Online bill paying: boon or bane?
A paperless future is coming for the world of bills,
and some companies are trying to hasten that future by charging
customers for the privilege of receiving their bills the old-fashioned
way: by mail.
Executives readily admit that getting customers to
give up paper statements is a challenge, but the savings to their
companies will keep them pushing toward that goal.
The incentive for companies to herd customers toward
online billing is huge.
"Our cost base is reduced by more than two-thirds
when we present a customer's billing statement electronically rather
than through a paper statement," American Express CEO and Chairman
Ken Chenault told an executive strategy forum presented by Forrester
Research last fall.
"Electronic payments produce a 50 percent cost
savings vs. payments by mail. Our relative cost of providing customer
service online is 90 percent cheaper than providing the same service
through a telephone service representative."
The average cost of mailing bills fluctuates anywhere
from about 50 cents to $1.50 per statement, estimates Robert Leathern,
a senior analyst who tracks online billing for Jupiter Research.
Does that savings justify sticking customers who aren't
wired with these charges?
"That's definitely an issue," Leathern says,
but he points out that the customer base for most of the companies
that have resorted to charging for mailed statements consists almost
totally of people who are online. "It's really only online
banks, long-distance carriers [and the like] -- companies that have
full-featured account manager tools online and the nature of the
business is online-centric."
Take NetBank. Since July 2001, it has charged $3 for
each mailed monthly statement.
"Fewer than 10 percent of our customers, about
9.8 percent, take a paper statement," says Rich Jeffers, assistant
vice president of corporate communications. "Most of our customers
were using the online option, taking an online statement. [Adding
the charge for paper bills] is an effort to encourage that behavior.
We'd love to see that at 100 percent."
An online tradition
In fact, automatic electronic payment without a mailed bill has
been an online tradition. Internet service providers such as America
Online rarely mail statements because they generally bill their
customers' credit cards directly. The only hard copy of the transaction
the customer would have was the credit card statement.
Unlike ISPs though, banks and telecommunications companies
are among the many businesses that have traditionally snail-mailed
paper bills, which makes customers who prefer paper bridle at these
"A lot of companies tell us that consumers are
not ready in many cases to turn the paper statements off,"
The people who prefer paper statements are not necessarily
Luddites. Take David Kohn of Deerfield Beach, Fla., who has been
using the Web for years. He used to have a good deal with his ISP:
receiving an invoice by e-mail and paying by mailed check each month.
Then, the ISP was "gobbled up" by the much
larger Earthlink, which changed the payment options last May. Under
the new plan, those who paid by check would receive a monthly paper
statement and would be charged $2 for it. To continue receiving
an online invoice and avoid the $2 monthly charge, check customers
would have to switch to electronic payments, either through a credit
card or electronic funds transfer from a bank account.
"Basically, I'm insulted," he says. "They're
forcing me to pay more because I choose not to let them have access
to my checking account, and I don't have a credit card in my name,
and I wouldn't let them have access to it even if I did."
He is looking for another ISP.
That illustrates one of Leathern's points, that it's
risky to impose such charges on existing customers.
"If it's a new relationship, [companies] can
use it as a selling point and say something like, 'We manage to
keep costs down by sending you an electronic statement rather than
mailing it to you.'"
The risk of losing customers over such charges prompts
a good deal of caution in most businesses that aren't "online-centric."
"If there's a long-standing and established expectation of being
able to receive and pay bills by mail, the customers are more likely
to rebel at having a charge added," Leathern says. "You
see a lot more of the carrot approach: 'Turn off the paper statements
and we'll give you a $5 statement credit or an Amazon.com gift certificate.'"
There are a number of instances from the consumer's
end in which a paper statement is preferable to an online statement,
"For example, if you needed a printout of your
bank statement to get a mortgage, the online statement might not
be acceptable. Not only might it look differently from a paper statement,
but it might include different information."
Just like consumers, not all companies are ready
for this brave new billing either. Some folks who readily went to
online billing say the promised convenience just wasn't there.
Bridget Testa of Houston tried using the online statements
offered by her long-distance carrier, "but it got to the point
where it was taking so long to access the server that I changed
back to getting it on paper."
It would often take an hour's worth of attempts to
access the bill, she says.
"Then, each time I wanted a different view of
the details of the calls -- one of the benefits touted for e-bills
-- I'd once again have to try it repeatedly. I have no objection
to e-billing or e-payment, but if they want people to use it, they
have to get their infrastructure up to the task of handling the
volume of customers. All I have to do with a paper bill is slit
open the envelope and spread the papers out -- no waiting."
In their push to get people online, companies will
have to realize that "different strokes for different folks"
truly applies, Leathern says.
"Many find [online billing and payment] convenient
and will be willing to jump right in. Others will need their hands
held to transition from one activity online to another, and others
would prefer to sit down with paper bills on a Sunday afternoon
and pay them."