Mastercard: real-time data hurts bill payments
If there is one universal experience in everyday financial life, it is paying bills.
And yet, although we’ve all gone online, most of us have written checks and measured cash flow against what’s owed – and the experience is fragmented at best and friction-filled at worst. .
Along the way, they can also align bill payments with consumer standards and expectations for other purchases.
“Compared to innovations with POS and digital checkouts, bill payments have really lagged behind,” she told Webster.
The statement comes amid a backdrop where 15 billion bills are paid each year in the United States – and about 60% of them are done digitally, up from 40% a decade ago. The other 40% is done mostly by check, which gives you an idea of the fragmentation that still exists.
Fragmentation exists even within digital channels, as two main channels have taken hold: aggregator-based bill payments and direct billing channels. In the first case, consumers go to their financial institutions (FIs) and set up billers to make payments. In the direct option, consumers go to merchants’ websites to pay their bills.
“We’ve seen the direct billing model grow in popularity over time,” Toukan said.
She argued that the aggregator model is relatively clumsy; on the other hand, the direct billing option gives consumers the peace of mind that their transactions will be completed in a timely manner (with confirmation numbers and insurances). The channel also gives consumers more choice in how they make payments rather than having to pay through their bank account.
When paying through an aggregator, it can be difficult to set up billers, she said. Individuals do not receive all their invoices in the same place and can pay through their bank, without necessarily obtaining payment confirmation from the issuer of the invoice.
Regardless of the channel, Toukan said, information is key — and yet information is sorely lacking when it comes to most online billing activity. Data can be patchy and only exist in pockets, depending on the company the consumer is transacting with.
In fact, consumers would ideally want a one-stop-shop for paying their bills. And there is reason to hope.
“For the first time in a long time, we’re seeing financial institutions looking to revamp their programs, with a focus on retention, loyalty, engagement and rewards,” Toukan said.
Digital entrants are also looking to add bill payment functionality to their offerings.
Along with real-time checkout functionality, real-time data can be leveraged to keep consumers engaged and satisfied.
Toukan pointed to Mastercard’s own Bill Pay Exchange, which allows consumer and biller to exchange real-time information (on real-time rails) when payments are made through aggregators.
Real-time data and ubiquity
“The availability of real-time data enables improved consumer/biller experiences and greater ubiquity of eBill adoption,” she said.
Consumers care about seeing their bills and having payment choice. Aggregators offering bill payment can expand their offerings beyond simply giving consumers the option to pay through their bank account. Now, when consumers pay through banking or digital aggregator channels, they can receive real-time notifications, with payment-related confirmations.
“A real-time message can be sent back to me from my biller, which improves everyone’s efficiency,” Toukan said.
Flexibility means consumers can also dictate how payments are made, when they pay, and how often, so they can budget more effectively.
While there is no one-size-fits-all approach (some billers need to combine batch payments with real-time payments), having a range of solutions and options is essential. Toukan added that real-time payments can be a particularly attractive option for consumers who pay their bills late.
To achieve this, merchants, banks and billers must overcome inertia and mobilize to start testing and adopting new features. Many may be waiting for a “perfect” solution to be implemented, but it’s not clear that a “one size fits all” answer exists, she said. Those who start to “lean in”, take steps to drive change, and ensure a range of choice and flexibility in their solutions will begin to reap the benefits for their customers faster.
Real-time data exchange is the glue that ties it all together on multiple tracks, as banks choose to route payments how they want and billers choose to choose how they want to receive payments.
While Toukan said she looks forward to the day when we have an Uber-like bill-paying app, she hopes that now, more than ever, this is possible.
“Convenience, choice, flexibility — it’s no longer a pleasure to have; it’s a must in the market we’re in,” she said.