Western Union Payment Services: Current-cy

Growing with Online Banking; Growing More with Expedited Payments

Tue, 31 Mar 2009 05:00:00 GMT

The current financial crisis presents opportunities to attract and retain consumers by providing greater online banking convenience. Consumers are searching for more efficient ways to manage their money and optimize payment schedules, online. A robust online banking suite – especially one that incorporates expedited pay options –can add to a bank’s bottom line by helping reduce costs, increase fee revenue, attract and retain consumers, and improving the consumer experience.

Online Banking Consumers: More Affluent, Younger and Loyal

It is no surprise that the nation's largest banks have poured resources into online banking. According to Javelin Strategy and Research*, Bank of America, Wells Fargo and JPMorgan Chase now control an estimated 39% of the online banking market after recent industry consolidation. Online banking users are valuable to banks. Studies have found that they are generally wealthier, younger and more loyal than average. And online banking is a "sticky" service that keeps consumers involved directly in the security and management of their finances.

Consumers are looking to simplify and consolidate their banking relationships. This provides mid-sized banks and credit unions the opportunity to position themselves for growth by offering the same services as bigger institutions. Online banking and bill payment are "addictive" services according to the Javelin report, with half of all heads of households saying they had logged in within the previous week to check balances or transact business. Those institutions that provide robust online banking services are more likely to capture the "primary accounts" of these consumers.

Robust Online Services a "Must Have" for Financial Institutions

Online banking and related online solutions continue to be a growth opportunity for financial institutions. The Javelin study indicated:

More than two out of three households bank online at least once a month.
By 2013, an estimated 83 million households will bank online.
Of those households, 45 million will be paying bills online.
By 2010, an estimated 28% of consumer bill payments will be initiated online, a 62% jump from 2007.
Market penetration for online bill pay is still only at an estimated 48%, with market penetration among consumers of mid-sized banks and credit unions even lower.

Improving the online banking experience for consumers has become a competitive must. The question becomes which added services will provide the best "bang for the buck" in terms of fee revenues, consumer attraction and retention, and operating cost savings?

Western Union Payment Services has witnessed banking institutions' rising interest in a number of features that should continue to gain acceptance throughout 2009:

Expedited Payments
Mobile Banking
Financial Alerts
Paperless Push

The return on investment after adoption of these technologies will be measured in increased loyalty, reduced operating costs, increased fee revenue and opportunities to cross-sell additional online and related bank services and products.

Enhancing Online Bill Pay with an Expedited Payment Option

An expedited payment option (payments delivered same- business day or following-business day to the biller) allows consumers to maximize account control, setting "just-in-time" payment schedules for bills. This added efficiency is particularly useful given current economic conditions. According to the Javelin study, expedited payment users are avoiding late charges ranging from $20 to $49 at increasing rates, from 41% in 2007 to 55% in 2008. (Whether this trend will hold given current financial conditions is unclear.) As consumers look for ways to maximize the efficiency of their spending, an expedited bill pay feature may look more attractive.

The expedited payment option can drive increased fee revenue and reduce bill-pay costs while also provide consumers with a highly visible, improved online experience. Data from the Javelin study help confirm this by showing:

Annual revenue for expedited payments will grow from an estimated $1.4 billion to $2 billion over the next five years, a compound annual growth rate of 7.5%.
The usage of expedited bill pay is highest for those who have access to mobile banking. Nearly 45% of mobile bankers use expedited bill pay at least one a month, 14 points higher than online-only consumers.
The growth potential for expedited payment services is high, with 74% of consumers using some form of expedited payment directly with their billers and only 25% using expedited payment through their banks.

Making Online Banking Work for Consumers

For those institutions with online capabilities, the Javelin study identified five simple rules for creating a successful online banking environment:

1. Streamline online bills and statements.
For most bills (utilities, cable TV, etc.), consumers don't need to see underlying charges. But the ability to check charges on items like credit card bills is essential if a bank wants to become their consumers' main financial portal.

2. Leverage the strength of the Internet over paper.
Deliver timely information on transactions. Real-time or near-real-time account data promotes frequent visits and usage. Highlighting new transactions (since last log-in) also alerts consumers to new activity.

3. Be transparent about fees.
Explain fees openly and in clear and simple language, not in jargony, legalese.

4. Promote the "green" nature of online banking.
Consumers are increasingly looking for way to contribute to improving the environment. Opting for online over paper is an easy way to make the case.

At a time when growing the asset base is critical, capturing and retaining "primary accounts" is a must for banks and credit unions. New online banking features can grab consumers and raise retention rates while also boosting revenues and cutting costs.

* SOURCE: Javelin Strategy & Research, 2008 Online Banking and Bill Payment Forecast, Nov 2008

Optimizing payment options a must in tough mortgage market

Fri, 27 Feb 2009 06:00:00 GMT

With mortgage loan delinquencies and foreclosures reaching record highs - and as consumers are forced by the worsening economy to prioritize and sequence the payment of monthly bills -- adding easier, faster and more convenient mortgage payment options increase the chances mortgage bills will be paid.

Measuring the market: Challenging times

The convergence of declining home values, rising unemployment and a weakening economy has created a record number of delinquent mortgage payments and foreclosures.

16% of U.S. homeowners owe more on their homes than the homes are worth, a number likely to increase, according to a recent article in The Wall Street Journal.
During third quarter of last year the number of delinquent loans increased across all loan categories - prime, Alt-A and subprime, according to the Joint Mortgage Metrics Report for Third Quarter 2008 issued by OCC/OTS.
This same OCC/OTS report states that banks and thrifts have increased the number of newly initiated retention actions - loan modifications and payment plans - by 13% from second quarter to third quarter 2008.

Measuring the market: Shifting payment trends

With all the changes taking place in the economy, it is not surpising that consumers are adjusting how and when they pay their bills. According to the most recent Western Union Money Mindset Survey:

20% are paying bills late.
31% are waiting longer to submit payments, delaying paying their bills as long as possible before incurring late fees.
Consumers paid 2.02 mortgage bills late in the last six months, compared to 1.8 primary, store-branded or other major credit card bills.

The Western Union survey also found that in just the last six months, consumer bill paying behavior has continued to shift:

47% are paying more bills online
40% prioritize which bills get paid first
31% are making only the minimum monthly payment more often

Mortgage servicers need to be providing more reliable, fast and convenient payment options so that customers can customize their monthly payments to fit their needs. As convenience and flexibility increase, so does the likelihood of receiving that monthly mortgage payment.

Five ways to add flexibility for customers, boost payments

Leading mortgage servicers are responding to these trends by adding convenient and flexible payment methods. Here are four bill payment methods that have become increasingly popular with consumers:

1. Electronic Bill Payment
According to the 2007 Federal Reserve Payments Study, electronic payments have increased at an annual rate of 12.4% since 2003 and now exceed bill payments made by paper checks. Electronic bill payment offers convenience and flexibility, allowing customers to manage their monthly payments whenever and wherever they want with same-day and next-day payment options.

For mortgage servicers, electronic bill payment can reduce costs and improve the customer experience. There is increasing demand for mortgage servicers to provide interactive, user-friendly Web sites for customers to manage their payments. A variety of online features can encourage bill payment, such as prominently featuring "pay online" visual cues and links.

2. Interactive Voice Response
Interactive Voice Response (IVR) enables billers to send automated messages to customers related to account activity and overdue bills. IVR can send reminder messages to those who may have forgotten to make payments. In addition, it allows customers to make payments using only the phone touchpad. A customer who needs more information or who wants to speak with a live representative is quickly routed to the right place the first time, reducing the frustration of multiple customer service transfers.

For mortgage servicers, IVR reduces staffing and improves call center efficiency, while providing an immediate channel for customers to make payments. IVR solutions reduce overall response time and increase customer options for self-service - a win for customers and servicers.

3. Recurring Payments
Recurring payment options offer customers the convenience of setting up automatic, monthly mortgage payments. The customized, recurring payments reduce the chance of transaction errors and can be timed to reflect automatic payroll deposits. Mortgage servicers can even offer an equity accelerator that allows customers to set up bi-monthly mortgage payments according to their payment cycle. Increasing the number of payments per year accelerates payment of a customer's total mortgage.

For mortgage servicers, customized payment options:

offer predictability,
help manage delinquent borrowers, and
increase the likelihood of receiving payments on time.

4. Email Bill Presentment and Payment
Email bill presentment and payment (EBPP) lets mortgage servicers email customized billing information, including delinquency notices, to customers. Customers receive a personalized bill with a secure link to make a one-click monthly payment. The most immediate convenience for a customer is 24-hour account access and the ability to make payments instantly. Customers can also opt-out of paperless statements and other documents to streamline their bill payments.

For mortgage servicers, EBPP positions a company for what will soon become the future of bill payments. Analysis by Forrester Research estimates that by 2010, the number of EBPP users will grow by 75% to roughly 47 million households. E-bill presentment and payment also allows mortgage servicers to "go green" by eliminating paper waste.

Look for New, Innovative Payment Strategies to Hit Market

In response to these unusual economic times, the payments industry is developing new products with new features to help mortgage servicers and their customer develop successful workout plans. The challenge to stand out in the competitive mortgage environment is nothing new. But today's volatile and unpredictable economy puts increased pressure on mortgage service providers to transform and perform. Offering a full-breadth of payment strategies will strengthen relationships with customers, build loyalty, and, most importantly, increase the likelihood of getting paid.

How to help debt-laden consumers keep up with payments

Sat, 31 Jan 2009 06:00:00 GMT

A recent study commissioned by Western Union indicates that consumers are not responding to the increasing rate of personal debt lying down. The majority are actively seeking ways to regain control of the finances. This consumer mindset provides billers with opportunities to proactively help their customers/clients consider payment alternatives, thus lessening the likelihood of payment delinquencies. In this article you'll learn about the study that measured consumer attitudes and receive tips on communicating helpful information to your bill payers.

The emotional turmoil of debt

Conducted by Javelin Research, the Western Union® Payment Services Money Mindset Indexrevealed that forty-nine percent of consumers believe they are worse off now than they were six months earlier. Meanwhile half (fifty percent) are more stressed about meeting financial obligations. The stress of economic debt is pulling consumers' heart strings as much as their purse strings. Thirty-four percent report that debt is creating an adverse impact at home and work, namely:

Nearly one in four (22%) say that meeting their financial obligations is negatively impacting
their family life
22% say their circumstances are affecting their relationships with their spouse or partner
17% claim that meeting their financial obligations has negatively impacted their work life

Good news: Consumers seek financial empowerment

Even with the emotional turmoil of debt, only five percent of consumers are considering bankruptcy and a mere eight percent are planning to default on bills in the next six months. They appear to be seeking financial empowerment through better employment, cutting back on expenses and utilizing smart financial strategies to keep them on track.

According to the Western Union® Payment Services Money Mindset Index:

An optimistic 28% of consumers are seeking new jobs to improve their situations
22% are looking for secondary jobs
12% report that someone in their household has already taken on a second job

Accordingly, consumers are also changing their spending habits and improving their money management skills to ease financial and emotional burdens. Dining out is the number one expense that consumers have recently cut back, as mentioned by fifty-two percent of respondents. In the next six months, nearly 7 out of 10 survey participants (sixty-nine percent) plan to cut back on unnecessary spending and thirty-six percent will prioritize which bills get paid first.

What does this mean for billers?

The results of the study indicate that consumers are taking action and may be receptive to suggestions and alternatives when offered. This provides the opportunity for billers and their collections department to show leadership by offering avenues for help and guidance with bill payment and payment solution options.

Offering both assistance and additional options provides a win-win situation with you and your customer/client. It not only increases your ability to recoup payment in a timely fashion, but can improve the perception that your firm values it consumer relationships.

"Despite a shaky economy, confident consumers are becoming more savings savvy, learning to find other financial resources such as new employment opportunities, reorganizing their budgets and making payments that fit their current lifestyle and financial needs," said Royal Cole, executive vice president and general manager of Western Union Payment Services. "By being more resourceful, people can learn to efficiently tackle debt, protect their credit standing and even find a way to set aside funds for some discretionary spending."

Demonstrate your concern by offering tips

Through billing statements stuffers, call centers, newsletters, or whatever forms of communications you employ, you can demonstrate your concern and helpfulness by offering consumers the following tips:

"Tip #1 -Save your credit score by paying, not delaying"
Remind your customer/client that late payments can negatively affect their credit. Rather than miss a payment, encourage them to contact your call center to discuss payment options and flexible due dates that may correspond with "pay day."
"Tip #2 - Learn about a more convenient payment method"
Inform the consumer of your full-range of payment options. Whether it is automated EFT or paying bills using a walk-in cash payment services, consumers may not know all your options and may consider switching to a service easier for them where payments are processed fast and securely.