First, let’s acknowledge that Millennials are driving the long term trends of the payment industry. And that many studies show that they will soon have the most purchasing power of any demographic group. Furthermore, 30% or more of Millennials report that they have never visited a bank branch and demand an online solution. Fast, convenient on-demand payments are the wave of the (near)future. But cash is still king and the traditional retail payment channels are as important as ever.
In fact, in-person payments are predicted to increase particularly due to the rise in Hispanic population. According to Pew research, Hispanic population is expected to increase to 29% of adult population in the U.S by 2050. These consumers are often paid in cash and they are often comfortable making bill payments in person using cash or money order. Recent industry surveys have shown that almost 9% of Hispanics paid using in-person channels in the most current calendar year. That has impacted the total U.S bill payments volume year over year and should result in a small increase for the next few years. By 2019 it is projected that there will be over 34.5 billion US bill payments. And 11.9% of those will be paid by customers walking into retail locations.
While customers still want the flexibility and convenience of paying bills at retail, the introduction of mobile and online solutions has resulted in lower consumer fees. While a boon for the customer, it has compressed margins and revenues. Retailers provide the labor and it is a constant evaluation of resource allocation and ROI. If the bill pay transaction takes x amount of time to Y in commission, the lower consumer fee means they make less per unit of associate time than they did before. They then compare that to other tasks that are competing for the associate’s time. So, what does that mean for retailers and bill payment providers?
Well it has led to automating the bill pay transaction and eliminating or reducing the retail associates involvement. Currently this automation has taken two form factors, Kiosk or Bar Code.
With Kiosk, the transaction steps remain mainly the same, but instead of the retail associate entering the data into a terminal, the customer is now responsible. Providers like Tio have provided kiosks that accept cash and debit credit cards so that the bill pay requires no retailer involvement. Western Union has taken a “staged” transaction approach, which only requires the associate to enter a code at the register and collect the funds. Each solution is better for the retailer, but neither offers the convenience or elegance of a “Uber” type user experience that more and more people are demanding.
Retailers and BillPay providers realize that consumers want to use smartphones to make mobile payments and smartphone manufacturers playing an increasingly important role in the payments landscape. We are seeing alternatives to conventional banks like Green Dot’s GoBank which are mobile-only succeed. 90% of mobile data traffic will be from smartphones by the end of 2021 so the majority of consumers will have mobile payment capable devices in their hands.
So if customers want the flexibility/elegance of mobile and have a desire to use cash, how do you bridge the gap at retail? My money is on Bar Code. This solution takes the power of the app and retail bar code scanning infrastructure to turn bill pay into a common retail purchase. Companies like Pay Near Me and Vanilla Direct are linking their network of billers to their POS integrations and providing a bill pay solution that is familiar for the consumer and retailer. To illustrate the simplicity, here are the instructions from VanillaDirect.com:
Download a barcode at PayItHere.com for your specific biller or locate it on your paper bill.
Take the barcode and bill payment amount to a participating Pay It Here retailer.
As the cashier scans the barcode and collects the cash, your bill will be processed for payment.
Pretty straight forward, right? Like scanning a can of beans or soda. Neither the associate or consumer have to learn a completely new process.
Now there is room for improvement. With many billers providing e-bills, having them loaded into the app ready to select is an easy first step. And with only 17,000 or so locations in a couple of key retailers, these solutions are not as ubiquitous as CheckFree Pay , WU or Moneygram. But these limitations will be overcome over time.
Eventually all bill payments may be paid on mobile devices with funds from online accounts or cryptocurrency. But my gut and experience out in the trenches tell me that cash will be around for quite a while. And as long as that is the case, we will need innovative retail bill payment solutions. Yes, Walk-in Bill Pay is here to stay (for now).