According to a recent study, nearly 25 percent of U.S. households have only cell phones while another 15 percent with landlines received most of their calls on cell phones.xi Put simply, this means more consumers are making phone payments from a mobile device. Over 15 percent of respondents made a payment from their cell phone in the last month. Granted, a large percentage of payments are for the monthly mobile services, but a surprising number of payments are also made to cable, electric and insurance companies.

Bills Paid Using a Mobile Phone

As the future unfolds, mobile phone-based payments can be expanded to include new bill text alerts and due date reminders. With smart phone and wireless Internet connectivity growing exponentially, this can open the door for billers to promote other strategic billing options – particularly since one of the most cited objections to paperless billing is that consumers will miss the payment.

Mobile Alerts

xi Wireless Substitution: Early Release of Estimates from the National Health Interview Survey, July–December 2009, Center for Disease Control, May 2010

Bills Paid Using a Mobile Phone

Cell phone

Cable or satellite

ISP

Electricity

Insurance

Major credit card

Natural gas

Dept. store

62%

32%

21%

19%

17%

16%

15%

14%

Interested respondents:Would getting these alerts

cause you to sign up toaccess bills electronically

through your mobile phone?Interest in receiving alerts

on a mobile phone

Mobile Alerts

Don’tknow24%

Don’tknow12%

No61%

Yes27%

Yes56%

No20%




8

Walk-In Payments

While the majority of online consumers prefer to pay and receive bills electronically, other consumers prefer to make a monthly bill payment in person. The walk-in bill payment category is made up of retail store payments (e.g. department stores), direct to service provider payments (e.g. utility companies) and alternative financial service outlets (e.g. check cashing stores). There are over 100,000 retail outlets that enable secure bill payments to billing service providers.xii Walk-in bill pay customers come from all ages and ethnic groups and what motivates them to make in person payments varies. Many simply prefer to pay bills using cash. Others like the ability to get a physical receipt as proof of payment. Additional walk-in bill pay cohorts need to make an expedited payment, have a distrust of the postal service or Internet or prefer to pay bills where they can also shop and cash checks. One of the fastest growing segments in America that utilize walk-in bill payments are the 28 million people in the U.S. who don’t have bank accounts, known as the “unbanked” and the 44 million who have accounts but tend to rely on non-bank financial service providers, known as the “underbanked”.xiii In fact, 77 percent of this

of segment pay at least some portion of their monthly bills in person.xiv

Another driver of walk-in payment usage is attributed to the established payment habits of immigrant populations - especially those from Latin American countries. Due to the historical nature of payments infrastructures, unreliability of mail systems, and the relatively low number of households that have banking accounts in many parts of Latin America, a sizable portion of consumer-to-business payments are made in person. It is not uncommon to see long lines outside a company’s office as consumers wait to pay bills in countries such as Mexico and regardless of whether they pay in cash or by check the receipt becomes the only and therefore valued proof of payment. Although vast improvements in the banking and remittance systems have been realized across many of these countries, the habits of walking in a bill payment have been established and likely carry over to payment practices in the U.S. Additionally, in the U.S. the Hispanic population is projected to nearly triple, from 46.7 million to 132.8 million during the 2008-2050 period while its share of the nation’s total population

vii The Nilson Report, Issue 188, September 2007

viii FDIC National Survey of Unbanked and Underbanked Households

xiv Bill Payment Practices of the Unbanked and Underbanked, February 2010, Aite Group


Have you visited a walk-in location to pay a bill? (check cashing store or similar)

Among Online Households Walk-In Payers (Non-Retail)Are More Likely to Be Younger, Male and White

32-4448%

Hispanic16% African

American9%

MixedRace/Other

3%

21-3136%

45-6315%64+

1%

Male59%

GenderAge Ethnicity

Female41% White

61%

Among Online Households Walk-In Payers (Non-Retail) Are More Likely to Be Younger, Male


9

is projected to double, from 15 percent to 30 percent: another sign that walk-in bill payment popularity may be poised for growth.xv Ultimately, the walk-in channel represents a strategic and necessary channel for almost all service providers. It serves as a gateway to the un- and under-banked segments as well as immigrant populations. It is also utilized as an emergency payment channel and a valued service for those who simply prefer human interaction.

The State of Electronic Billing: Electronic Bill Growth and Penetration

As a result of increasing postage rates, paperless e-billing is being viewed by many companies as a potent and strategic source of cost savings. Perhaps even more compelling, however, is the mounting evidence that shows the strong relationship between online billing and payment and customer satisfaction. J.D. Power has reported multiple findings in a variety of industries that, among customers who receive electronic bills, the overall customer satisfaction score is significantly higher compared to the average paper billing customer. It has also been shown that online billing customers experience fewer billing errors.xvi

Another study commissioned by NACHA‘s PayItGreen and conducted by Javelin Strategy & Research, revealed that consumers are less satisfied with their billers when they receive statements by mail. Only 15 percent of consumers who are paperless for all their billing statements are dissatisfied or neutral with their service providers, compared to 21 percent of those who receive everything via traditional mail.xvii

This survey also establishes and validates the connection between paperless billing and customer satisfaction. Customers who receive e-bills at bank

sites have consistently reported higher levels of satisfaction and retention with the biller, even above those who receive e-bills at the biller direct sites – which also produce increased rates of biller satisfaction and retention. This may be due in part to customers’ “delight” with a biller that provides electronic bill delivery to them through an alternative and preferred consolidated bill payment site.

Receiving e-Bills Either at Financial Institution or Biller Sites Improves Customer Satisfaction and Retention with the Biller

With the reduced costs, opportunities to increase customer satisfaction and retention and drive higher usage of online self-services, billing organizations are more motivated than ever before in convincing their customers to give up the paper bill in favor of a paperless e-bill.

However, convincing consumers to go paperless has not been an easy task for billing companies. Paperless billing adoption rates tend to vary by industry for many of the same reasons online and recurring payments vary by vertical.

xv U.S. Census Bureau, Population Division, 2010 xvi Source: J.D. Power and Associates 2008 Residential Television Service Satisfaction Study, 2008, J.D.

Power and Associates 2008 Internet Service Provider (ISP) Residential Customer Satisfaction Study

xvii NACHA’s PayItGreen 2010 Survey Conducted by Javelin Strategy & Research

Impact on Relationshipwith Biller

Do you think that receiving a billelectronically has generally:

FinancialInstitution E-bill

BillerDirect

Receiving e-bills either at financial institution or biller sitesimproves customer satisfaction and retention with the biller

Source: Changes in the consumer Billing and Payment Marketplace 2000-2010, Fiserv

2%Made worse

Made nodifference

Improved therelationship

with the biller

More likely

Not madeany difference

Made it less likelyyou will switchto a competitor

1%

65%

34%

FinancialInstitution E-bill

5%

62%

33%

BillerDirect

3%

73%

24%

61%

37%

Impact onBiller Retention

Do you feel that receiving bills electronically has:



10

Also, up from24% last year

Up from 24%last year

Not sure30%

Yes, e-billsreceived

33%

On the fence43%

Interested36%

Notinterested

21%

Yes, no e-billsreceived

18%No

19%

Financial institution online bill pay users – Doesyour online bill pay service offer the ability to

receive and view bills online? If so, do you use e-bill?

Interest in receivinge-bills at bank’s site

Usage and Interest in E-bills is increasing,especially at Financial Institutions Websites


Adoption Rates of e-Bills Delivered to Financial Institution Sites Vary by Vertical

Adoption Rates of e-Bills Delivered to Biller Direct Sites Vary by Vertical

Virtually all billers are now contemplating strategies, channels and promotions to increase the e-take rate. This is evident, for example, as the vast majority of billers enable paperless e-bill delivery at a customer’s financial institution bill pay site – which is preferred by consumers over biller sites 23 percent to 14 percent. Billers are also increasing the number of incentive offers, which consumers cited as a reason they signed up for e-bills, from ten percent in 2009 to 25 percent in 2010.

Electronic Bills at Financial Institutions and Biller Sites

One clear and positive trend with respect to e-bill adoption is the fact that the number of consumer financial institution (FI) bill payers receiving e-bills at their banks has increased over the previous year. In addition, interest among FI e-bill recipients also increased.

Usage of and Interest in e-Bills Is Increasing, Especially at Financial Institution Websites



Bank-based e-bill recipients: What types of bills did you receivelast month through your bank-based bill pay service?

Adoption Rates of E-bills Delivered toFinancial Institution Sites Vary by Vertical


Cable/satellite

Cell phone

Electricity

Major credit card

ISP

Insurance

Natural gas

Dept. store CC

Local/LD

Mortgage

Personal/auto loan

Water/sewer

48%

46%

46%

44%

34%

34%

30%

25%

24%

19%

13%

13%

BD Viewers: What type of bills did you view last month through your bank-based pay service?

Adoption Rates of E-bills Delivered toBiller Direct Sites Vary by Vertical


Cable/satellite

Major credit card

Electricity

ISP

Insurance

Dept. store CC

Local/LD

Natural gas

Personal/auto loan

Mortgage

Water/sewer

53%

50%

42%

31%

27%

22%

20%

19%

17%

16%

9%



11

This is very positive for FIs as well since FI e-bill customers have higher levels of a financial institution’s products and improved retention vs. non e-bill users.xviii

What Types of Financial Services Accounts Do You Have with Your Primary Bank?

Taking this momentum even further, research shows that e-bill receivers were likely to use five services last year compared to ten services this year.

With respect to e-bill adoption at biller direct sites, 52 percent of online households, or 48 million online households, view at least one bill at a biller direct site. That said, many of the bills viewed at the biller’s site are also accompanied by a paper bill. According to the Fiserv 2008 Biller Survey on Consumer Trends in Viewing and Paying Bills Online, over half of the bills viewed at biller sites come with a paper bill which presents billers with the additional costs of providing dual bill delivery.

In sum, service providers have a good opportunity, as well as a challenge, to convince their website bill viewers to take another step and turn off their paper bills.

Barriers to Paperless e-Bill Adoption

While online paperless bill payments have grown substantially over the last ten years and are now in the mainstream, paperless bill delivery adoption has historically lagged behind. Overall this “e-gap” between online bill payments and paperless online bills can be sourced to a comparatively higher perceived value proposition with online payment. At the very least, the online bill payer saves the cost of the stamp, not to mention enjoys convenience and speed. Paperless electronic bills, on the other hand, are not perceived to deliver benefits that are as finite or apparent. In fact, many consumers feel that adopting paperless e-bills could cause them to lose track of their bills and lead to missed payments and late charges. Additionally, consumers cite security concerns and the hassle of registering at the biller’s website.

Barriers to Viewing and Paying Bills at Biller Direct Sites

The upside to these barriers lies in the fact that many of them can be overcome with education and awareness. Many bill pay systems, whether at biller or bank sites, send email notifications that a new bill is available, or

Savings Account

Debit Card

Credit Card

Money Market

CD

First Mortgage

Home Equity Loan

Car Loan

Student Loan

Stock/Bonds

What types of financial services accounts do you have with your primary bank?

Bank-Based Bill Pay + e-Bill

Bank-Based Bill PayNo e-Bill


78%70%

60%57%

45%34%

24%17%

24%14%

18%14%

16%9%

17%7%

20%7%

15%6%


Listed below are some possible reasons you are notcurrently viewing and/or paying bills at biller’s websites.

Which one is most important?

Barriers to Viewing and Paying Bills at Biller Direct Sites


Among Non-Users of Biller Direct

Prefer to receive paper statementsto help me keep track of bills

Don’t want billinginformation online

Prefer to receive/paybills at my bank’s site

Don’t want to register myinformation on biller’s site

Worried will lose track of bills

Don’t know enough aboutviewing bills at biller’s sites

35%

18%

11%

10%

6%

4%



xviii SunTrust Study, Aspen Analytics, 2008

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especially at online banking sites, alerts that a bill is coming up on its due date. Regarding the objection of security, numerous studies have concluded that identity theft more often occurs offline than online via practices such as “dumpster diving” and mail theft. In turn, they have recommended that consumers request electronic statements in place of paper statements.xix

Drivers of e-Bill Viewing and Paper Turnoff

In order to convince more consumers to view and ultimately turn off paper bills in favor of e-bills delivered to the biller site or consolidated site, strategies and tactics which leverage the user experience, customer engagement, (e.g. defaulting to paperless billing upon electronic payment) positioning and promotion, are necessary. They should be configured around the following:

• Reasons Current Users of e-Bill at Biller Direct and Bank Channels Cite for Viewing Electronic Bills

• Motivators for Non-Viewers of Biller Direct to View e-Bills • Biller Direct Top Motivators for Turning Off Paper Bills

Top Reasons Current e-Bill Users Say They View Bills at Biller Sites and Bank Sites

It important to understand that the reasons current e-bill users elect to receive e-bills at FI sites are quite different than those who receive them at biller direct sites. These differences illuminate the unique value propositions each channel offers and why they each appeal to different consumer segments. Therefore, in order to drive optimal paperless penetration rates, a holistic and comprehensive approach is needed to ensure different customers’ needs, preferences and pain points are addressed.

A one-size, one-channel strategy will simply not deliver the full breadth of benefits to all customers. This is because it discounts the e-bill’s value proposition(s) to segments of customers who value it for different reasons based on their chosen billing and payment platform, thereby putting a drag on adoption rates and possibly customer satisfaction.

Reasons Current Users of e-Bill at Biller Direct and Bank Channels Cite for Viewing Electronic Bills


xix Javelin Strategy & Research, 2010 Identity Fraud Survey Report

Reasons current users of e-bill at Biller Direct andBank Channels cite for viewing electronic bills


Listed below are some possible reasons you arecurrently viewing and/or paying bills at billers’ websites.

Please select the most important.

Among Bank-Based e-Bill Recipients

Convenience - viewing andclicking to pay in one step

Get an email reminder eachtime have a new bill due

Get my financesmore organized

To get and pay allmy bills at one site

Offered an incentiveto sign up

Save me the time ofopening paper bills

Stop receiving paper andhelp the environment

Bank’s site is a saferplace for my bills

22%

15%

13%

13%

9%

8%

8%

6%

What is the primary reason you first decided to sign up toreceive bills using your financial institution's bill pay service?

Among Biller Direct e-Bill Recipients

Convenience - all I haveto do is click and pay

I can view the bill online along withan email to remind me to pay

Like to pay bills at last minute

Viewing and paying bills electronicallysaves paper and energy

I’d rather pay the biller directly

No more stacks of paper and clutter

No more bills lost in the mail

57%

11%

6%

4%

4%

4%

3%Reasons current users of e-bill at Biller Direct andBank Channels cite for viewing electronic bills













22%

15%

13%

13%

9%

8%

8%

6%










57%

11%

6%

4%

4%

4%

3%














22%

15%

13%

13%

9%

8%

8%

6%










57%

11%

6%

4%

4%

4%

3%














22%

15%

13%

13%

9%

8%

8%

6%










57%

11%

6%

4%

4%

4%

3%


13

The differences show how consolidated e-bill users utilize the service for a variety of reasons including convenience, new bill alerts and reminders, better financial organization, and the ability to conduct billing and payment at one centralized site.

In contrast, biller direct users overwhelmingly state that the convenience of clicking and paying the bill is what makes them sign up to view the bill at the biller’s site.

Motivators for Non-Viewers of Biller Direct To View e-Bills

Among consumers who do not currently view and pay bills at biller direct sites 17 percent expressed interest, 38 percent said they were on the fence, and the rest described themselves as not interested. This is a key data point in that it can be used to set realistic adoption goals for billers. Billing managers tasked with setting and achieving electronic presentment rates should consider their market opportunity as roughly 55 percent of online households (77 percent of all U.S. households) minus those that are currently paying bills electronically through a consolidated bill pay service. Moreover, it is critical to contemplate viewing bills versus actually going paperless and how that impacts adoption objectives. Let’s look at the top attributes that compel new customers to view their bills online at biller sites. The top three are email reminders, incentives, and payments credited the next day. The latter again demonstrates consumer value of immediate payment posting. If they

have not already, billers should strategize on what, if any, motivators they have at their disposal.

While a number of companies and industries (regulated utilities for example) will be unable to deliver some of the product features and incentives consumers say will motivate them, many are inherent in the service already and therefore simply need to be aggressively communicated to make the e-bill proposition more widely accepted.

Interest in Biller Direct of Non-ViewersInterest in Biller Direct of Non-Viewers

Motivators for viewing bills at billers’ sites

% of Non-Viewers

Email reminders billis ready to be paid

Receive cash or opportunitiesto win prizes

All paymentscredited next day

Assurance billers continue sendingpaper bills until I ask them to stop

Financial guarantee thate-bill never late

Viewing bills saves paperand technology

More informationon how it works

Auto payment of billsusing checking account

27%

26%

21%

19%

19%

18%

17%

13%

Among non-viewers:interest in viewing and/or paying bills

at billers’ sites in the next year

Notinterested

45%Interested

17%

On thefence38%

Interest in Biller Direct of Non-Viewers

Motivators for viewing bills at billers’ sites

% of Non-Viewers

Email reminders billis ready to be paid

Receive cash or opportunitiesto win prizes

All paymentscredited next day

Assurance billers continue sendingpaper bills until I ask them to stop

Financial guarantee thate-bill never late

Viewing bills saves paperand technology

More informationon how it works

Auto payment of billsusing checking account

27%

26%

21%

19%

19%

18%

17%

13%

Among non-viewers:interest in viewing and/or paying bills

at billers’ sites in the next year

Notinterested

45%Interested

17%

On thefence38%




14

Importance of the environment in decisionto view/pay bills electronically

Environmental Impact of Online Billing and PaymentViewed as Important by 58% of Users

Important30%

Indifferent27%

Notimportant

11%

Veryimportant

28%

Source: Changes in the Consumer Billing and Payment Marketplace 2000-2010, FiservSource: Changes in the Consumer Billing and Payment Marketplace 2000-2010, Fiserv, Inc.

xx Pew Research Center for the People & the Press, 2009

Biller Direct Top Motivators for Turning Off Paper Bills

As stated previously, consumer motivations for viewing bills are distinct from turning off paper bills, and billers should consider all perspectives when considering electronic billing practices and promotions. Since the ultimate goal is e-conversion, companies need to take a close look at what will motivate non-biller direct e-bill users to make the switch. The good news is that many of these drivers, once again, are inherent in the service. Almost all billers offer the top motivator; the ability to turn paper back on at any time. Other automatic attributes and elements of the paperless e-bill offering also come meaningfully into play, including email notifications, lowering of identity theft and benefits to the environment.

Paperless Billing Motivators

The Environment Is Still Important to Consumers Who View and Pay Bills Online

Although the economy is top of mind for most consumers and environmental concerns have declinedxx, the importance of the environment in the decision to view and pay bills electronically is still quite high. In fact, the majority, 58 percent, of electronic billing and payment users said it was important or very important in their decision to activate and utilize the e-service.

The most important reasons cited were: saves paper (85 percent), saves trees (81 percent) and saves landfill space (71 percent). Furthermore, while green marketing has appeared to reach somewhat of a saturation point with so-called “Green Fatigue”, electronic billing and payment does not seem to be “browning out”. Indeed, many billers continue to leverage this value proposition in promoting paperless billing to their customers.

Environmental Impact of Online Billing and Payment Viewed as Important by 58 percent of Users

Paperless Billing Motivators

If I knew I had the option to go backto paper statement any time

Ability to access 24 monthsor more of billing history

Email or textmodifications to alert me

Easy to dispute orcommunicate with biller

If I knew that viewing billsonline leads to less ID theft

If I could be giventhree extra days to pay

If I knew that paperless billing hada real impact on the environment

If I could get all my billsdelivered to one site

If the bills contained relevante-coupons or offers

Nothing would persuade me

47%

43%

42%

37%

34%

31%

25%

20%

20%

16%



15

Conclusion and Recommendations

The billing and payments landscape is undergoing a new wave of business and technological change driven by economic conditions; new consumer habits, expectations and demands; emerging payment platforms; and the maturation of Gen Y. These changes are occurring at Internet speed, creating new customer billing and payment segments that not only desire but expect a comprehensive array of options.

The benefits of these shifts to billing organizations who understand and embrace a holistic and nuanced view of the mission critical function of billing and payment are substantial. Strategic, customer-centric billers who proactively invest in and manage their billing and payment operations realize measurably lower costs, higher customer satisfaction and retention, increased paperless adoption, optimized online interactions, streamlined billing and payments systems, and lower collections costs – all of which ultimately puts them in a position of strength in terms of customer interaction and cash flow.

To capitalize on the opportunities, billers should:

• Develop a comprehensive, multi-channel billing and payment strategy that offers customers consistent, easy to use options that will nudge them to preferred billing and payment channels with integrated messaging and promotions.

• The velocity of change in billing and payment will continue as more Gen Y consumers amass more bills and payments and demand new ways to pay and receive bills. In order to be prepared for such shifts, evaluation of trends with customer bills and payments is going to be a necessary action to deliver customer satisfaction and retention.

• Allow customers the option of receiving and paying bills in the ways they want. Since there are numerous segments of consumers whose preferences and expectations for billing and payment vary, satisfaction and electronic take rates among customers will be higher if billers enable customers with options that match their preferences.

• Conduct website tracking analysis to determine the most popular activities visitors perform on the company website. If billing and payment rank relatively high, then prominently feature the billing and payment option in the body of the home page or in the left navigation area.

• Offer a quick and easy expedited payment option. Many customers already suffer from username and password fatigue and requiring a sign-up procedure may be a frustrating obstacle to a customer who is in a hurry to make an emergency payment.

• Prominently and consistently post the phone pay number and payment options landing page URL on the paper bill and remittance envelopes. Also feature a recurring bill payment sign-up area on the remittance coupon.

• Since paperless billing is critical to the success of electronic billing, continue to educate customers about the benefits, provide important alerts that bills are due particularly near the due dates and reinforce reduction of identity theft that accompanies paperless billing. Support messaging with third party statistics and expert quotes. Do this on an ongoing basis and tie auto payment into any paperless billing incentive campaigns. Promote the benefits of electronic billing throughout the sign-up process while reinforcing the ability to go back to paper bills at any time


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About the Author Eric Leiserson is a Senior Research Analyst at Fiserv. His responsibilities include the development of consumer related electronic billing and payment research, adoption strategies and marketing programs for Fiserv Biller Solutions. He has conducted numerous primary research projects and webinars in the areas of green marketing, consumer segmentation, longitudinal surveys, web usability and focus groups. Prior to joining Fiserv in 2004, Leiserson held marketing and sales positions at Unisys Corporation and Intuit.

About Fiserv As the global leader in financial services technology, Fiserv is driving innovation in Payments, Processing Services, Risk & Compliance, Customer & Channel Management, and Insights & Optimization, and leading the transformation of financial services technology to help our clients change the way financial services are delivered. Visit www.fiserv.com for a look at what’s next, right now.

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