StreamALERT e-Newsletter - February 2005

Supercharge your Collections Strategy with Consumer Collections Automation Solutions

Now more than ever, consumers are demanding freedom of choice when it comes to purchasing and paying for goods and services. For organizations, it is not enough to provide a wide range of product offerings—they must also ensure that their customers have options when it comes time to pay the bill. A well thought out consumer collections strategy can benefit both billers and their customers by allowing companies to collect funds more quickly and cheaply, and consumers to choose when and how they pay.

Consumers are poised to enter a new era in payment behavior. A 2001 Federal Reserve study ‘Retail Payments Research Project’ indicated that paper checks accounted for more than 70 percent of all consumer-to-business (C2B) remittance payments in the U.S. The ‘2004 Federal Reserve Payments Study reveals the sea change that has taken place in the consumer payments landscape. According to the study, paper checks account for only 45 percent of consumer payments, outweighed by electronic payments for the first time.

Consumers are shifting to electronic payments by substituting credit cards, debit cards, and Automated Clearing House (ACH) transactions for checks. In fact, our research shows that during the next five years, their share of remittance payments will increase to 70 percent, surpassing paper checks by a huge margin. Given this changing payments landscape, organizations should revisit their consumer payments strategies and examine Consumer Collections Automation (CCA) solutions as a way to balance the cost and complexity of their billing and collections operations with their customers’ needs. Innovative billers are already acting on CCA for the following reasons:

Consumer Convenience and Control: When it comes to payments, consumers today require a level of convenience and control that would have been unimaginable just ten years ago. They want the freedom to select the channel and method of their payments, as well as their frequency and timing. Conventional paper checks cannot provide this level of flexibility, so consumers are turning to electronic payment options—both over the Internet and telephone—that provide greater control over their time and money. Companies are taking a serious look at CCA solutions based on their potential to satisfy their customers’ desire for simplicity and flexibility throughout the billing and payment process.

Competitive Advantage: For some billers, offering a diverse range of payment options is a way to achieve competitive differentiation. Others are being drawn to CCA for the exact opposite reason—to defend against the possibility that their customers might defect to a rival based on the availability or absence of suitable payment options.

Lower Costs: Billers are also turning to CCA solutions because they deliver substantial savings. Our research indicates that an organization with 250,000 accounts that processes 150,000 bills each month pays $8.03 to process each bill. Using an automated solution, it can reduce this by 57 percent to $3.43. Faced with cost savings of almost five dollars per bill, billers are finding that they cannot ignore electronic payments any longer.

Given the tremendous change in consumer preferences and the benefits of collections automation, it is imperative that organizations rethink their billing and collections strategy and give CCA solutions a serious thought.

PayStream Advisors’ Corporate Insights Report titled, “Payment Without Presentment: Six Solutions to Supercharge your Consumer Collections Strategy”is available for download from our online store.  This report, profiling six of the leading consumer collections automation solution providers, offers valuable insights into CCA solutions and helps managers compare and contrast different solutions to identify the one that bests suits their organizations' requirements.