5 Burning Questions: ChargeSmart’s COO Philip Mikal

Philip Mikal is Chief Operating Officer of ChargeSmart, a provider of online payment solutions to the financial and mortgage industries. Headquartered in San Francisco, ChargeSmart enables customers to pay their mortgage, auto and education loans as well as utility bills via the Internet using a major credit card. As COO, Mikal is responsible for day-to-day development, design, operation, and improvement of ChargeSmart’s electronic payment platform as well as customer research and analysis.

For our Briefing Room on Consumer Payment Choice, Mikal shares how ChargeSmart is modernizing the way people view all types of bill payment by delivering convenience, reliability and efficiency.

How would you describe your payment instrument and the value proposition to consumers and merchants? What are you replacing or complementing?

ChargeSmart offers consumers the ability to use their credit or debit card to make bill payments for merchants that typically do not accept cards. It’s a complementary service as the industries we focus on have a product, normally a loan or lease, where their business model is not favorable to the costs associated with card acceptance.

The 2008 Consumer Payment Choice Study conducted by the Fed concluded that cash is the most widely used payment instrument for retail payments, suggesting that the cashless society is still more fiction than fact. Why do you suppose that is the case, given the fact that cards have been adopted by 93.4% of the population and cards are so widely accepted?

My personal experience is that cash remains an easier to use payment type for most consumer purchases. Although some merchants are adopting programs like Visa’s No Signature Required or Mastercard’s Quick Payment Service for purchases under $25, a majority are seemingly not participating in these types of programs or the programs have yet to be expanded to all merchant types. Merchants also have little incentive to promote card usage over cash. Fraud and chargeback costs are material to any business even when within industry standards.

Consumers view security and ease of use as the most important determiner of payment type choice. How does your payment product map to these two attributes?

As ChargeSmart’s main value is the use of card for bill payments, consumers benefit from the same security and ease of use they are already familiar with.

Surveys suggest that consumers have adopted new electronic payment methods, like online banking, but mobile in the U.S. still accounts for <2% of payment transaction volume. Will your payment type play any role in driving the adoption of mobile of a payment type? Why or why not?

It’s unlikely that ChargeSmart will have any significant impact in driving the adoption of mobile payments. Our customers normally pay their bills from home or at work which has resulting in very little demand for mobile access.

Consumers report using fewer checks, but almost three quarters of them still use them to make bill payments. That suggests one of two things: those who send bills to consumers don’t provide convenient to use electronic payment options or consumers don’t want to use them. What is your view on this?

I’ve seen that consumers are very sensitive toward the pricing and convenience of various payment options in the market. Demand is there to move away from checks, but alternatives like pay-by-phone often have fees associated with them – I’ve regularly seen phone payments have a fee higher than $10 per payment, which is above the threshold of convenience for most consumers. Additionally many find the websites of various billers confusing and time consuming to have to register and manually enter payment information. Paying all their bills at the same time using a checkbook is easier than visiting five or more Websites every month.

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