January 21, 2014 •Brian Watson
Whether you're a consumer, a CFO, or both, there's a lot to like about online billing and payment.
Delivery is fast. Payment is simple. Automation reduces errors and creates efficiencies. And statement digitization reduces expensive processing, printing, and mail delivery costs.
But despite its advantages, EBPP success isn't easy. Or cheap.
Far from turnkey, it takes plenty of time, money, and focus to introduce and operate a profitable platform. Not to mention ensure customer buy-in.
The good news: two-thirds of American consumers pay at least one bill online each month. That makes for a solid base from which business can build a break-even audience.
But of that group, an estimated 20% change the payment channel they use on a month-to-month basis. Even more daunting – given that many of the cost benefits of EBPP are a byproduct of eBilling – Forrester Research reports that only 24% of consumers are receiving eStatements alone (with another 29% receiving both an e- and paper statement).
In other words, building a profit profitable base of paperless billing and payment users – one with the kind of volume needed to cover both initial setup costs and variable subscription or transaction fees – can be a long, involved process.
And until you reach a break-even point, EBPP will be a revenue cycle cost – rather than a way to collect more and spend less.
That’s why it pays to take a measured approach to EBPP deployment; one that focuses on lowering what you pay to host and run your app.
Read on for four tips designed to help you do just that – reducing solution break-even without sacrificing all the cool stuff that makes online billing and payment such a great revenue cycle tool.
1. Limit Statement Hosting Costs
Hosting probably isn’t the first thing that springs to mind when you consider the costs of online billing and payment. Things like application setup, customer notification, and payment processing just intuitively seem more likely to affect the price you pay than something as simple as storage space.
But hosting an EBPP application is about more than the server capacity it takes to run the software. Statement presentment is also a key component of most online billing and payment solutions. And hosting digital statement images for thousands and thousands of clients can add up quickly.
It’s not a simple tradeoff to navigate – especially because having easy access to an online repository of past statements is a major selling point of EBPP for many consumers.
To keep statement hosting costs from getting out of hand while still offering customers the ease of digital record keeping, consider setting a limit for how many months you store a bill online. For example, hosting a three-month supply of statements allows customers to go back and check recent bills. But it also keeps you from getting nickel-and-dimed by the cost of hosting thousands of statements – most of which will go unviewed after the initial billing period.
2. Consider Convenience Fees
Credit and debit card processing fees are a major source of EBPP overhead. As part and parcel of the cost of doing business, merchant service providers add transaction, interchange, and gateway charges that cut into per-transaction profitability.
One way that businesses offset those additional costs is through convenience fees – charges levied against consumers that pay for a product or service using an alternate pay channel. For example, if a business’ customary channel is mail-in remittance, payments made using any other method – say IVR or through the web – could be eligible for a convenience fee.
Enticing as that revenue offset might seem, businesses considering a convenience fee policy would be wise to tread lightly.
Why? Simple: customers traditionally balk at paying extra for things they perceive to be free – like online payment.
Verizon faced a public relations nightmare over its introduction– and subsequent cancelation one day later – of a $2.00 online convenience fee in 2011, with over 95,000 customers signing web petitions within hours of the announcement.
Stories like that don’t mean convenience fees should be out of bounds. However, there are some important points to consider before you make it part of your EBPP policy, including:
• Card associations (like Visa, Mastercard, American Express and Discover) have rules that govern convenience fees. Double-check with your merchant processor to ensure you’re in compliance with their regulations.
• Most card associations prohibit fees on recurring transactions (e.g. automatic monthly payments).
• Most associations also prohibit fees being levied on credit card transactions, but not on other forms of online payment that don’t include processor fees – like ACH.
• Businesses can charge a convenience fee for one-time credit card payments, but waive additional costs for recurring transactions using ACH. That policy is popular with businesses because it encourages low-cost ACH auto pays, while still enabling one-time credit card payments.
3. Set Online Payment Limits
Another way to limit credit card processing fees is by establishing payment rules that limit the number and kind of transactions customers can authorize online.
Without online pay limits, customers can unknowingly (or purposefully) drive up processing overhead by making multiple small payments on an outstanding balance over a given period.
That could be a customer innocently paying their balance in installments – say a small payment every couple of days for a week. Or, in a more malicious scenario, a disgruntled client voicing their displeasure with your business by paying off a $5.00 balance with 500 separate one cent nuisance payments.
Either scenario can quickly cut into overall revenue collected. To avoid costly online transactions:
• Establish a minimum amount for online transactions – say $3.00 – that ensures credit card processing costs will be covered by the amount of revenue collected.
• Set a limit on the number of transactions that can be completed in a specific date range to prevent customers from making multiple payments – each with a separate processing cost – over a short period of time.
4. Be Patient with Upgrades
Emerging eBilling technology – like text-based SMS billing and payment or IVR– can be plenty enticing.
But while there’s a clear utility in those kinds of tools, there’s usually an additional expense, too.
From a cost/benefit standpoint, it doesn’t make a lot of sense to upgrade to the latest notification and payment channel tools if you’re not already reducing customer billing costs using simple eStatement delivery and online payment technology.
That’s why it pays to start small with a simple, stripped-down solution that ensures initial setup and activity costs are as low as possible. Then – once you’ve built a break-even audience – gradually add new components that provide additional cost, speed, and automation benefits.
