Online Bill Payment Consumer Barriers

Part
01
of two
Part
01

Online Bill Payments - Consumer Barriers & Solutions

Fear of fraud, lack of website speed, lack of familiarity and technophobia, hidden financial cost, payment delays, and lack of access to devices and infrastructures are consumer barriers to online bill payments. Fraud monitoring tools, local hosting, offering incentives for online payment, and third party integration arrangements to avert payment delays could be a few potential solutions.

FEAR OF FRAUD

PROBLEM
SOLUTION

LACK OF WEBSITE SPEED

PROBLEM
SOLUTION

LACK OF FAMILIARITY AND TECHNOPHOBIA

PROBLEM
SOLUTION
  • Billers can offer perks and discounts to customers who make online bill payments, thereby encouraging them to go paperless.
  • Billers can campaign to the customers highlighting the eco-friendly nature of online bill payments to arouse their eco-consciousness.

HIDDEN FINANCIAL COST

PROBLEM
  • People often overlook the financial cost of paper bill payment but get deterred by the financial cost of online bank and e-payment transactions.
  • Customers lack the education and awareness to understand and detect hidden costs involved in online transactions.
  • Payment services and instruments have costs connected to the use of the service as well as costs based on infrastructure and equipment.
  • There may be hidden costs involved in the use of innovative online payment services of, which customers could be unaware of and also in some cases, personal data will be asked in order to use the service.
SOLUTION

PAYMENT DELAYS

PROBLEM
  • Lack of an integrated system can cause payment delays which is a consumer barrier to online bill payments.
  • Credit Unions, a website addressing credit unions, found that people are concerned about the time taken to process online payments.
SOLUTION

LACK OF ACCESS TO DEVICES AND INFRASTRUCTURES

PROBLEM
SOLUTION

  • As 50% of US commercial banks are upgrading their payment infrastructure, there will be better customer access to the payment infrastructure.
  • The Federal Reserve System in the US has also released the future vision to improve the US online payment system, which includes improving speed, security, efficiency, international reach, and collaboration.

RESEARCH STRATEGY

Since online bill payments have the same process as general online payments, the assumption is that the consumer barriers to online payments apply to the online bill payments situations as well. One key barrier, fear of fraud, is identified from a PR Newswire study report on global online payments. This report probably has more barriers to online bill payment identified in it, but the rest of the report is behind a paywall.

The website of Paytabs, a payment processing company features an article that identifies low website speed and the resulting low reliability as a barrier to online payments. A blog titled, Blue Pay observes that lack of familiarity and technophobia, and hidden financial costs deter people from making online bill payments. Lack of familiarity and technophobia are clubbed together for the purpose of this research because they are interconnected. The blog says that people overlook the financial costs involved in making a paper bill payment, and from this, it is deduced that regarding online bill payments, such a worry about hidden costs prevails. Blogs and websites like Blue Pay and Mashable, having a good global internet ranking (as per Alexa ranking), are assumed to be good sources for identifying further customer barriers to online bill payment. Mashable lists payment delays as a customer barrier to online bill payment and offers solutions.

A Finconet study report also provided some details and solutions to the problem of hidden costs, which is another customer barrier. It also identifies the lack of access to devices and infrastructure required for making online bill payment as another barrier. The International Financial Consumer Protection Organisation (FinCoNet) is an international organisation of supervisory authorities, which have responsibility for financial consumer protection. Though this source is from 2016, it is relevant because it identifies two crucial consumer barriers, which are still relevant and offers solutions to them.
Part
02
of two
Part
02

Online Bill Payments - Consumer Motivating Factors

The factors motivating consumers to use online bill payments are convenience, saved costs and less hassle, speed of payment processing, the option to pay multiple bills are once, and the fact that online bill payments mean less clutter and paper.

Overview

  • A 2017 report titled 'How Americans Pay Their Bills,' from ACI Worldwide noted that consumers spent $3.9 trillion on bill payments in 2016. The survey data was based on the bill pay habits of almost 2,500 individuals throughout the U.S., and it revealed data into how different generations pay their bills, as well as how the tactics and channels they employed in 2016 to handle their bills have changed in contrast to 2010 and 2013.
  • An estimated 8.2 billion bills (56% of total bills), according to the report, were paid online through a third-party site, bank, or biller.
  • Between 2010-2016, the volume of bills paid via check decreased by 20%. The quantity of bills paid using ACH rose by 10%, while bills paid with a credit card doubled during that time span to 15%.
  • Meanwhile, issuers of credit cards eclipsed alternate biller sections as around 46% of all credit card bills were paid online, compared to an estimated average of 36% of bills paid online from every biller category.
  • At least 72% of online bill payments were conducted through a biller's site, which indicated an 18% increase since the year 2010. Merely 32% of bills were organized on a recurring basis, while the other 68% were established as one-time payments.
  • The 2017 report titled 'Expectations & Experiences: Consumer Payments' is based on a survey of 3,031 U.S. households that utilized their checking accounts to complete a purchase or manage a bill in a specified time (30 days) before the survey was released. As per this report, 64% of users of online banking in 2015 stated they used it "to receive and pay bills." About 75% reported paying bills through online banking by 2016, while 35% had obtained their bills electronically in the specific time span (30 days prior).
  • Online bill payment sentiments was noticeably high since 79% of users of this service rated it at least an 8 of 10. Compared to mobile pay users, only 70% feel the same way.

Generational Differences

  • Bills handled through the mail diminishes with every younger age cohort as the volume have decreased to 15% for the millennial group. Online bills, as a share of overall bills, grows with younger age groups as the volume for millennials, Gen Xers, baby boomers, and seniors have reached 61%, 60%, 52%, and 42% respectively.
  • Gen Xers (16%) and millennials (22%) handle more of their bills with debit cards compared to baby boomers (11%) and seniors (5%).
  • Out of all the online bill paid by millennials, 78% are conducted through the biller's site. For seniors, this figure is about 60%. The websites of banks represent just 22% of the online payments for millennials and 39% for seniors.

Motivating Factor #1: Online Bill Payments Are Convenient

  • As per a 2017 report titled 'Expectations & Experiences: Consumer Payments,' 50% of people who pay their bills through their financial organization and 47% of people who pay through billers directly say that they are motivated to do so because online bill payments are more convenient.
  • Billers can set up online payments as the default option for consumers, and then give them the option to opt-out and pay offline if they wish to do so. Once they have started using online bill payments, consumers will see it is actually more convenient.

Motivating Factor #2: Online Bill Payments Save Costs And Are Less Hassle Than Mail

  • About 43% of individuals who pay their bills through their financial organization and 40% of those who pay through billers directly report that they are motivated to do so because online bill payments save costs and are less inconvenient than mail.
  • A biller or business that could save a sizeable amount of funds when more clients pay online have the capacity share some of the savings by providing a reward to people who shift to online payments in the form of a discount, a gift, or an opportunity to win a prize.
  • A survey from Online Resources indicated that the online bill payment adoption rate increases to 80% when alternate payment methods (e.g., telephone payments) charge less than $5 for the service. So charging a fee for offline methods lead to client's using more convenient online methods to pay their bills.

Motivating Factor #3: Online Bill Payments Are Processed More Quickly

  • Less than one-third (24%) of individuals that pay their bills through their financial organization and 31% of those who pay through billers directly say that they are motivated by the swift processing of online bill payments.
  • The typical individual only spends between two to four minutes preparing a bill with a check that they plan on mailing. According to Bluegrass Integrated Communications, "A year’s worth of stamps for 8 monthly bills is around $50. Paying a bill online usually takes less than a minute. Billers can allow consumers to set up automated payments to further save time and avoid any late penalties."

Motivating Factor #4: Online Bill Payments Allow You To Pay Multiple Bills At Once

  • More than one-third (33%) of people who pay their bills through their financial organization say that they are motivated to do so because online bill payments enable them to pay more than one bill simultaneously.
  • Billers can assist consumers with regulating their invoices "without worrying about paper bills and checks while decreasing the odds of lost payments and time spent shuffling papers." Consumers will encounter an email after each payment concerning the billed invoices. Those are ultimately stored within their inbox forever.

Motivating Factor #5: Online Bill Payments Mean Less Clutter And Paper

  • Around 40% of those that pay their bills through their financial organization and 36% of people who pay through billers directly say that they are motivated to do so because online bill payments result in less paper being used.
  • Billers can encourage consumers to pay online by revealing that it can save paper and aid the environment. Billers can share the gallons of water, number of trees, and tons of paper that have been saved.

Research Strategy:

For the ways that billers can better accommodate or provide the motivating factors, we had to rely on blogs of companies in the online payment domain, including Bluegrass Integrated Communications, PaySimple, and Sighted. These companies provided shared insights on how they and other billers have encouraged online payments. These were the most reliable sources of information that we came across.
Sources
Sources