Bill Pay: Paper in, Digital Payments out

Americans overwhelmingly prefer to see paper bills, but most then go ahead and pay them electronically. That’s a key finding from a study released last month sponsored by the U.S. Postal Service’s Office of the Inspector General.

The three-month analysis of customer records from a major East Coast utility found that 91% of customers elected to receive their bills by mail. Even among younger, supposedly digitally-savvy customers, an average of 89% of customers chose paper bills.

The unidentified biller dubbed “Utility East” provided InfoTrends Inc., a consulting firm working with the Inspector General, with 2 million residential customer billing records for last May, June and July. Weymouth, Mass.-based InfoTrends then randomly picked several subsets of 5,000 customers to examine how they received and paid their bills. The firm also interviewed executives who manage billing and payments.

Utility East customers were more likely than the national average to get their bills delivered by mail, but also more likely than average to pay them electronically. Yet both groups still strongly preferred to see paper statements.

Why the preference for paper delivery? “Research shows that consumers value the physical mail piece as a record-keeping tool and reminder to pay,” the report says. “Moreover, consumers do not save any money by receiving their bills digitally, whereas they save postage when they pay online. The executives we interviewed said this was consistent with what they have observed in the industry.”

While they still like to receive paper bills, Americans increasingly are turning to electronic channels to pay them. Citing its most recent massive annual study of mail trends, the Postal Service says Americans received 24 billion household bills and statements in fiscal 2013, with the Postal Service delivering nearly 80% of them. But consumers paid only 37% of those bills by mail that year—a 45% decline from 1998.

The new study says more than 70% of Utility East customers use electronic bill payment, with new customers on their third billing cycles adopting electronic payment at even higher rates.

The study also examined Utility East’s average costs for sending and receiving bills. Electronic delivery and payment is the cheapest, not surprisingly—just 6 cents, including 5 cents for delivery. Mail with electronic payment costs 49 cents for delivery and a penny for processing for a total of 50 cents, while mail delivery and payment costs an average of 53 cents.

But InfoTrends also factored in call-center costs—a substantial expense for most billers. Customers who received mail bills but paid them electronically were the most likely to call customer service, followed by those who receive and pay bills electronically.

Thus, adding customer service brings the average total cost of mail delivery with electronic payment to 80 cents. Delivery and payment by mail rises to 76 cents while all-electronic delivery and payment costs 32 cents.

Bill delivery and payments remain an important revenue generator for the loss-racked U.S. Postal Service. What the Postal Service calls transactional mail pieces, primarily household bills and payments, brought in $18.5 billion for the agency in fiscal 2013, more than a quarter of its total revenues. The Postal Service hopes paper will continue to play a major role in bill payments, at least for a while.

“Customer satisfaction rates are a primary driver for companies that send transactional mail,” the report says. “While over time more customers may opt to receive bills electronically, our research shows that physical mail still plays an important role today and will continue to do so in the near future.”

—Jim Daly