Fiserv, formed in July of 1984, became the leading United States Internet banking services provider and leader in electronic bill payment and presentment services upon acquiring CheckFree in 2007. In 2009 only a small portion of the company’s e-commerce revenue came from e-billing, whereas the majority came from electronic bill payment.
E-billing, also called paperless billing, is a method in which financial intermediaries or other billers can send bills to their customers over the internet, and electronic bill payment would be offering customers to pay those bills online.
The problem that Fiserv had run into was getting more customers to buy into the e-billing process. It was an easy sell to the financial intermediaries and other billers. They would be saving money in postage time needed to send bills out.
However, these people did not have the time to persuade the end customer to begin accepting e-billing over receiving a paper bill in the mail. By becoming involved in both the incoming and outgoing transactions of a customer, Fiserv could substantially increase its financial position. Facts
There are roughly 86 million “online” households in the United States. Of these households, 70% had been using electronic bill payment, but only 20% had been using e-billing. For the intermediaries (banks and billers) a paper bill costs roughly $1.25 per bill, but they could save up to 45%, or roughly $.56, per bill if customers no longer received a paper bill.
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Furthermore, customers who were receiving the e-bills, even if they were still receiving paper bills as well, required less customer service help. This allows for an additional saving of $2 to $4 per customer regardless of whether the customer was still receiving the paper bills. Obviously this would be an easy sell to any of the billers.
They are saving money and hopefully increasing traffic through their websites by having customers receive their bills online. This could be posed as a potential benefit on top of the savings that the billers would have from e-billing.
In order to target key segments of consumers to switch them from paper billing to e-billing, Johnson and Black performed multiple types of market research including internet surveys, focus groups, and concept tests.
The online interviews allowed them to segment their customers into different groups based on likelihood of adopting the e-billing process. These groups were also defined by the types of behavior each group demonstrated as well as by demographic and size. This would obviously allow Johnson and Black to decide which groups will readily make the switch, and which groups need more persuasion to accept e-billing.
I think focus groups, especially in this case, are very helpful. This generates specific questions that, in the customer opinion, are important and need to be answered. It gives a potential customers opinion on the matter, which then generates the positives and drawbacks of the product from the consumer’s point of view.
In this case the questions mainly revolved around how the e-billing process works. Some of them were, “Does the e-billing automatically pay the bill too?” and, “Who sends the e-bill?” As far as benefits go, consumers thought that the e-billing process was simpler and quicker, but they thought that a paper bill would serve as a reminder to pay the bill.
The concept test seemed to be where the most important steps were taken. A representative sample of 2,000 people was asked to try the e-billing for two months and then respond to a survey about it. What is interesting here is that the original sample, only about 4.5% of the consumers expressed interest in trying it.
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However, a similar sample was offered a $20 gift card to try the sample, and 53% agreed to try it. After a two month period 73% of those who did try the e-billing process said they would be willing to adopt the e-billing program. In other words about 774 people of the original 2,000 in the sample agreed or strongly agreed that they would take on this program.
Another item about the concept test that was great was they were able to group the individuals in the sample in the same groups from the internet surveys. The feedback provided by the individuals could then be summarized into positives and negatives by group which gives an even better understanding to Fiserv as to what needs to be done to convince those that would not readily adopt the e-billing program.
Another item that is important to note is the cost of the biller to get the end customer to switch to e-billing. In order to get a customer to go to complete paperless billing (not receiving a physical bill) the cost was $4 per customer. However, to get a customer to receive e-bills as well as paper bills, the cost was $2.00. Further research shows that it would then cost an additional $1.50 to get that same customer to switch to complete paperless billing after 12 months. Resolution:
I think right off the top, trying to get the group labeled as the “paranoid paper pushers” to switch over is one that is just not worth it. They only make up 9.3% of the market, and they will have little to no effect on a biller’s financials, as far as costs per bill, due to the fact that they will almost always pay bills on time.
They are the oldest group, which is expected. This group will not need any further “assistance” from the biller as they have probably been doing the same regiment their whole life and would be extremely resistant to change.
The “desperate avoiders” group is definitely a group that should be a prime target. They won’t spend additional money on something like e-billing, but the cost savings to the biller would be enough to provide the service for free. This is a group that normally loses bills, and forgets when they are due.
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This results in a higher cost to the biller due to calls that need to be made, and possible losses if the bills are sent to collections. The biggest complaint from this group was that a paper bill reminds them to pay the bill. It seems a bit contradictory to me that they are the ones more likely to lose them and forget due dates. However, the biller could offer to send e-mail reminders, which would cost next to nothing, as the due date gets close.
The biggest issue with this group is that they are not already using electronic bill payment. I think the billers and/or Fiserv should provide some incentive to this group of people (similar to the $20 gift card) to adopt these programs, but still allow them to receive a paper bill at first. Of course this will drive the initial cost up at first, but the potential savings in the first few years, if they do chose to go paperless, would more than compensate for that initial cost.
If they do not choose to go paperless, the biller is still saving between $2 and $4 per customer annually which will eventually wipe out the initial cost of getting them to try the online product. The “convenience seeker” group will also be a difficult group to persuade to adopt e-billing. They are similar to the “paranoid paper pushers” group in not losing bills and paying on time.
However, their biggest complaint, according to the concept study, was about computer failures and losing the data. The nice thing about e-billing is that all of the information is stored online. If at any time they need to pull up a record, they would be able to. So this tells me that they do not understand the product. I think getting them to try the product would be the hardest part.
I would again suggest a similar incentive that was used in the case study to get them to try it. After they are in, I would offer an online tutorial as to how e-billing works, or at the very least a “help” section that would direct customers to a frequently asked questions and answers page that could describe exactly how the system works. These questions could also come from the focus groups that were used earlier.
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Once these customers understand that the information is always readily available online, I think they will be easily swayed to use the e-billing process within the first year. The “self-improvers” group is the last group I think that any additional “work” would have to be done. Just by looking at the behaviors and attitudes that are common among them, it seems like they need to have a little more structure.
The e-billing process will essentially eliminate losing bills because you can always call them up online, and the process allows for easy bill management. Also, this process coupled with electronic bill payment will easily save time from having to sit down, write checks, and mail them out. Research also shows that they have minor internet security problems. Banks could offer fraud protection, at an additional price of course, to try to eliminate this.
This could be tricky because it does seem like this group does not have a lot of disposable income.
As far as the “e-savvy planners” and the “maximizers” groups go, I don’t see a need for any additional strategies than what have already been employed, like direct mail advertising, billing inserts, and e-mailing campaigns. These groups are accepting of new technologies, and I think they can easily see the time saving, the simplicity, the organization, and the overall efficiency of paperless billing. Also, the “e-savvy planners” are marked as a group that would be willing to spend more money on management and time-saving tools.
You could possibly design an app for smartphones that would allow people to manage their finances on the go at any time and pay bills as well. Billers could always charge for this app, which could also offset the early costs of getting some of the other groups to try e-billing. They make up a fairly large portion (19.7%) of the market, so by charging a small fee of say $5-$10 for use of the app could definitely offset those early costs.
Other options could be added like premium memberships to allow these customers access to other financial management tools. By taking some of these recommendations and acting upon them, I believe billers will greatly cut their costs in the long run. Of course this will boost profits for the billers as well as further establish Fiserv as a provider of user friendly technologies.
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