Introducing a New E-billing Solution: Eight Lessons Learned

Electronic billing (e-billing) keeps drawing attention in the media, however the number of widespread solutions introduced for business-to-consumer (B2C) billing are still limited. When looking at solutions that provide bill presentment and payment, the number is even less.

Both business and consumer seem to be reluctant to adapt to this new form of collection. During a period of two years, Innopay advised and supported a company with an innovative solution in the Netherlands that was introducing a new billing product, AcceptEmail, into the market. It is now time to review the results and share the findings with the market and stakeholders.

This article presents the findings in eight important lessons learned from the experience. These lessons will give an insight into the different aspects of the billing solution itself, the way the potential users regard it, and adoption strategies.

1. Effective Use of Existing Channels

Most large billers are suppliers of energy, telecom and Internet services. Historically, a bill is one of the few contact moments with the customer, therefore the marketing department will grab the opportunity to inform customers of new or complementary product offerings.

Sending bills through a new channel creates new possibilities: surveys revealed that email marketing has the most favourable return on investment (ROI) of all marketing activities. This effect is multiplied by the fact that the email channel is the channel with the highest coverage. Since every organisation is capable of sending emails, the investment to do so is limited. Therefore, this should be taken into account when shifting from dispatching physical post to the digital channel. For the marketing department, this shift generates many possibilities because a customer can be redirected from the email to a website, webshop or poll. This generates new opportunities to expand customer relationship management (CRM).

Therefore, when creating the business case for an e-billing solution, not only the cost savings from the accounts receivable (A/R) point of view should be taken into consideration, but also the benefits from a marketing point of view – billing is not just a way to collect money, but an opportunity to communicate with your customer.

However, this opportunity is little used in the digital domain, as not all the elements of e-billing are taken into consideration. Billing is usually seen as an IT project of the accounting department and their performance is not measured by communication indicators. Therefore, there needs to be an integrated approach with all relevant departments involved.

2. How to Address Your Customer in the Digital Era?

For decades organisations focused on the management of the physical contact data (name, address, city, etc). Today, filling out the email address field is still optional. In our conversations with several large organisations, it appeared that their processes are not adequately established for using the digital channel, consequently there is no need for the possession of email data of customers. We expect that this need will increase considerably in the future. There are many good reasons to use the email channel for more processes.

One of the drivers is the harmonisation of European payments. The new rules of the Payment Services Directive (PSD) on payment mandates make it obligatory for the beneficiary to actively inform the consumer before deducting the amount from the consumer’s account. Large telecom and utility providers have the mandate as payment method established for more than 70% of their customer base, so they are facing a large cost component if current processes would remain unchanged. It would be a logical choice to inform their customers via email, which creates a serious business case to complete their customer database with email addresses.

3. Small Steps but Moving Quickly up to Speed

In the introduction phase of a new product, it is exciting to see how end users will accept the product. Several surveys and research conclude that manufacturers overestimate the advantage of their product, while the consumer experiences the disadvantages of the change that the product brings, because they are forced to change their behaviour. When the necessary behavioural step for the consumer is big, the new product is less likely to be successful. In general, the consequence is that successful innovation is only realised through small changes in existing behaviour patterns.

The e-billing company that Innopay worked for had made specific choices in the design phase for components that had proven their success: email as a channel and a widely used online payment method (within the Netherlands). History proves that the combination of two widely accepted technologies is a guarantee for high-level acceptance with the end user. A qualitative survey, conducted during the pilot phase by a Dutch retailer, revealed that not a single person had questions regarding the process of the e-billing solution: the required activities were immediately considered as logical and easy by the end users. The retailer concluded that the use of the solution led to faster payment by its customers, thereby reducing their days sales outstanding (DSO).

4. The Market Can Set its Own Standards

The e-billing company that Innopay worked for operated as an independent party and was not related to a single financial organisation. Their philosophy was worked out on the technical platform with four objectives:

1. No exclusive relationship with one specific payment method. At present iDEAL is established as the payment method, but credit cards or all payment methods that a payment service provider offers can be integrated as well.
2. Sending of e-bills can be done by the company, by the beneficiary itself, or its service provider.
3. Create own look and feel. The sender can determine the design of the invoice. There are only a few guidelines ensuring that the e-invoice can be read properly in the recipient’s inbox.
4. Access to the core functionalities through web services. All important functions are accessible directly. This enables the organisation to integrate the e-billing solution into its own software. New products can be built on top of the central platform by external service providers, such as system integrators. Service providers can develop specific services. For example, contact centres or email providers can widen their value proposition by sending e-bills on behalf of the customers they do campaigns for.

This set of characteristics guarantees flexibility, enabling the service provider to develop their own specific services. By nature their end users take advantage of these value added services.

5. Success in Niche Markets

We were surprised by the success of the e-billing solution in some market segments that were not within the primary focus at first. Credit management companies and contact centres, in particular, immediately spotted the opportunity and added value for their company’s processes. After some interviews with different companies, the underlying reasons became clear.

Service providing contact centres are currently looking for new opportunities to extend their services due to changing legislation for the telemarketing sector. Offering full service outbound sales campaigns for large web merchants, telecom operators, energy companies and charity organisations is part of this. Instant follow-up of a successful sales call with an e-invoice shortens the time-to-transaction and brings a higher conversion because the customer receives the option to pay within minutes after the call has ended. A paper bill would come days later and by then the enthusiasm of the consumer to purchase can be significantly lower. The call agent can send the e-invoice immediately, extending the value chain of the call centre.

The added value for credit management companies is basically the same as for the call centres because most of the larger credit management companies have their own call centres. Additionally, they can cut cost in communication for payment agreements with debtors and reminders by using the electronic channel. One of the largest credit management companies that Innopay worked with claims that it will save nearly €500,000 per year by using e-billing effectively.

6. Different Cost Structure Brings New Possibilities

The cost structure of e-billing is very different compared with a paper invoice. This creates possibilities to restructure collecting processes: costs of communication (paper, postage) decline to nearly zero by use of electronic channels. This offers new opportunities for direct marketing, charities and credit management organisations.

Research by Harte-Hanks in July 2007 showed that email marketing has a very high ROI as a marketing channel. One of the main factors is the low cost of the use of email channel. Compared to paper postage, these costs are negligible. By adding a payment method to the email offering, the recipient is able to react immediately. The process of ordering and payment are assembled into a single action that enables the buyer to do an impulse purchase. The sender is only faced with the transaction costs – the largest part of the total costs – if he actually sold the product. This keeps the basic costs of the campaign low: only when the campaign is successful and many products are sold will the costs rise. Charities can benefit from the same characteristics in fundraising campaigns.

The credit management sector also recognises the benefits of the different costs structure. There is an intensive growth of debts for which an agreement is made with the debtor to pay off in several terms. Large credit management companies see opportunities in using electronic channels to communicate with the debtors, and can create extra options for then to pay off their debts. Using automated processes it is possible to create arrangements to pay of a debt in many smaller amounts.

7. Adapt to Social Developments: Go Green

The reduction of paper usage and polluting physical transport is an ubiquitous company policy.

Yearly, about 15 billion paper invoices are sent to consumers in the Netherlands alone. This is equal to 780,000 tons of paper, which requires 2.5 million tons of wood. The production of this amount of paper equals creating 1.9 million tons of CO2. This might not be the largest contributor to the climate change, but it surely has its effect. It’s not surprising that electronic alternatives to paper are looked at with great interest.

In various sectors, sustainable entrepreneurship is part of the company strategy. One of the companies that came to Innopay with a plan to incorporate a plan for sustainability comes from the energy sector. Particularly because creating and providing energy is its primary business, using it economically is important. Reducing paper usage is therefore a main focus in this sector. Regarding the enormous amount of monthly bills, the possible savings are quite large: millions of printed bills and reminders can be replaces by an electronic version.

8. Start Simply, Migrate Gradually

Constructing an effective administrative process to send and collect payment requests and bills can be the result of years of effort and refinement. Practical experience is needed to create a balanced mix of payment methods; direct debits, pre-filled transfer forms, and bank transfers all have their part in the total mix. It is not easy to just add a new payment method to the collecting process. It is therefore a good idea to start with the exceptions:

• The costs of handling exceptions are relatively the highest, so the potential gain is also high.
• The impact on the existing mainstream process is small, because handling of exceptions is, at most, partially automated.

In this way, a new billing method can easily be implemented in current processes. As soon as this ‘light’ implementation has gained sufficient comfort for the future, it can be integrated in the main process and the advantages of the electronic billing can be extended further.