In a recent chat with PaymentsJournal and Mercator analysts, Ron Shultz, Senior Vice President, Global Bill Pay at Mastercard shed some light on what the future of bill pay should – and can – look like… starting with the four areas of pain that financial institutions must address if they hope to transform the Bill Pay consumer experience and drive step change to reduce the use of expensive and inefficient paper checks.

Consumers in the U.S. pay about 15 billion bills annually, noted Shultz – an average of about 15 to 20 bills per household, per month. Of those 15 billion, only half are paid online and 5 billion are still sent by paper check in the mail or by phone.

Historically, financial institutions’ online banking website and later mobile apps were central to a consumers’ bill pay experience. However, the process of paying bills online through an FI has become increasingly more difficult.  For example, consumers who want to pay bills electronically from their checking account have to go through a very manual process to set up their billers within their FI’s online website or mobile app and often times this results in a consumer becoming frustrated and giving up. FI-based bill pay was championed as a great customer retention tool for banks. And yet, financial institutions have not invested heavily in their bill pay capabilities. Currently, as few as 27% of consumers[i] make their online bill payments through their FI. In 2010, this number was closer to almost 40%.  The dramatic drop has been the result of online bill pay users finding a better experience by paying directly on billers’ websites.

As Mercator Advisory Group’s Director of Debit & Alternative Products Sarah Grotta notes, “In the last two and a half years, we’ve seen large billers and sellers take advantage of the prevalence of mobile phones to use that channel to communicate directly with their consumers. Through messaging alerts, payment confirmation and payment choices, Billers have improved the consumer bill pay experience and are seeing results.”

According to Shultz, consumers are facing four key pain points in their online bank bill pay experience. With new technologies banks can address these pain point:

A consumer who pays bills online may go to different sites for credit card payments, utility bills, insurance, healthcare expenses, telecom, and other bills. Biller direct sites are offering benefits that consumers appreciate such as the choice of payment and the opportunity to see their entire bill not just the amount due, and they are getting consumers’ attention by communicating with them directly through alerts and notifications about their bills. These features are sufficiently beneficial in that consumers are willing to go through the cumbersome effort of creating separate user names and passwords and log into separate biller sites each time they need to pay a bill.

However, this requires users to visit multiple different biller websites to pay on average 15 – 20 bills per month. They must keep track of bills that have been mailed or emailed to them, manage usernames and passwords for different sites, and leave payment credentials scattered across the web – a trail that is making consumers more and more uncomfortable as their concerns around privacy and security continue to grow.

Running counter to this trend is the satisfaction that consumers show with their financial institution’s online and mobile app experience. In a survey conducted on behalf of American Bankers Association, 93% of U.S. consumers rated their respective banks’ online and mobile app experience as “excellent,” “very good,” or “good.” The survey also found that 70% of Americans use a mobile device to manage their bank account at least once per month and 46% do so more than three times per month.[ii]  In addition, consumer research shows that consumers are looking for a consolidated place to view all their bills, pay all their bills and help support their monthly budgeting process. This data suggests that financial institutions have an opportunity become central to consumers’ bill pay routine once again by creating a better bill pay experience.

With all this in mind, said Shultz, it’s clear that the opportunity for a digital transformation in online bank bill pay is eminent. Sure, cash and check payments will continue to taper off over the years, but there will be no dramatic step change away from these methods until the alternatives become more attractive.

The industry has been proclaiming the death of the check for years now, but the reality is that billions of bills are paid by checks per year, even with all the technological advancement of the past two decades, there still is not a better way to pay bills for many consumers.

The check will go away, but to bring step change it will be incumbent on the ecosystem to bring “advanced” features to bill pay – that is, easy setup, more useful bill presentment, greater payment choice, and increased transparency.

“I should have a choice of payment and I should know exactly where my payment is along the way, just like I know when my Uber or Lyft is arriving,” Shultz said. “I should know my payment arrives at the biller and I should have the confidence and satisfaction that my account is up to date.”

Retiring the check stands to benefit everyone involved. Shultz notes that it is an expensive payment method to support, along with cash. Paper payments require manual processing and exceptions, which means more resources are needed and thus there is a greater cost for financial institution and billers alike. The time is now to modernize bill pay features and functionality.

Shultz explains that Mastercard is launching the Mastercard Bill Pay Exchange later this fall. The company is building on three decades of experience in the bank bill pay space combined with the newly acquired Vocalink’s real-time payments capabilities and expertise.

Shultz believes Mastercard will be able to bring new features and functionality to bank bill pay that he says will help accelerate the adoption of online bill payment.

Shultz explains that Bill Pay Exchange will be delivered to consumers via their banks, delivering modern features and functionalities created for today’s economy: Viewing and paying bills in a single place, easier/automated biller set up, broad bill presentment, payment choice and enhanced messaging.

Also important, says Shultz, growing our Biller Network of nearly 140,000 billers – the largest in the US – will go a long way toward creating momentum in this space. Billers also want to deliver bills electronically and get paid on time, with automated reconciliation and robust data delivered where, when, and how they need it.

“The timing is right,” Shultz said. “Perhaps a bit overdue. We see great focus right now from financial institutions on providing an upgraded bill pay experience for the consumers.”

[i] https://www.digitaltransactions.net/consumers-increasing-pay-billers-directly-rather-than-through-bank-sites/

[ii] https://www.aba.com/Press/Pages/111318MorningConsultResults.aspx

Bill pay transactions make up 30% of consumer spending, with the total estimated at more than $4 trillion annually in the United States. This makes paying bills central to consumers’ financial lives. Despite its importance, making an electronic bill payment can be a complicated exercise for a consumer. The segment is ready for change.

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