M-Commerce: For Billers, Mobile Isn’t Optional

Richard Crone and Heidi Liebenguth

To ward off third-party interlopers, billers must understand their bill is their brand. That means seizing the unprecedented opportunity that lies in mobile apps.

Remember the bad old days of online-banking bill pay? Billers were forced to accept bulk payments in the form of so-called check-and-list payment—one check and a list of accounts to credit.

The early deployments required consumers to allow at least five business days for the consumer-service provider and financial institution to snail mail the check and allow extra time for manual processing by billers. It was as if optical character recognition workstations and other automation techniques used to process paper remittance stubs and checks were never invented.

This resulted in many exceptions to the normal automated workflow, causing processing delays, input errors, customer-service problems, and finger-pointing all around. It was all the result of third-party intermediaries controlling the user interface and injecting themselves between billers and their customers.

We bring up these painful memories because if we don’t study the past, we are doomed to repeat it.

Billers were forced to support third-party intermediaries by default, principally because they were late in providing electronic bill presentment and payment (EBPP) directly to their customers. Billers may have invented what is called in retailing omnichannel support, allowing customers to pay their bills at bank and third-party Web sites, over the phone with attended agents and voice-response units, at walk-in centers, and by mailing paper checks.

However, the electronic biller-direct channels that encourage the use of direct debits through the automated clearing house consistently generate the highest customer-satisfaction scores with the greatest user loyalty at the lowest cost.

For these and many other reasons, recurring billers should always favor and encourage biller-direct EBPP. And this online interaction is going mobile.

Mobile Malaise

Unfortunately, our direct and recent experience in consulting to recurring billers in every major recurring segment, from cable television, utilities, and insurance to all types of loan servicers, shows that most have not adapted their EBPP platforms to support the new mobile reality.

This once again puts recurring billers at the mercy of third-party intermediaries, especially when you consider the fact that U.S. adults are now spending more time on the Internet through their smart phones than on wired desktop computers, according to The Nielsen Co. This has led to exponential growth in mobile banking, which is growing up to five times faster than Internet banking.

And for some financial institutions, more than one-third of all the service interactions conducted through their mobile-banking app are for bill-payment functions.

As with online banking and EBPP years ago, financial institutions and third-party intermediaries have launched mobile bill-payment features ahead of recurring billers. In a world where the one who enrolls is the one who controls, being a fast follower is not good enough. It certainly won’t maintain the advantageous position that billers now enjoy for their own biller-direct channels and Internet sites.

But one opportunity, created by the advent and popularity of mobile technology, can help billers avoid repeating their online bill-pay history. This opportunity lies in the world of apps. Let us explain.

For best-in-class recurring billers, adoption and growth rates for their Internet Web sites have continued to increase. Much of this growth is driven by millennials, who don’t enter the bill-payment market with 12 to 15 bills per household. Rather than sign up for a bill-payment service with their financial institution, they are more inclined to visit the individual biller Web (mobile-optimized, if available) sites of the few service providers they rely on.

The growth of the millennial demographic—more than 77 million folks ages 18 to 30 and the single largest segment in the U.S. economy today, with their preference for mobile AND everything electronic, including payments and online services—signifies a new opportunity for billers. They can once again optimize enrollment towards their preferred, low-cost, and loyalty-building tenders and direct channels in advance of third-party intermediaries.

EBPP: Killer App

Billers need only measure the connections to their own Internet Web sites by mobile devices and tablets. In our consulting experience, mobile connections typically account for not less than 20% for non-mobile-optimized Internet sites and double that or more for those that have carefully formatted their content for mobile devices and are offering their own branded mobile app.

Customers have demonstrated a clear preference for mobile. If billers expect to regularly serve them directly, they must enrich the experience by providing a mobile app.

Consumers spend more time in apps than mobile browsers by a factor of four. Studies indicate that consumer time spent in retailer apps has skyrocketed. Billers are retailers of subscription and recurring services; the deployment of a mobile app by the biller represents a new way to improve the customer experience and deliver a higher level of personalized service. EBPP is the cornerstone feature of the overall customer self-service (CSS) functionality in a biller’s app.

Billers can learn much by studying the recent efforts of retailers in launching shopping apps. The retailers that have formed the mobile payment consortium known as the Merchant Customer Exchange (MCX) claim over 50 million downloads of their own individually branded shopping apps. Emulating retailers, recurring billers can design a mobile app not only for bill payment but a host of differentiating service features that will create new revenue opportunities beyond traditional product and service sales.

Smart billers are responding to this demand with apps that go well beyond the services offered through traditional wired desktop Internet Web sites. Geico, State Farm Insurance, Allstate’s esurance, and many other billers, for example, feature EBPP prominently in their mobile apps, but also envelop all the other parts of their service proposition.

The primary goals of MCX are to protect retailers’ data rights and to challenge the high cost of card-based payments by developing its own network for direct, over-the-top clearing arrangements using participating retailers’ branded, proprietary mobile apps.

Again, billers are retailers, and the same opportunity exists for recurring billers that band together and take the lead to enroll their customers for mobile bill payment in advance of interloping third-party intermediaries, new entrants, and financial institutions.

The bill is the brand. It is compelling proprietary content with a customer touch point to be managed as a strategic asset by the biller. And the EBPP process, especially when mobilized, possesses all the characteristics of a killer app. Namely, it is individualized, dynamic, perishable, and interpreted and analyzed differently by each viewer with a predetermined schedule for review that must be acted upon every month.

Billers As Retailers

Mobile bill payment enables more than just payment. By building a customer-relationship management (CRM) database, where customers are known and reachable before, during, and after each billing, statement, and payment experience, a biller can increase its overall franchise value.

Mobile bill payment in a biller-branded app can be further leveraged to collect the big data that will help billers serve customers in a more personalized way, responding to their history, preferences, location, and more.

 

A biller-branded mobile app can also be used to steer remittance choices to the lowest cost/preferred payment tenders, providing new functionality that promotes the biller’s lowest-cost remittance options such as ACH-based automatic and semi-automatic direct debits. And the mobile app can serve as a platform for new sources of revenue from actionable offers and advertising from sourcing brands and complementary businesses.

Ultimately recurring billers, using their own biller-direct channels and mobile apps, can join forces to lower overall costs by securing direct over-the-top clearing relationships with partnering banks in the same way retailers are doing today with their consortium-based efforts such as MCX.

In doing so, billers will be in a position to reclaim what is rightfully theirs, namely their proprietary billing content. They will protect their customer data from third-party intermediaries seeking to commandeer the customer relationship and sell competitive advertising as free riders on the bill-payment relationship.

Remember, the bill is the brand. Remittance statements and payments represent proprietary content and a customer touch point to be managed as a strategic asset by recurring billers, in the same way that retailers are banding together to protect the point of sale and payment data from interloping third-party intermediaries.

Working together, recurring billers can transform billing and payment functions from a cost center to a revenue-producing new line of business in the same way that MCX intends to do for retailers. In this way, recurring billers should be thinking of themselves as retailers … with built-in repeat business from known customers.

Mobile First

Pursuing a mobile-app strategy, using mobile EBPP as a cornerstone, can also materially impact the valuation of a recurring biller. As customer interactions shift to mobile, company valuations are predicated upon enrolled active users.

Consider just one example: Whats­-App sells to FaceBook for $19 billion. It has 450 million users, adding a million new users a day, and it represents the largest acquisition of a startup in history. Value per user: $42.

Or consider Intuit’s purchase of Check Inc. (formerly Pageonce) for $360 million, or $36 for each of their 10 million users. Intuit is valuing the regular interaction with known, enrolled customers and the upside opportunity that comes from turbocharging the data analytics that can be married with the billing and payment function.

Companies like Check Inc. are profiting from billers donating their statement and payment data—data that the billers themselves should be using to increase customer satisfaction and their own company valuations.

Recurring billers’ large and regularly accessible user base has value in itself. If customers are enrolled for EBPP and, ideally, the biller’s own mobile app, new lines of business are available from being able to reach these customers any time, anywhere for anything they might choose to opt-in for with the biller.

The guaranteed habitual contact point is the review, authorization, and confirmation of the bill payments, an enviable position that should not simply be abdicated to others without serious study. Smart recurring billers recognize that their content is valuable to their customers and others, and that the bill represents their brand. In the case of utilities and others, it may be the customer’s only awareness of their brand.

When Google acquired smart-thermostat maker Nest for $3.2 billion, and when Opower, an energy-usage analytics company, launched its IPO in April, the market affirmed the value of utilities’ user data in creating new revenues. Even regulated utilities and billers in non-competitive markets will be judged, and their market valuations impacted, by the total number of enrolled users in their mobile app.

The battle cry in financial services, retailing, and nearly every other consumer segment is “mobile first.” So should it be now with recurring billers and the plans they formulate for launching their own mobile app.

Richard Crone is chief executive, and Heidi Liebenguth is managing partner and research director, at Crone Consulting LLC, San Carlos, Calif.