By Samantha Sassorossi, Marketing Data Analyst, Paymentus
This article is part 1 of our multi-part series focusing on affordability and how Paymentus is helping organizations reduce costs while delivering the highest levels of service. In this installment, we offer a look at the challenges facing many of today’s consumers.
Whether it’s eggs, gas, insurance, electricity, or any number of everyday consumer goods and services, the conversation inevitably leads back to one thing: affordability.
As costs rise and financial pressures mount, the average consumer is facing unprecedented financial burdens that are only increasing. Looking at the cost of utility bills alone, a recent survey from American Home Shield indicates that 1 in 3 Americans say they struggle to afford their bill, with half of Americans saying they are overwhelmed by their monthly utility bills.
What’s the impact? This same survey shows over 1 in 4 Americans missed at least one utility payment in the last year, with 14% missing at least two. This is an unsustainable path for organizations and consumers alike, making it an imperative challenge to solve.
Understanding the Financial Challenges Facing Your Customer Base
Regardless of industry, it’s highly unlikely that your customer base will be exclusively affluent consumers who are unaffected by economic factors. Yes, utility providers are unique in that they cannot choose their customers, but organizations in competitive industries such as telecoms, healthcare providers, and insurers do not have the luxury of turning down business in search of the ideal consumer.
of U.S. households (5.9) million
are unbanked*
of U.S. households (18.7) million
are underbanked*
What’s one unifying aspect that the unbanked and underbanked share? Households with highly volatile income. This places them at a greater risk of missed or late payments when prices begin to rise, especially for variable bills such as utility bills, which could spike in times of extreme weather.
Not all unbanked and underbanked households are struggling financially. Some simply lack access to bank branches, choose to avoid account fees charged by some banks, or simply prefer cash-based transactions. The challenge here is both affordability and access to simple, convenient bill pay options.
Why Do Consumers Pay Bills Late?
Unsurprisingly, our research shows that there are a host of reasons why consumers may pay their bills late.
- Cash flow constraints and income volatility – A sudden job loss, reduction in hours, or unexpected expense can impact everyone, but is especially difficult on low-income households. Consider that your most vulnerable bill payers are one surprise $50 expense away from not being able to pay your bill that month (and potentially the next).
- High cost of alternative financial services – Check cashing, money orders, and high-interest payday loans are expensive payment alternatives that many unbanked and underbanked people rely on. Each dollar spent here is one less dollar available to pay for essentials.
- Inconvenient payment methods – The reliance on cash payments means having to physically pay bills. More often than not, lobby hours are limited to traditional working hours, which means a customer working 9-5 must take time away from work to visit a lobby and pay a bill. In a choice between the two, most will opt to stay at work and continue to earn rather than take the time to go pay a bill.
Three Consumer-Focused Strategies to Increase On-Time Bill Payments
There are a host of actions organizations can take to mitigate the bill payment challenges experienced by all groups, but especially those in lower-income brackets.
- Expanded cash payment options – A reliance on cash should not necessitate a schedule that revolves around lobby hours. Offering payment options such as in-store payments at retail stores such as Walmart, CVS, Walgreens, and Dollar General greatly expands your footprint without added costs, and gives your customers a more convenient way to make in-person payments.
- Personalized reminders and notifications – Sometimes all it takes is a good reminder to get a customer to make a payment. Text and email notifications have proven effective in promoting action when delivered well in advance of a payment due date.
- Predictive analytics – Digital dashboards such as Agent Dashboard offered by Paymentus give organizations a window into the payment behaviors of their customers. Through this, organizations can quickly identify customers at a high risk of late payment or disconnection, and proactively offer assistance in the form of payment suggestions or plans.
If affordability is a concern for your organization, let’s talk! Our team can show how Paymentus can help you launch a platform that is designed for all customers, and is proven to increase on-time payments, provided payment plans and flexible payment otions, regardless of method or channel.
*FDIC National Survey, 2023
