Are Customers Paying With Checks Anymore?

I went to pay for my dry cleaning only to be told that I could not pay using a check. My wife pulled out her checkbook to pay for our fast food dinner and received a dirty look from the cashier as though our check was worse than receiving a bag full of pennies. Nowadays, it seems that everywhere a consumer looks, he or is she will surely encounter a sign reading “Sorry, we no longer accept checks.” What is this shift in payment method that is happening in our society, and how can businesses reap the benefits of the public moving away from check payments?

America has been alone in its fascination with paper checks. Up until 2002, 50% of all payments made were with checks, compared to other countries such as France and the UK where checks accounted for less than 10% of all payments made. This number, however, is falling quickly and dramatically in the United States. The largest reason sustaining the use of paper checks lies in the bill pay arena. In 2007, 44 % of Americans continue to use checks to pay their bills, yet as the check gets more and more impractical, this number is becoming steadily smaller. There are several reasons adding to the decline. The first reason is that mailing a check presents much more risk than by paying electronically. Electronic database break-ins may receive the majority of publicity in comparison to banal mail box theft, but in reality, the odds of becoming victim to fraud or theft involving checks are much, much higher. The second reason contributing to the decline is the inconvenience of checks. The amount of time and effort involved in writing a check, sticking it in an envelope, stamping, and mailing it does not compare to the ease of going to a bank or vendor’s website and clicking a few buttons to pay a bill.

Obviously, with check payments on the decline, there are several advantages to electronic bill pay, for both businesses and consumers. The bottom line is: it’s quick, simple and inexpensive. Costs from paper to administrative are cut drastically for businesses and the number of days outstanding for bills is greatly reduced, while customers save time and space by filing bills online. The advantages are not limited to the businesses and customers, but can also in effect preserve our environment, as paper usage is decreased.

How can you as government agencies give your citizens the capability to pay electronically, and begin to reap all the benefits that electronic bill pay has to offer? There are a few key points to keep in mind in attaining and implementing electronic bill pay. First of all, the different types of electronic payment available. Secondly, the payment channel, and last of all, the e.bill vendor who is right for you.

There are two types of payments when it comes to electronic bill pay. The first is an electronic check, also called an ACH payment. This is a payment made through NACHA, which is a nonprofit association that represents more than 11,000 financial institutions. The second type of payment is a credit card payment made online. Each has its own set of advantages. ACH payments, for example, cost the biller less than a credit card payment would, although a credit card payment offers a much timelier payment and businesses can get their money an average of one to two days quicker than ACH.

The next step in the process is deciding on the right payment channel. A few of the most popular options include on the web, through a bank’s website, IVR or a call center. A web payment can be hosted by a company’s own website, and can either be enrollment sites or one-time-pay sites. Banks also offer convenient one-stop pay all options on their websites. IVR applications are phone systems which allow customers to pay their bills with credit cards on the phone after entering their account number. Call centers, which can either be in-house or service bureaus, can accept both credit card and electronic check payments.

Last of all, electronic payment functionality can be built in-house, however, over ninety percent of companies choose to outsource their electronic pay functionality. Choosing the right vendor is an important decision in order to get the most of what electronic bill pay has to offer, and the key to making the right decision is asking the right questions. The most obvious question is the cost, both of implementation and transaction cost. But there are several other important factors from software feature and services provided that need to be considered. A free list of pertinent questions to ask when seeking an electronic payment vendor can be found at www.bestpracticesystems.com -see article “Questions to Ask When Choosing an E-Bill Vendor”

With paper on the decline, both as checks and paper bills, companies are being pressed by more and more customers to offer electronic bill pay services. On average, businesses can expect between 5 and 10 % of customers to pay electronically within the first year, with percentages continuing to rise as more people become aware of the service and the numerous advantages paying online has to offer. Obviously, electronic bill pay is a win-win situation for customers and businesses alike, and the sooner a company implements this service, the sooner saving paper, time and money is just a click away.