An era when every business is a tech company, and every human has a smart phone. Have you noticed how practically every television ad these days includes an image of a person using a smart device or an app? We live in an era where individuals want-what-they-want-when-they-want-it. And bill payments haven’t escaped this game changing transformation in attitudes and behaviors. […]
An era when every business is a tech company, and every human has a smart phone.
Have you noticed how practically every television ad these days includes an image of a person using a smart device or an app? We live in an era where individuals want-what-they-want-when-they-want-it. And bill payments haven’t escaped this game changing transformation in attitudes and behaviors.
Today, bill payers want to have more control over which bills they pay, and when they pay them. They also want the ability to settle payments digitally on their smart devices, whenever it suits them. Billers, on the other hand, want to lever the potential of digital technologies to remove the frictional costs associated with receiving payments.
Let’s then, explore how the bill payments industry works today, and how it’s changing.
There are two main bill payment routes today, Direct Debit and Manual Bill Payment.
– Direct Debits
In the case of Direct Debits, a mandate is agreed upfront between the biller and the payer, permitting the biller to pull the funds directly from a payer’s account. This makes bill payments easier for the biller by ensuring predictable payments. Furthermore, it can be easily automated. Direct Debits aren’t for everyone. For example, Gig economy workers want to control when the money leaves their account. In the case of utility bill payments, as many as 45% of gig workers opt to pay invoices manually.
– Manual Bill Payments
For billers, manual billing means sending out of an invoice either by post or digitally over e-mail. Payment then happens as a secondary offline step via a manual bank transfer, cash, or cheque. On the face of it, this would appear to be a low-cost solution while offering payers a great deal of flexibility. But manual billing is complex for billers that need to support a myriad of processes to serve the many ways a payer might choose to pay. Additionally, with little to no dialogue taking place once the invoice is issued through to the time it is either paid or defaults, predicting cashflow becomes incredibly hard.
For the payer, invoices may come through any channel which makes aggregating and prioritising bills awkward. Added to these challenges, payers must cope with the necessary manual processes to make payments including re-keying reference numbers. Should reference numbers be incorrectly entered, this can cause headaches for the payer and reconciliation issues—plus even more costs—for the biller.
Clearly, what is required is a bill payment solution that gives billers the control and ease of processing they get with Direct Debits but one that helps payers to retain the flexibility and control of their money as they enjoy with manual bill payments.
This is where Request to Pay fits in.
Request to Pay is a new form of digital bill payment that joins up the communication part of bill payment (sending/receipt of invoice) with the payment. We’ve recently launched a demo of what this look likes but an overview of the process is below.
This process has advantages for a biller, namely:
- Lower cost – Only pay a fixed fee for the request, no processing costs
- Easy – Integral to the biller’s existing platforms meaning no new integrations
- Robust – Immutable reference numbers that billers specify
There are advantages for the payer too. These are:
- Control – See all requests from all billers in your app for more control
- Trust – Requests arrive in your app and not over e-mail/SMS
- Convenience – The convenience of chat messaging with the security of a bank.
With billers and payers both benefiting from the heightened ease of use, improved data security and enhanced predictability of paying bills digitally via secure messages to smart devices, we’d argue that the future of digital bill payments is here.