The best bill is no bill at all. But if you must pay bills, you want the process to be clear, fast, and easy. Getting a real-time payment confirmation would be great as well.
As bill pay technology has become more sophisticated, those are just the kind of features consumers have come to expect.
BillGO, a fintech focused on becoming America’s bill pay platform, has confirmed these findings thanks to two nationwide studies it commissioned in 2020 and 2021.
To learn more about this research, PaymentsJournal sat down with Daniel Hawtof, SVP of Bill Pay Product at BillGO, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service for Mercator Advisory Group.
Overview of Bill Pay
Consumers have anxiety about bill payments and need to know that payments are going to get to the biller on time. They know that if they don’t pay their bills on time, late fees, penalties and damage to their credit scores are all very real possibilities.
“According to FICO, if a person misses a single bill, it can trigger as much as [a] 180-point drop in their credit score,” Hawtof said.
This means that someone who has pretty good credit who misses a single bill can end up labeled as a high credit risk. Consumers know this and want to avoid tardy payments. Banks and fintechs are trying to help their customers make timely payments, but to do so, they need to innovate beyond the legacy bill pay platforms that still play an oversized role in many organizations.
For instance, in an ideal bill pay system, the FI could forecast consumers’ cash flow based upon activity in their accounts.
“It would really help to alert the consumer when they might run into a cash flow issue and be at risk of making a late bill payment,” Grotta said. “And I think if we can come to those kinds of solutions, we’re really going to pull down consumers’ anxiety level.”
Bill Pay Adoption
Years ago, banks were the primary place consumers went to pay their bills. However, in recent years, banks have been losing that bill pay share as consumers elected to pay billers directly. However, the tide may be turning again as Now about half of consumers use their bank to pay some of their bills online.
A core issue in bill pay is organizing all the websites and passwords necessary to do it. Consumers often must create spreadsheets to consolidate and forecast their bills.
“According to our research, consolidation is something that users really want,” Hawtof said. “And there’s a great opportunity for banks to work with innovative companies to bring all of that information together.”
Grotta agreed, noting that the best modern bill pay experiences she has witnessed in the marketplace are ones where financial institutions are partnering in the industry.
Incentives to Switch Bill Pay Methods
Inertia is king. Absent incentives, most consumers are unlikely to change their bill pay methods.
One incentive to switch bill pay systems could be microloans. Hawtof said that this is backed up by BillGO’s research. “In our studies,we asked consumers about microloans, and about 20% [said] they would be interested in getting a microloan to help them bridge the gap between payday and bill due dates,” Hawtof said.
Historically, payday loans have filled that gap. But payday loans often charge exorbitant interest rates, have fees, and can sometimes be predatory.
Banks has a trusted relationship with their consumers and could offer microloans to support them. This is a prime concern not just due to the current economic situation, but also because of the scrutiny that overdraft and NSF fees are receiving right now.
“Financial institutions are trying to figure out how to help consumers but at the same time stay away from really heavy overdraft fees as well,” Grotta said. “So, I think having a microloan service sort of interwoven with bill pay makes a ton of sense.”
Indeed, a microloan may offer a better interest rate than a credit card company.
Managing Subscriptions, With a Subscription Manager
Once a customer has put a credit card on file for a given website, if something changes, it is a headache.
Hawtof elaborated: “What if you want to use a different card, or you want to you have to update a card, because let’s say the expiration date changed on your credit card. First, you have to figure out, ‘what did I subscribe to? What are all my subscriptions so that I can go change that credit card?’ And then you have to log in to each one of those and make a change.”
There are solutions that help manage all customer subscriptions and push out new card info to all the subscription services at the same time.
“Say I want to change my HBO, my Netflix, and my wine.com subscription in one fell swoop,” Hawtof said. “Once they’ve given permission to do, we have credentials to be able to go in and update the credit card on behalf of a consumer, saving them time.”
Grotta noted that Mercator research shows not only are consumers interested in having the ability to have bills paid automatically, but they also want the flexibility to use a debit card, credit card, and checks.
“Consumers are looking for the flexibility to manage those payments on their terms with the payment product that meets their need at that particular instance,” Grotta said
Furthermore, with the advent of real-time and faster payments, consumers now expect more of their payments to be instant, or at least processed within the same day.
According to the BillGO studies, more than 30% of consumers think that when they pay a bill, it should be instant. Hawtof noted that this contrasts with public opinion from even two years ago. “Fewer consumers really felt that instant payments were necessary. But with the advent of things like P2P transactions that are conducted instantly, it’s now becoming an expectation.”