Bill Due? More Consumers Expect an 'Expedited' Option

  Whether they need to beat late fees or prefer the convenience and speed of electronic payments, a quarter of consumers surveyed recently said they had used some type of expedited payment method in the past 12 months.
  Fort Knox National Co., an Elizabethtown, Ky.-based third-party billing services provider that hired Edgar, Dunn & Co. to conduct the survey, defines an expedited payment as any method that is faster than mailing paper checks to a biller. The online survey of 2,016 consumers was conducted in November 2004.
  Consumers have grown accustomed to paying faster than ever for goods and services with several payment types, and they expect the acquirers who bill them to offer a variety of quick-payment options even if that means paying an extra fee. Third-party billing vendors can help acquirers offer all or some of those payment options to consumers, handling everything from Web payments and call centers to walk-up windows and processing.
  Many consumers who responded to the survey conducted expedited payments to meet due dates at the last minute. Some, though, used payment channels such as automated telephone or Web-based systems that quickly posted payments to their accounts, even though they had plenty of time before the bills were due.
  The average American today is billed for more services than in the not-so-distant past-two phone bills instead of one, along with monthly charges for such services as cable television, home security and health-club memberships. "The average household now has 15 bills per month," says Paul Flanigan, Fort Knox chief marketing officer. With more bills to pay, it is no wonder consumers sometimes have trouble keeping track of when payments are due, he says.
  Nearly half of the respondents who said they had paid bills after they were due said they had simply forgotten or run out of time. Another 30% said that money was tight, while 23% cited traveling, 16% said illness and another 13% said they were late at a financially tough time of the year such as the winter holiday season.
  Consumers also have more credit cards than ever, and they are more aware of the consequences for late payments to issuers. The bills for which the largest number of consumers reported having used an expedited payment method were credit card payments, 42%, and home mortgages, 12.3%. Car loans were next, with 8.3%.
  No surprises there, says Jerry Portocalis, senior vice president of sales and marketing at BillMatrix Corp., a Dallas-based third-party billing services provider. "Consumers are paying those bills that have a high impact on their credit scores," he says.
  In fact, when consumers could list more than one worry they had about paying bills late, 63.6% cited late fees. Damage to credit ratings was the second-most frequently cited concern, on 52% of consumers' lists. Disruption of services was third, mentioned by 24.3%.
  The most popular payment method, whether for late or on-time payments, is by telephone. Nearly 52% of the respondents called in payments. That can put a strain on call centers, which is why many acquirers try to steer customers away from live operators to interactive voice recognition call centers or Web sites that they maintain themselves or hire third-party billers to operate.
  Flanigan predicts that as consumers become accustomed to using automated payment methods instead of live operators, they will move away from phone payments and toward the Internet.
  Almost one-third of those surveyed by Edgar Dunn paid via the Web. Only 8% of respondents paid using old-fashioned rush delivery or overnight mailing of a check, and just 6% made expedited payments via wire or money transfer.
  Some 66% of respondents said they had never done an expedited payment.
  Those who did use expedited payments did so regularly. Most, 73%, of the respondents who used expedited payment methods reported doing so at least once every six months. Another 13.4% said they used them once every three months, 9.1% did so at least once a month and 4.5% initiated an expedited payment more than once a month.
  Most consumers surveyed seem to follow some strategy for holding onto their money as long as possible but before acquirers, issuers or other players assess late fees. Of the users of expedited payments, 21.2% reported paying on the day the bill was due, 20.3% reported paying one day before the due date, and a danger-loving 18.8% paid after the bill was due but before late penalties. Their just-to-be-safe counterparts, 14.3% of them, expedited payments three days before they were due. A spacey 6.4% expedited payments whenever they did not know when they were due.
  Flanigan says many consumers know exactly when their bills are due and how long different payment types take to post to their accounts.
  "As consumers have gotten used to additional controls, they've become increasingly savvy about the billing cycle," he says.
  Billers' services include live and automated call centers, Web-site development, payment processing and settlement, and collections services. How much they charge billers and how much billers charge customers for expedited payment services varies. "We have a number of billers who provide the service for free until a couple of days before the due date," Flanigan says.
  Indeed, customers are willing to pay more for bills that will hurt them more if they are late. "How much you can charge is directly related to the penalty involved," Portocalis says.
  Predictability Perk
  Patricia Frazier, vice president of Denver-based Western Union Payment Services, a subsidiary of First Data Corp., says Western Union provides every major mortgage and car-loan company with Quick Pay service, which converts walk-up cash and check payments into electronic payments.
  Frazier says most people who pay through Western Union do so because they are trying to meet due dates. But they also like using services that give them confirmation their payments have been made or have arrived. "When you put a check in the mail, you don't know when it is going to get there," Frazier says.
  BellSouth Corp., an Atlanta-based provider of telephone, cellular phone, Internet and digital television services, offers its customers a variety of electronic payment methods, says Melissa Bernardino, BellSouth manager of treasury advisory services.
  Recurring payments via automated clearing house (ACH) debits to bank accounts or credit cards are free. Making a one-time electronic check or credit card payment online or via a telephone interactive voice response service also is free, though BellSouth adds a couple of steps to the credit card process to steer customers away from the payment option that costs the company more in interchange.
  Consumers can walk into a brick-and-mortar site such as a check casher or supermarket customer service desk that acts as an agent for BellSouth and pay with cash, check or money order for whatever the agent charges, usually about $1. Or they can call a BellSouth payments representative to pay with a credit card or check. The service costs $2.50 per payment.
  Bernardino says she has listened in on calls to BellSouth's payment center and has not heard many customers complain about the fee, which helps offset labor costs.
  Consumers who pay $2.50 to call in their payments to operators when they still have plenty of time left intrigue Bernardino. "We had a number of customers who called BillMatrix when they could have just as easily put a check in the mail," she says. "At the end of the day, there's still a group of customers that you don't know why they do what they do."
  Portocalis says most of BillMatrix's customers pass extra fees on to their customers if regulations allow them for expedited payments. State laws prohibit some utilities such as electricity and gas from charging extra fees. But those utilities still can charge fees if it is clear that the company charging the fee is a third party, such as Western Union's SpeedPay service, instead of the utility itself, Frazier says.
  Bernardino says BellSouth is seeing a steady trend away from walk-in payments toward telephone and Internet payments. Of the 63.8 million payments BellSouth customers made from January to June this year, 64% of customers mailed their payments. Electronic methods accounted for 25% of payments, and 11% were initiated by walk-ins.
  Of the 16 million electronic payments initiated during that six-month period, 34% were one-time electronic-check payments and 29% were ACH "credit push" payments from online banking sites. Moreover, 23% were recurring electronic-check payments, 13% were one-time credit card payments, 1% were made with the BellSouth MasterCard and another 1% were recurring credit card payments.
  Bernardino says while most customers who call in payments do not mind paying a fee, many get annoyed when told they cannot pay BellSouth over the phone with credit card payments. They can only do so online, and only with Visa or MasterCard.
  "We do find a push-back that we don't accept all credit card types," Bernardino says. "They wanna pay when they wanna pay how they wanna pay."
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