Billing Meets the Age of the App

Bills and bill payments are going digital much faster now. That’s good for some e-payment providers—but consumers are seeing benefits, too.

Even before the pandemic, a foundational shift in bill payments was under way. Now, digital bill payments have even more momentum.

The push to digital payments prompted by the onset of the Covid-19 pandemic in 2020 definitely had an impact on the electronification of bill payments. But many observers assert that was going on even before the pandemic struck and shows little signs of waning.

One striking piece of data is that, according to Fiserv Inc.’s Expectations & Experiences research, based on data collected in the fourth quarter of 2020, 46% of seniors 75 years old or more used electronic billing, compared to 40% in 2019. And senior use of automatic payments jumped to 79% in 2020 from 65% in 2019. The report also found mobile bill pay use increased to 45% in 2020 from 40% in 2019.

Before the pandemic, the payments industry was changing as consumers gravitated to online devices, whether desktops, tablets, or mobile phones, and check use has fallen. In the most recent Federal Reserve triennial payments study released in 2019, the number of checks written fell to 16 billion in 2018 from 20.2 billion in 2015.

The continuing digitization of bill payments is significant. Household bill payments now total $2.75 trillion per year in the United States, found a report released in December from bill-payment provider doxo Inc.

“Even before March 2020, there was an ongoing trend to digital transactions, with an ongoing rise in the use of mobile phones, and the move from cash and checks to digital channels,” says Sanjay Gupta, executive vice president at Miami-based ACI Worldwide Inc. “The pandemic accelerated that in a few dimensions.”

No More Stamps

One trend is non-paper billing options, Gupta says. More companies are offering, and more consumers are choosing to receive, bills in electronic format only. Consumers during the pandemic had an aversion to using stamps and the postal services. While U.S. Post Office locations were open during the peak of the 2020 lockdowns, many services, such as passport applications, were by appointment only.

Another trend is the use of mobile channels and mobile wallets, Gupta says. “We have seen growth of 50% in the use of mobile wallets in the past year,” he says. The third trend is the increasing ease consumers have in using digital services. In August, ACI added the PayPal and Venmo wallets from PayPal Holdings Inc. as options for consumers to pay their bills.

At doxo, vice president and co­founder Roger Parks sees similar trends. “For bill pay, it was as simple as people don’t go to the post office to get stamps,” Parks says. “They were forced to try online bill payment.”

Earlier this year, doxo and InComm Payments announced a service to enable billers to receive digital payments from customers that prefer to pay in cash. To initiate a payment, consumers capture a barcode generated via the doxo mobile app and scan it at the register of a merchant in InComm’s VanillaDirect network.

After scanning the barcode, the consumer pays his bill in cash through the merchant. Now, as consumers have set up their billing payments online, many are sticking with the electronic payment option, Parks says.

A related change is how the U.S. Postal Service is changing its delivery and pricing. Beginning in October, the Post Office changed its current three-day delivery metric for first-class mail to include an additional day or two for some pieces traveling longer distances. “They’re making mailing a check less desirable,” Parks says.

Make It Free

It’s not just bill-payment providers that are experiencing growth. Bill payments made with automated clearing house transactions are increasing, too. “Online bill payment is an inherent use case for remote payment that doesn’t rely on physical in-person delivery or processing of paper payments, statements, invoices, and remittances,” says a spokesperson for Nacha, the governing body for the nation’s ACH network.

In the second quarter, Nacha says there were 2.2 billion consumer-initiated ACH payments on the Internet, an increase of 14.3% from the year prior and up 37.5% from the same quarter in 2019.

While external factors may be pushing many consumers to electronic bill payments, billers and their vendors are relying on that alone to motivate consumers.

Nacha says many billers provide an immediate credit when consumers pay a bill directly on the biller’s Web site. “This is a key benefit for consumers in paying bills online,” the spokesperson says. “During the pandemic, many consumers experienced delays in mail delivery, both for statements and for payments, so the reliability of online bill payment is also a key strategy.”

At Seattle-based doxo, making bill presentment and payment mobile friendly is a top priority, Parks says. More than 66% of the payments made with doxo—it works with more than 100,000 billers—are made on a mobile device, he says. Overall payment volume is up 70% year-over-year for doxo. More than 6 million U.S. households pay bills using doxo, he says.

Though the number of billers providing online payment is impressive, Parks says there are many more without that capability. If the holdouts now want to capitalize on the electronic payments surge, Parks says, the key is to ensure paying a bill is free, though he acknowledges many government entities charge a convenience fee.

“If [users] have to pay a fee there’s going to be less adoption,” he says. Enabling the ability to link to a bank account for payment is another driver. And as more billers enable online payment, the broader inventory will result in more transactions.

Relieving App Fatigue

ACI’s Gupta says today’s strategy for online bill payments must keep the user experience paramount. “It’s not just that it’s a digital method, it needs to be convenient,” he says. “People are coming to expect that in all areas.”

Another element is to focus on a mobile-first experience, he says. Consumers are using the latest smart phones and have developed a comfort and expectation about what they can do with the mobile devices.

In 2018, ACI announced moBills, a service that puts bill presentment and payment in the mobile wallet on a smart phone. Participating billers send the information to consumers, and it appears in the Apple Pay or Google Pay wallet. Payments can be made directly in the wallet. Gupta says the wallet presentation may also alleviate some app fatigue consumers could develop from trying to manage separate apps for each business.

A good user experience is essential, Parks says. “We work with billers to make sure [the online bill pay option] is easy to find on their Web sites,” he says.

These types of maneuvers will likely aid the digitization of bill pay, or at least these providers expect so. “We’re seeing ongoing activity moving from checks and cash to digital,” Gupta says. “We’re seeing the rapid acceleration of the mobile channel. It’s happening.”

Concrete evidence is in the data, Parks says. “People react with the wallets and their time,” he says. “Bill pay is a utility. You just want it to work. If it works, you do it again.”