Published on 18th Apr, Edition 16, 2016
Utility bill payment in physical bank branches is still a common practice in Pakistan. With all the exciting technologies surrounding us today, we might think that long queues in the sun should be a thing of the past, but they are not.
Conventional bills like power and gas utilities as well as bills for current day services like broadband internet are some mandatory and recurring expenditures that are still following archaic billing methods, including high cost physical branches, franchises and one stop shops, with insufficiently staffed offices and often poorly trained personnel. Much needs to be done to improve the customer experience and rather than seeing the short-term costs as a hurdle, the long term competitive advantage should be considered.
Unfortunately, in Pakistan, the consumers only receive a pile of papers with complicated financial figures, often with unclear hidden cost of services that consumers don’t fully understand and are hence unable to utilize. Even after completing the billing process, the consumers still need to maintain physical records for any future discrepancies, which are also a common occurrence given the inefficient billing systems and clerical errors.
What if this process could be simplified? What if the consumers didn’t have to add another series of tedious tasks to their monthly routine as the due date approaches? What if we could leverage the ongoing advancements in mobile payments and branchless banking for better customer experience? What would it take for not only the service providers to come on board with smart solutions but for the consumers as well to be educated and adaptive of such solutions?
These are some questions that need answers – answers that pledge that consumers will be able to receive and pay their utility bills online, through mobile phones, tablets and personal computers, while doing something more useful than standing in a queue.
These questions have been around for a while and are yet to be fully resolved. According to a commercial survey a couple of years back by Fiserv, paperless utility bills were not even common in a developed country like United States. Only 23 percent of the total number of consumers received electronic bills. However, the same report suggested that no less than 90 of consumers would like to witness improvement in this particular area of utility bill payment. When a majority consumer segment is willing to use a remote channel for bill payment that ensures ease of use, it is safe to say that with high-end, secure technology and swift internet speeds of today, people would prefer online and on-the-go methods for bill payment.
Why is it important for Pakistani utility companies and facilitating banks to focus on online bill payments facility today? It is because we as a nation have been making great progress in the field of information technology in recent years with an increasingly favorable local IT scene as well as foreign interest. The high-speed broadband services, especially in urban areas, have reached at least comparable levels to global standards. The exponentially increasing usage of mobile and smartphones also convincingly leads to the conclusion that online bill payment has an existing ecosystem at the user end.
The launch of (and existing competition in) 3G/4G services in Pakistan opened a lot of doors for improvement in almost all the sectors where technology can make a difference. By the end of January 2016, 128.042 million users made it to the list of mobile subscription in Pakistan. The number of 3G/4G users exceeded 24 million, implying that Pakistanis are hugely enthusiastic about using online facilities. If not 3G/4G, there is still a great number of population which is regular consumer of voice, SMS and USSD channels. If utility companies provide online payment facilities, it is highly likely that mobile user-base would include a lot of early adopters.
The utility consumers that are more proficient in using tablets/computers over mobile phones should also be considered. A good percentage of online payments in Pakistan are still operated through desktop computers and laptops, portraying the users as potential online billing consumer’s base. State Bank of Pakistan’s annual electronic banking statistics revealed that 1,370 thousand credit cards and 25, 024 thousand debit cards existed in the country by the end of 2015, summing eBanking transaction values as high as Rs. 35,848 billion. This is a massive user-base that still remains widely untapped and in need of simpler and more efficient online bill payment services.
Another aspect to consider is the lack of physical branches in rural areas of the country, where people may not be well educated but are regular customers of mobile services. Many areas also have access to merchant driven branchless banking, which has been a surprise success in recent years due to its ease of use. Banks and utility billers can also target these areas where people are willing to pay bills but are unable to do so at ease, many resorting to illegal local connectors that steal and redistribute power in one way or the other.
Another recent commercial survey by World Bank Group showcased the lack of digital financial instrument usage in Pakistan, revealing only 1 percent of the debit card holders are using it for online payments. However, at the same time, Pakistan has surpassed all other countries in South Asia in digital finance and branchless banking, standing at a position where 6 percent of the adults use mobile banking as compared to the 2 percent in rest of the South Asian countries.
The utility companies which have already stepped into the online bill payment circle do not completely meet the requirements and demands in a way the consumers want. A consumer will only prefer to pay online if the online bills are not complicated to spot and pay. Many banks that facilitate their customers with online and ATM based utility bill payment options, either have an interface which lacks flexibility and simplicity or is a mesh of a lot of different services that the consumers need to be educated about. Besides that, not all banks cater to all utility companies on all channels (ATMs, internet banking, mobile banking apps, etc.), which leads to a confusing mix of available/unavailable services that the consumers usually give up on after a few attempts.
There are a number of banks and utility companies which are willing and working in spreading the canvas of online bill payments in Pakistan. It is the time all banks and service providers to realize the need and aggregate such functionalities in their various channels, including ATMs, branchless banking, internet banking, mobile banking, etc.
Annual consumer bill volume in the world is estimated to be at least 330 billion, as per the research by a European company Billentis. This is a massive market where anyone with better services can come in and grab a bigger chunk of the business if only they can solve the pain points of the utility consumers.
The use of ecommerce websites has transformed from a non-reliable source to a preferred source of online shopping in the past decade. This has been made possible because companies strived to educate their market and worked hard to drag Pakistan out of the conventional store shopping arena. This has helped raise adoption and awareness levels of consumers that are ready for more similar solutions for their day-to-day needs.
There are also bill payment services provided by payment facilitators like 1Link, where they have installed bill payment solutions that work as central aggregators for payments. Before a central aggregator, each bank would have had to approach and acquire various service providers directly, meet their individual terms, and perform all settlement and maintenance operations on their own. But with the availability of such third party facilitators, the bank simply gets these services as a complete package without the need for a separate infrastructure.
If online payment system for utility bills could be streamlined in the next few years, it would significantly reduce the costs and expenditure of banks and utility companies as well as the cost (travel, time off from work, etc.) for the consumers. The utility companies will not necessarily need to dispatch snail mail dependent of paper bills, saving the costs of printing, delivery, etc. The banks would be investing less on physical branch banking facilities and customer services, leading to swift operations and better growth chances. People not only in Pakistan, but around the world would like to see advancement in this field in the form of mobile and desktop apps, ATM/POS bill payments, merchant assisted payment mechanisms, SMS/USSD based alerts and transaction services, IVR and Call Center assistance, etc.; hence covering the entire spectrum of bill payment possibilities for various customer preferences