Service Provider Q&A

Verizon Communications is using a progressive strategy to drive electronic billing and payment uptake by consumers and large business customers. This strategy involves four key channels: payment by phone; direct debit and credit card; direct payment on Verizon.com; and a consolidated model built on CheckFree’s technology and services, which allows customers to receive and pay bills through their own bank’s online portal.

CheckFree is the largest provider of consolidated electronic billing in North America—if you pay bills through a banking site, it’s highly likely that CheckFree is making it happen—and provides Verizon with the tools it needs to support and grow the consolidated electronic billing and payment channel. Angeline DePauw, director of electronic remittance for Verizon Communications, and Matt McKernan, senior vice president, billler business unit for CheckFree, sat down with Billing World and OSS Today to discuss her company’s goals and challenges in electronic billing and payment. Here’s what they had to say.

BWOT: In the early days, the drivers around electronic billing and payment had a lot to do with cutting costs, saving paper and speeding payment. Over time, we’ve seen vendors elaborate their messaging to push on everything from environmental benefits to improved customer communication and retention. What are the real drivers behind electronic billing and payment for Verizon today?

DePauw: The main thrust is still to reduce paper and cost. The postage cost kills us. Paying electronically is one thing, but we’ve also got to get customers using the electronic bill—that represents big savings. Understand that you’re looking at so many different costs—postage, paper, manual handling of paper payments and calls coming into our business centers. We’re also trying to increase self-service and get people to pay online so we do not bottleneck the business centers. So, the main driver is still to reduce cost—paper, postage, calls into contact centers and business offices, and at the same time meet what the customer wants.

What we hear the most is that customers want to pay by credit card, but we only offer it in five states that we started a pilot on, because we can’t cost justify the expense of it—particularly the interchange fees. We started a pilot to prove that if customers pay by credit card they’d buy more goods and services and pay sooner, but they don’t. We also don’t get the money in any quicker than normal and, frankly, credit card customers aren’t high risk, they just want the airline miles and points. … We opened [credit card payment] up further in our pay by phone channel. That service, though, is outsourced. The vendor charges a convenience fee but also picks up all the expense.

CheckFree brought the online banking customers to us, and that also helps us reduce our cost. We can take advantage of the large network they maintain.

BWOT: Verizon supports both bill direct and consolidated electronic billing. How do you differentiate between them—what different benefits do they bring you?

DePauw: We don’t view them differently. They are just options for the customer. My goal is to increase electronic payments and bill suppression, and I don’t care how they get to us as long as they pay electronically. If they pay at Verizon.com, that’s fine. If they do it by home banking, that’s fine. Of course one difference is that the home banking means guaranteed funds are coming in, so there’s no risk there. But at Verizon.com we don’t know if that money is good or not until we try to collect on it. If the customer selects an e-bill, they can go either to Verizon.com or to the online banking. Either way we mandate that they suppress their paper bill.

BWOT: Customer segmentation is becoming increasingly important in telecom. Does electronic billing help you identify high-value customers?

DePauw: We really can’t or are not allowed to look at, say, Bank of America’s customers who pay us [due to privacy laws]. We do the analysis on the customers who come to our website and pay. We look at what they do online at Verizon.com versus what they do at a home banking site.

BWOT: What can CheckFree tell us about limitations on the use of customer information, and how does you address this with customers who’d like to use this information to segment and target their customer base better?

McKernan: In most cases, CheckFree does not own the customer data, it belongs to our bank and biller clients. CheckFree does invest significantly in independent primary research to understand the mainstream consumer and segment attitudes and behaviors, and then shares that research with our biller clients to create effective EBP adoption strategies.

BWOT: Does the online banking option reduce your ownership of or communication with the customer at all?

DePauw: We do lose a bit of contact with the customer, but marketing owns our bill—they say what it will look like, and they are using it more as an advertising tool. If the customer gets an e-bill, they get the link that leads them back to the website to get our bill, and we can deliver our message. If they go to home banking to pay, we might lose some communication, but if they get a paper bill they still receive the message.

BWOT: As electronic billing has moved beyond just billing and payment, what is Verizon doing with it to improve customer communication and care?

DePauw: We are really trying to move customers to the self-service strategy and move those calls out of our business office. If you have bill inquiry or repair, you can do that online, you can order services or set up payment arrangements. So the whole thing is to move people online, and we hope as we move them online they will get more comfortable paying the bill online and suppressing that paper bill. This is where everyone is headed, and as the younger generation comes up, they only know online. This transition will happen over time, and you just have to keep at it. You do get to points where growth flattens out and you have to ask, what else can we offer out there?

BWOT: What’s the overall take rate and growth rate on the various forms of electronic billing and payment you offer? What steps are you taking to further drive customer adoption?

DePauw: Remember that customers can get a paper bill but pay electronically, or vice versa. For payment, between whether they pay by bill direct or Verizon.com, it’s about the same, but a little more on the home banking side.

29.8 percent of the consumer customer base use electronic payment, but that number actually includes some of our large business customers as well.

Those who use recurring direct debit or credit card, that’s roughly 28 percent of the overall base of those who pay electronically. Those customers are on our automatic draft program, and we automatically access their account.

The other 72 percent [of that 29.8 percent that make up electronic payers] is split roughly into 12 percent for pay by phone, 15 percent through Verizon.com, and the rest is online banking [about 45 percent of electronic payers].

Our preferred method is our recurring program—it can be forecasted so we know when the money is coming in. We prefer bill direct because it’s on our web site and it’s the best customer communication vehicle, but the overriding driver is just to get customers to accept an electronic bill and pay electronically. In the landline side of the house, where my responsibilities are, payment is pretty much the same every month, and when people sign up for recurring they pretty much know what the payment is going to be. On the wireless side, the bill amount fluctuates quite a bit more, but that’s outside the scope of my responsibility today.

Last year we had a 38 percent growth rate for customers signing up for e-bills, but of our total bills that we send out, only 3.5 percent get it electronically. We hear customers want some kind of incentive to switch over. We are working with our marketing people and I’m leading a team to put together a strategy to get people to suppress their bill. For example, is there a sweepstakes we can do? No one wants to mandate [the switch to an electronic bill]. We could offer credit card billing in exchange for paper bill suppression.

Our big initiative is with one of CheckFree’s major banking customers, where if the customer is paying online but not receiving an e-bill, we could do a trial period where people can test out an e-bill and still receive their paper bill. Our hope is that maybe once they’re comfortable they’ll switch over. We want to increase exposure to the electronic bill, and we will target those who are already paying electronically. We’re looking to do that with Verizon.com also—trying to get those who view their bill online but still receive a paper bill [to switch to electronic billing also]. Only 15 percent of those who pay electronically also have their paper bills suppressed.

BWOT: Matt, how does the telecom industry compare with other industries in terms of adoption and sophistication of consolidated electronic billing?

McKernan: From our perspective, the telecom industry is slightly ahead of other industries in using and in understanding the value of consolidated electronic billing and payment. Most of the telecom companies were early adopters of both the biller direct and consolidator [paying bills at one site, such as a bank] models. Along with utilities, telcos were the first to offer electronic bills back in 1997.

However, because consolidated EBP was very new at that point and there were few distribution points [banks offering e-bill presentment], they somewhat shifted their focus to the biller direct model. Now the consolidator model is growing at a faster rate than biller direct. There are nearly 2,000 distribution points where consumers can receive e-bills from CheckFree billers, and over 9 million consumers who have discovered the convenience of consolidated EBP at CheckFree-supported sites. The telecom industry is among the first to understand consumer demand for consolidated e-bills and embrace this trend, leveraging marketing done by the banks, including free bill-pay services, to help achieve e-bill adoption and paper suppression goals.