Billers Reap Unexpected Timely Perk From Digital Payments

Inflation is making the cost of everything more expensive, even putting the proverbial check in the mail to get the bills paid in the first place.

In a recent interview with Karen Webster, Ron Shultz, executive vice president of Global Bill Pay Product Development at Mastercard, said that today’s 60-cent stamp is symbolic of the costs and the inefficiencies tied to bill payments in general.

The biller ecosystem needs a digital makeover to help get the paper out of its system — the checks, the monthly statements and even the stamps.

Right now, he said, billers are burdened with the paper chase: sending invoices, processing checks and grappling with back-office frictions in a world where, in the U.S. alone, 5 billion paper checks are sent every year.

All too often for billers, there’s the perennial challenge of only sporadically having the right data in place to reconcile payments.

“You can get a check without an account number. You don’t know where to apply it — or even to which invoice it needs to be applied,” said Shultz.

The mismatches pile up in the biller’s back office, manual review is warranted, and people spend time (and get paid) trying to make sense of it all. It’s no small wonder then that billers want to free up resources, cut costs and accelerate payment flows — and, by extension, cash flows.

Merchants and other businesses (particularly SMBs) dependent on getting bills paid on time also, understandably, want to see processes improved. Shultz noted that many smaller firms are waiting as long as 45 days to get paid.

“There’s just no visibility in the system,” Shultz said, “and visibility improves cash flow planning and forecasting.”

Billers, he said, can affect positive change throughout the ecosystem by incentivizing consumers to pay digitally. Doing so would satisfy four desires that billers have: to get paid on time, in full, electronically and with automated reconciliation in the mix.

But some of those goals break down in today’s bill payment ecosystem with that aforementioned paper chase in place, he noted.

“The bill payment industry just has not kept up,” said Shultz. This may seem paradoxical, given the fact that so many other areas of consumer interaction have made the leap to a mobile, always-on status, where all manner of sites and apps allow individuals to take advantage of touchless commerce.

The billing industry needs to lean in and take advantage of the digital tools that are out there, Shultz said. With digital initiatives, it must take into account that some individuals will choose to pay a bill directly online. In other cases, they want a single place to view and pay their bills electronically — at their bank, for example, or via an aggregator site.

With that digital leaning in, billers can be paid on time, Schultz said. Additionally, with automated reconciliation helping the back-office functions, billers’ operational goals can be satisfied.

That, in turn, means that customer servicing costs will decrease and inefficient paper checks will be excised from the bill payment ecosystem, benefiting all stakeholders.

The emergence of digital innovations (including Mastercard’s Bill Pay Exchange) offers application programming interfaces (APIs) for billers or their service providers that deliver bills digitally to consumers and enable them to pay with cards, real-time payments or through traditional bank conduits.

Payments Choice is Critical  

“Giving consumers payments choice will help improve cash flow and improve the responsiveness of consumers paying their bills on time,” Shultz said. There is already some evidence of this in Europe, where in Denmark and Norway, a majority of consumers are making their payments electronically.

There are longer term advantages in the mix, too, according to Shultz.

The more streamlined the biller can make the experience of paying for the expense of daily life, the more likely it is that they will cement consumer loyalty, which of course improves revenue visibility. Consumers are increasingly aware of and concerned about the energy used in producing paper bills and processing checks, which offers new avenues for billers to incentivize consumers to make the leap to digital channels.

“There’s a strong connection between the top line, the customer experience and loyalty, which all ties into a representation of who you are and what kind of service you deliver to your customers,” said Shultz.

Looking ahead, Shultz said there has been strong progress made over the past few years to help shift away from handling paper bills and checks. Consumer and treasury banks have been increasingly adopting digital bill payments, understanding that digital options are a critical part of consumers’ lives as they finally put the checkbooks and the stamps back in the drawer.

As he told Webster: “We’re pretty far along in the digitization of our lives — and the biller will see the benefits of going digital and encouraging their consumers to do so, too.”