The Internet can be used to create a better overall bill paying experience for customers, even if they don’t use traditional electronic bill payment services.

 

1.

Bill Payment Reminder Service:
Triggered by Biller/Bank

How Delivered: e-mail from bank; e-mail from biller

Description: With inexpensive (free?) digital connections to their customers, billers should be encouraged to communicate with their customers more frequently. Customer contact no longer has to be limited to a single billing statement per month. Billers could use e-mail to talk to customers 3-4 times per month using the bill and payment as the primary reason for the communication. For example, here is a standard three-part communication (with an as-needed fourth e-mail):

1. The first e-mail comes the day the statement is cut. An e-mail is sent summarizing the amount due and offering immediate payment alternatives.

2. The second e-mail is sent approximately five days before the payment is due, reminding customers to send their payment right away to avoid late payment charges.

3. (If needed) Payment reminder e-mail is sent the day after the due date.

4. Payment confirmation e-mail is sent the day payment is received/posted.

Our example uses e-mail, which is the cheapest and fastest. But reminders could also be in the form of faxes, voice mails, even postcards, or a combination.

2.

Bill Payment Reminder Service:
Triggered by User

How Delivered: bank Web; e-mail from bank

Description: Same idea as above but far simpler. The user programs their own reminders via a form on your Web site. User can select timing, frequency and wording of the reminders. This enhancement could be implemented for just a few thousand dollars (or less) and could easily generate that much in free publicity.

3.

Preauthorized Debit Sign-Up Area

How Delivered: bank Web

Description: Create an area on your Web where users can sign up for preauthorized debit payment to major billers in your area (don’t forget your own loan payments). Include educational material on how it works, what the checking account statement entries look like, consumer rights under Reg. E, and how to make changes. Include links to the billers’ customer service departments for specific questions.

4.

Bill Pay Calculators/Budgeting Worksheets

How Delivered: bank Web; biller Web (private-branded)

Description: Provide household/business budgeting templates and financial calculators.

5.

Bill “Overload” Protection Services

How Delivered: bank Web, or automatically

Description: Provide overdraft protection targeted towards bill payment needs. Loan advances could be triggered via a link from the bill payment section of your Web site or via e-mail requests.

6.

Biller Customer Service Inquiry Form

How Delivered: bank Web

Description: Create a list of major billers with links to their customer service Web sites, and/or customer service e-mail addresses. Build a fill-in-the-blanks form that will help users better formulate their questions. Use cookies to prefill the forms with user info (if desired).

 

7.

Links to Biller Order Entry

How Delivered: bank Web

Description: Along with linkages to biller’s customer service, include similar linkages to the biller’s online catalogue or order-entry sites. Bank clients could receive complimentary enhanced listings.

8.

Smart Payment Services

How Delivered: bank Web; biller Web (private branded)

Description: We’ve long advocated an expanded role for banks in helping users monitor and pay their bills. Banks could establish a bill payment “cockpit” that would provide a very real sense of control over their monthly payments. Users would log in to the virtual bill pay driver’s seat; take a quick glance at the fuel gauge (checking account balance); review bills paid last month; and see estimated payments for the coming month (estimates would automatically be generated from payment history). Users would have an opportunity to override the estimated payment amounts, or simply allow the month’s bills to be paid on “auto-pilot” (with the bank making estimated payments on the user’s behalf).

Users should be able to twist virtual dials within the cockpit to increase or decrease the size of the payments, turn auto-pilot on or off, etc. The end goal is to make bill payment practically invisible for the user.

9.

Bill Payment Budgeting Services

How Delivered: bank Web; biller Web (private branded)

Description: Utilities have long offered services that average the customer’s bill over the year to make it easier to budget for and pay. A bank could apply the same concept to all the bills, calculating a single monthly bill payment that covers everything; very similar to a mortgage escrow account. It could be prefunded with a customer deposit, or shortfalls could be covered with a loan advance.

10.

Bill Payment Confirmations

How Delivered: e-mail, fax, page, or voice message from bank or biller

Description: Send confirmations when payments are posted; when payment authorizations are made online; five days before automatic payments are to be made; when high-dollar checks clear; when payments are late; when late payments are received, etc. Let the user sign up for the type and frequency of confirmations.

11.

Online Escrow Services

How Delivered: bank Web; e-mail to/from bank

Description: If you haven’t witnessed the online auction phenomena yet, cruise to  www.ebay.com  and take a look. At any given time, the site has some 60,000 live auctions in process. Buyers can peruse specific categories, e.g., Beanie Babies, software, office equipment, etc., or search by keyword description. The auctions make their money by charging sellers a few cents to put a lot up for bid.

Other than collecting and posting feedback on buyers and sellers, the auction companies don’t get involved in the transaction once the winning bid has been declared. It’s up to the buyer and seller to agree to a method of payment and consummate the transaction. In practice, personal checks or money orders are generally used. But both are time-consuming and/or risky for one of the parties of the transaction.

Several escrow companies have surfaced to remove the risk from the transaction (see  www.tradesafe.com ). The buyer sends payment to the escrow company (either by check, money order or credit card). Upon receipt, the escrow company informs the seller to ship the goods. Once the goods arrive and are deemed acceptable, the escrow company releases the funds to the seller. For its role in the transaction, the escrow company pockets fees in the neighborhood of 5% of the purchase price.

Financial institution would be well-suited to provide online escrow services. They would have both credibility and the infrastructure to handle various payment types. Online escrow services could provide a new source of fee revenue and generate new transaction account and loan business from buyers and sellers.

 

Ebay  www.ebay.com is generating 30 million hits per week from buyers bidding on 148,000 items currently on the auction block.

12.

Online Money Orders

How Delivered: bank Web form; e-mail to bank

Description: We’d switch banks for this: a form on the bank Web to send money orders and messages to individuals or businesses. The form would allow users to enter an unlimited amount of descriptive information that would be passed on to the recipient.

The combination of guaranteed funds provided by the money order feature and the flexibility of the user-composed message would allow the money order to be used for bill payments, invoice payments, payments for goods purchased online, gift cards, etc. Transaction fees could cover the costs.

As you can see in example (above right), the user is able to compose and deliver a holiday greeting and gift at the same time they pay their monthly lawn-care bill.

Other than the free-form message, all other fields would be completed using drop-down boxes on a Web-based form. Ideally, previous online money orders would be archived so that recurring payments could be quickly entered.

The service could also be delivered via e-mail assuming adequate security measures were put in place. The new encryption standards being implemented for e-mail should help in that regard.

 

13.

Bill Payer Fraud Controls

How Delivered: bank Web form; e-mail from bank

Description: Studies show that upwards of 75% of Internet users have concerns about fraudulent transactions. Financial institutions could take a large step in alleviating these concerns by providing user fraud controls on their online banking programs, especially pay-anyone bill payment.

The controls should be flexible and set by the user. If a security parameter is violated, various actions could be taken depending on the severity of the breech, and taking into account the habits and preferences of the user. Most times, a simple e-mail “heads up” would alert the user to the activity. For example, every time a bill payment for more than $1,000 was initiated, an
e-mail would be sent to the user. Assuming it was legitimate, no further action would be taken.

But suspicious activity would be handled differently. For example, if 50 bill payments totaling $7,200 were initiated to an unknown post office box , the user would get an e-mail or voice message requesting user authorization to proceed with the payments.

At a minimum, users should be able to select the maximum number of bills initiated in a certain period For example, no more than $2,000 in bills initiated in any
7-day period. Users could be issued an override code in the event they needed to override the fraud parameters. (Use of the override would also trigger a message.).

 

SFNB’s bill payment user controls guard
against fraud and user error.

Security First Network Bank (screenshot above) was the first bank to implement rudimentary security controls on its Web-based bill payment program. Users establish preferences in the following three areas:

•  maximum total dollars scheduled each day
•  maximum dollars per payment
•  maximum dollars to paid on a given day

14.

Bill Pay Usage Incentives

How Delivered: bank Web; biller Web

Description: A few banks have tried sweeps designed to encourage bill payment usage. We think more financial institutions should experiment with this approach. Users need an incentive to learn a new way of performing an everyday task. We also think it’s time to take the concept one step further and incorporate ongoing incentives into bill pay programs. The incentives don’t have to be large; just something that allows users to “keep score” and creates a little game around the drudgery of bill payment.

Some ideas:

•  Frequent flyer miles: Award one or two miles per $100 paid. A households paying $40,000/yr. in bills would earn only 400-800 miles, which would set you back something in the neighborhood of $10/yr. You could award bonus miles for various actions like setting up a mortgage or referring a customer.
•  Bill pay “green stamps”: Establish a point system that allows users to collect points redeemable for bank services or discounts at area merchants.
•  Performance rewards: Track the number of paper checks written vs. electronic items (see below) and reward users with points for certain milestones. For example, award 500 frequent flyer miles whenever electronic items is more than 50% of the total.
•  “Free bill” sweeps: Pick one bill pay transaction each month and pay it for the lucky customer. This is a fun promotion that is also good marketing and PR.

 

Bank of America  www.bankamerica.com gave away $10,000 worth of free loan payments late last year as an incentive to use its electronic bill payment.

15.

Keep Score

How Delivered: bank Web

Description: Whether you provide monetary incentives (outlined above) or not, consider helping users “keep score” with continual feedback on their electronic bill payment “performance.” Track adoption of electronic payments over time with comparisons against last month, last year, etc. Provide comparisons against others users, with top performers posted on the Web (names disguised of course). Performance measures could include: highest percentage of electronic items vs. total items; biggest increase compared to previous month, year, quarter, etc.

 

16.

Create a Transaction Feedback Loop

How Delivered: e-mail from bank; e-mail from biller

Description: To gauge customer satisfaction over time, create an e-mail based feedback loop for each transaction. Send an e-mail confirming each transaction with an estimated posting date at the merchant. Why create so much extra e-mail?

1. Provides assurance to users that transaction have been executed by the bank.

2. Provides a reminder of the transaction (especially if it is an automated recurring payment).

3. Provides ongoing assurance that no unauthorized transactions have been made.

4. Educates users about the timing of payment requests and subsequent posting.

5. Provides a convenient way for customers to inquire on a payment (by replying to the e-mail).

6. Shows users are tracking each payment, and that you care about each and every payment.

7. Provides a means of tracking ongoing payment quality by measuring the ratio of e-mails sent vs. replies received.

17.

User Initiated Bill Presentment

How Delivered: bank Web

Description: Bill presentment may be the holy grail of bill payment, but we are years away from its widespread use. Intuit’s forecast doesn’t have 50% of the bills even available electronically until sometime in the year 2003. In the meantime, you could provide a means for users to present bills to themselves. Create an applet on your Web that allows users to specify the amount and due date of recurring bills. Then present those bills using the Web, e-mail, or any of the methods discussed in this report.

Since the payment amount is merely an estimate, users would need a mechanism to change it before giving final authorization. You could also give users the option of designating any changes as permanent or temporary.

 

18.

Guaranteed 100% On-Time Bill Payment

How Delivered: bank Web; biller Web

Description: Bill payments authorized online according to the terms and conditions of the service would carry a 100% guarantee of accuracy and on-time delivery. Otherwise, you will pay all late charges, fines, etc. 8

NUI promotes Rapid Pay on its front page at www.nui.com . Rapid Pay includes three options: Direct Debit, Pay-By-Phone, and Pay-By-Internet