At the PayItGreen website (www.payitgreen.org), consumers are asked "What's your financial paper footprint?•bCrLf While this statement refers to the number of trees sacrificed for one's financial statements each month, a "financial paper footprint•bCrLf has an entirely different meaning for companies that bear print and mail costs. There is no question that it is expensive to mail paper statements, and growing more so. This leads us to the same question the industry has been asking itself since the late •90s: how to move more consumers to Electronic Bill Presentment and Payment (EBPP)?
The remittance industry should take an example from the airlines and their transition from paper to electronic tickets. Current industry struggles aside, the airlines have mastered moving consumers toward automation and self-service in support of their own cost cutting initiatives.
Learning from the Airlines
Historically there have been two types of tickets issued for airline flights - the paper ticket and the electronic ticket (also known as ticketless travel). It took about ten years to move the ticketless travel needle from 0 to 100%, but as of June 1, 2008 electronic tickets became mandatory for International Air Transportation Association (IATA) members. This migration required several steps or phases.
First, there was a period of education and incentives. Airlines extolled the benefits of ticketless travel: •it's a snap for you to make changes,' •all you need is your credit card,' •your ticket is stored in our system just waiting for you when you arrive at the airport,' and •no forgetting your ticket.' Travellers could receive extra miles or a discount for booking online and taking an electronic ticket. The final step occurred at airlines processing a small percentage of paper tickets. There was frequently an additional charge (up to $50) to use them. Today, travellers can't get a paper ticket at most airlines for any price.
The IATA estimates the potential savings associated with electronic ticketing at $3 billion a year globally. On average, an airline now spends one dollar to process an electronic ticket compared with $10 to process a paper ticket. With this transition complete, the airlines have moved on to converting travellers from agent assistance to self-serve on the phone and at check-in.
Balancing Revenue against Costs
How can we apply this business case to the remittance arena? While the airlines charged for paper tickets near the end of the transition, they knew it was the last step in weaning consumers off undesirable behavior. That $50 paper ticket fee was not considered a revenue stream, but a means to push the last consumers to a less costly service offering. Over a period of ten years, the industry incrementally, but inexorably moved passengers from the unwanted and more costly behavior one demographic group and promotion at a time.
Moving consumer behavior requires paying attention to the demographics of the group in question. Different types of consumers respond to different incentives and adopt new behaviors as a result of different offers, so a variety of rationales and incentives will probably be required to achieve widespread adoption. According to the Federal Reserve Bank of Boston Consumer Payments Survey, payment choice is driven by varying levels of concern about Security, Timing, Cost, Privacy, Convenience, Errors, Cost and Record Keeping. Different clusters of consumers weigh these variables differently.
Until now, the remittance industry has taken an "if you build it, they will come•bCrLf approach to electronic statements. Banks and credit card processors have had some success with their high end customers on the basis of a message which includes speed to receive the bill, security from identity theft and convenience, but adoption numbers remain fairly stagnant. Going forward, remittance processors might consider taking an incremental, targeted approach, finding the different levers that move different consumers towards EBPP and away from paper bills and payments. As an example, there are two current trends that marketers might consider when attempting to move the needle on paperless billing. First, is to tie into the "Green•bCrLf marketing boom. The second involves a trade in revenue earned from charging fees for expedited payments in return for an uptake in ePayment and presentment adoption. Each of these approaches targets a different consumer segment, but both have the potential to add to the total adoption rate.
The Expedited Payment Marketplace
While many financial institutions have begun to offer expedited payments (payments credited within one day) and to charge associated fees, consumers typically rely on Biller Direct websites to make these payments. According to a Digital Institute Consumer Study, of consumers that have switched primary payment methods from mail in the past three years, 44% switched to a biller website. Another point to consider is while the number of expedited payments is going up over time, the average fee for those payments is headed south.
Who are the consumers making expedited payments? Probably some of the four in ten workers (41%) who say they often or always live paycheck to paycheck, according to a 2007 CareerBuilder.com survey. These consumers are also using expedited payment services more and more often. They like the ease of use of Biller Direct sites and knowing when their bill will post, but they hate the fee. An example from the ChoicePay web satisfaction survey: "I don't like that I have to pay a fee for a bill that is already overcharging me on rising oil prices. However, I do appreciate that the bill is paid almost immediately, rather than the two days it takes my bank to transfer the payment.•bCrLf
Why Not Make Them Pay?
Telecommunications companies are already learning this lesson, with many adding individual charges for mailed itemized bills. Some print and mail a summary bill at no cost, but charge when a consumer requests the bill detail by mail. This practice keeps their official rates low, but leaves them open to potential bad publicity and customer churn.
If we go back to the goal of reducing operational costs, and compare the airlines' ticketing transition to the cellular providers' immediate jump to fees, consumers are likely to be adversely surprised by new fees and to consider the changes to be draconian. One suggestion instead would be to figure out the right "carrot•bCrLf to induce most consumers to change behavior on their own. Offering free expedited payments to people who enroll in paperless billing may be one advantageous promotional approach at this time, providing a vehicle to reduce the net cost of supporting consumers challenged with making their payments on time.
The Marketing Appeal of Green Initiatives
But not everyone lives paycheck to paycheck or wants to make last minute payments at the biller site. Arguably, there is another segment of consumers who could be reached with an environmental appeal. Research on green initiatives continues to support the value of offering eco-friendly options to consumers as a means to change behavior.
A recent report released by research and strategy firm Javelin stated that, "•although most consumers expressed an interest in adopting green banking behaviors, three out of four consumers still receive paper statements. (However), if every U.S. household stopped receiving paper bills and statements, 687,000 tons of paper would be saved every year — enough to circle the Earth 239 times.•bCrLf
The report identified that most consumers want to do the right thing, but it is up to the industry to influence consumers by offering tangible, compelling green options, including turning off paper statements. Among the key findings, 43% of consumers said they are more likely to do business with companies they perceive to be green.
Note that the green initiative and free expedited payments for late payers both end up at the same result, but by appealing to different audiences within the consumer pool.
The Electronic Payments Association, NACHA has recently released the Pay It Green initiative, complete with a toolkit for billers, and a calculator for consumers to help drive the green message about turning off paper. You will find the complete package at www.payitgreen.org.
The Uptake on Paperless Billing
As an example, one utility company recently implemented a program that offered consumers free credit card and ACH online payments with an option to sign up for ePresentment. For the initial launch, this company solely communicated the promotion on their website bill payment options page, providing a short description and link to sign up for the service, but did not make a green appeal. Over 1,500 consumers made payments within the first five days, with 23% opting for paperless billing. These consumers, likely driven by a similar constellation of Convenience, Cost, and Timing concerns made a decision to turn off paper payments, but is that the best they could do? A quarter of their expedited payment customers who chose the web instead of a walkup or phone option? How many more consumers could they reach with a green appeal at the point of decision? Even better, on the front page of the site — or on the bill itself? Time will tell because the eco strategy is their next marketing push, scheduled for third quarter.
Driving Desired Behavior with Many Messages
Perhaps the major lesson to take from the airlines is that the message to the consumer has to be tailored to drive the desired behavior - moving away from paper to electronic. That message, the incentives and the relative pricing of various options will change over time as different demographic clusters are converted. Today's tactic may be to tie free expedited payments to EBPP with a "green•bCrLf message or to offer discounted or free expedited payments for consumers who go paperless. As the cohorts who are persuaded by that message are migrated, the message will need to change with new offers until that point in the future when the days of receiving a paper bill, like paper tickets, is a thing of the past.
Director of Product Development and Marketing for ChoicePay, a provider of EBPP services, Elspeth has over ten years working in B2B technology marketing and product development. Elspeth is a current member of the NACHA Council for Electronic Billing & Payment (CEBP), with a specific interest in Electronic Billing and Presentment.
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