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How It Started, How It’s Going: The Evolution of Bill Payments for Utilities

Steve  Ostroff's picture
General Manager, BillMatrix and Walk-in Payments Fiserv

Steve has over 17 years of experience in general management, product management and strategy roles in financial services. He is currently the General Manager for the Fiserv BillMatrix and Walk-In...

  • Member since 2021
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  • Aug 9, 2021

By Steve Ostroff, General Manager, BillMatrix and Walk-in Payments, Fiserv

As industry change has accelerated in recent years, so has the evolution of utility billing and payments. Inspired by the popular meme of 2020 – how it started vs. how it’s going – we’re breaking down the evolution of bill payments for utility customers to understand what a next-generation bill payment experience will look like in the not-too-distant future.

How It Started: Cash Payments

Customers once relied entirely on cash to pay their utility bills, often delivered in-person to a payment window – as analog as it gets. While newer payment channels and technologies have come along, cash has proven surprisingly durable.

The value of offering multiple options to collect cash was reinforced during the early days of the pandemic. In cases where energy companies had to close their offices due to COVID-19 restrictions or lockdowns, many utilities simply directed their customers to pay via third-party walk-in payment networks. This enabled customers to pay their utility bills through a network of grocery stores and other essential retail businesses that remained open, given they were essential businesses.

As we gradually emerge from the pandemic, cash remains a popular option. In fact, according to the 2021 Fiserv Expectations & Experiences: Consumer Payments survey, 66% of U.S. households report using cash to pay bills as often or more when compared to pre-pandemic times. For utilities, this means that cash should remain a payment option to continue meeting consumer preferences and optimizing the customer experience for bill payers. However, utilities should continue to evaluate whether they need to accept cash in their own offices.  It might be more efficient, convenient and resilient to rely more heavily on third-party locations. 

How It’s Going: Digital Payments

As banking evolved from cash to checks to credit, customers moved along the continuum to explore new payment options. While checks were a popular payment channel for years, it wasn’t long before digital payments began to gain more traction.

Traditionally, “going digital” meant a customer would pay their bill through a utility’s website or an online banking site – with payment made by way of an electronic deduction from the customer’s checking or savings account. Now, the definition of “going digital” has expanded to include payments by credit and debit card that are increasingly made via online and mobile channels. 

Another digital trend is the move to paperless bills, or e-bills as they’re also called. When it comes to viewing these digital bills, we have found there is a roughly 50/50 split in consumer preferences for viewing them at the biller’s website versus their bank’s online portal.

For utilities, accelerated adoption of digital payments couldn’t come at a better time. As state disconnection moratoriums – enacted to protect customers struggling to pay bills during the pandemic – are being phased out, utilities are facing increased delinquency. Many are offsetting this deferred revenue with “beyond the meter” services such as selling home warranties or opening online marketplaces. But utilities without a range of flexible payment options are also at risk of increased call center volumes and higher staffing costs as they work directly with customers to help them pay off their past due balances.

How can utilities mitigate these lingering effects of the pandemic as we move toward recovery? The answer, not surprisingly, is via digital platforms. While we know the majority of consumers use multiple payment channels on a regular basis, digital payment options continue to grow in popularity. Offering digital payments not only gives utilities more cost-effective ways to manage receivables and debt – it also makes it easier for customers to pay their bills in the way they prefer.

Where We’re Headed: Alternative Channels

According to the 2021 Fiserv Expectations & Experiences: Consumer Payments survey, electricity, gas and water bills, along with mortgage/rent and wireless bills, are consumers’ top five monthly bill payment priorities. If power companies can couple that consumer desire to pay their utility bills with a full suite of payment channels, they can maximize their cash flow and increase customer satisfaction.

So where are we headed when we consider a full suite of payment options? It covers all the usual suspects: cash and walk-in payments, checks, credit and debit cards, and online and mobile banking. And now, it should also include person-to-person (P2P) payments and digital wallets, as those payment methods continue to grow in popularity. According to the recent 2021 Fiserv Expectations & Experiences: Consumer Payments survey, P2P payments are more mainstream than ever with 79% saying they've used a P2P service.

For utilities, the benefits are manifold. Consumers’ use of Apple Pay®, Google Pay®, PayPal®, Zelle®, Venmo® and the like offers new possibilities and extended reach. And alternative payment channels like these fintech wallets can offer lower cost alternatives to card payments, which is especially important in today’s challenging utility revenue environment.  

Today’s Choices Drive Tomorrow’s Payments
When it comes to utility bill payments, consumers and energy companies have made quite the evolution from how things started versus how they’re going – for all the right reasons. Utilities have overcome challenges and embraced change to deliver a comprehensive bill payments experience and are well on the way to offering consumers the same level of digital ease and convenience they expect from their banking and e-commerce interactions. And for that reason, the future of bill payments looks bright.

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