Utility payments are often a manual task with a poor user experience. Real-time information flows associated with Request to Pay can solve many of the issues. Sami Uski explains.
Utility bills are often paid manually. Bills are either sent directly to a customer from the utility company or a Creditor Service Provider (CSP) manages the process. Historically, utility bills have been difficult for customers to manage, as there is little or no standardization when it comes to managing personal preferences, such as changing the invoice delivery address, providing consent for e-invoices, or enabling automated payments.
Furthermore, the user experience is extremely varied depending on the channel an invoice is received in, i.e., traditional paper invoice in the post, PDF to an email or e-invoice to a mobile wallet.
For the sender and receiver of a utility bill, handling paper invoices is a costly and lengthy process. Entering data manually can easily lead to mistakes and tracking down missing payments from customers who have forgotten to pay bills is a slow and resource-heavy process. This is further slowed down by the fact that bills are batch-based, rather than being handled with real-time information flows. Furthermore, for utility companies that have operations in multiple countries, implementing country specific standards is always associated with extra costs – as is the case for banks.
One approach to solving many of the issues mentioned above is to utilize Request to Pay for utility payments. The real-time information flows associated with Request to Pay make it possible to communicate with customers and predict incoming payments. For instance, once a customer receives a Request to Pay to a wallet, they can instantly approve, reject or schedule a payment. That’s not all, a wallet provider can inform a utility company that an invoice has reached a user. Such information flows dramatically improve the predictability and forecasting of liquidity for utility companies.
Request to Pay represents a crucial step in unlocking the full potential of instant payments. With instant payments, a customer can be notified if there are sufficient funds to cover payment in their account, and if not, a bank can offer financing options. In addition, the utility company could, for instance, promote special offers such as pay today and get a 5% discount as part of the payment request to a consumer.
Looking at payments in the Nordic countries offers an interesting insight. These four countries, which have so many synergies, have somewhat unique ways of managing utility payments. This in turn results in different user behavior.
Finland has collaboratively managed the interoperability of e-invoicing. Banks have agreed to use the same e-invoicing standard and overall, have gained a major position on consumer invoices. Whereas in Sweden, at least at the time of writing, Bankgirot acts as a central entity where invoices are sent and then distributed. Denmark has had a long history with Direct Debits, leading to low penetration of e-invoicing. And Norway is now the leader on unified consent management and the ability to receive e-invoices to multiple channels – Vipps app, preferred mobile app or internet bank.
When looking at the Nordics, the challenge ahead for P27 (the Nordic Payments Initiative) is to create one common e-invoicing service and a rulebook for the Nordics. The same applies for any other potential platform initiatives in this field. E-invoicing in the Nordics poses a challenge as each country has a different system, and commercial and operating mode, which does not support interoperability.
At Tietoevry we have already created multi-channel distribution of invoices with unified visualization services to support Nordic system diversity. Our service clients’ customer scan receive invoices in their preferred channel, i.e., directly to their online bank, mobile wallet, or physical mailbox.
As utility bills are a recurring payment for many people, automating them makes a lot of sense. Processes already exist for automating payments, including direct debit or standing orders. But some countries – such as Finland – stopped supporting Direct Debit when their current e-invoice services were introduced. However, e-invoice services do not support automating payment initiation in the way direct debit does, which has obviously had a big impact on utility companies’ bill payment conversion rate. The upshot of this is that some utility companies have basically returned to paper invoicing for many customers, as not all users have adopted e-invoicing.
Based on these learnings, when implementing bill payment services in new payment infrastructures and real-time environments, it’s important to have designs in place that provide the mandate for direct debits from day one. Additionally, content rules should be in place, i.e., automated payments up to an agreed limit as set by the user. This way, utility payments could offer convenience and control to end-users and improve payment conversion of invoices via automation.
Problems persist for banks and utility companies. Country-specific standards need to be implemented, harmonization of invoicing is lacking, and little information is supported in payment flows. Many of these issues would be solved if individual markets adopted industry-wide standards. This would cut costs for banks and utility companies and enable interoperability as systems from different countries could communicate with each other.
For example, the Nordic countries are regarded as e-invoice frontrunners, but time has taken its toll even on these infrastructures. Technology developed in the early days of the millennium will need to be modernized, and now, with ongoing globalization, collaboration among countries seems more important than ever.
A great starting point for industry-wide standardization of utility payments would be a standard Request to Pay service. Each market could begin with a Request to Pay platform rollout, followed by, for example, an EBA Clearing R2P service on a SEPA Request to Pay (SRTP) scheme for Europe for further interoperability. When beginning to use Request to Pay, it should be simple to connect a proxy – social security, phone number – to iban and bic to ensure the ease of making payments. Markets should also be looking at implementing additional common services for utility payment use cases, like central biller registry, end-user mandates, and consent registry on top of request to pay flows.
Here at Tietoevry we have already implemented Request to Pay in our Nordic solutions for companies such as Siirto in Finland. For more in-depth learnings on Nordic implementations and how to build real-time payment infrastructures overall, feel free to reach out and we can discuss the right approach for your market.