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Why utility suppliers must accept online cash payments

Three reasons utility providers need to consider offering a cash payment option in their online checkout.

For consumers and utility companies, increasing the number of ways to pay a utility bill online offers a mutual benefit. Meeting consumer expectations for alternative payments and providing a more frictionless customer experience will not only result in more brand loyalty and increase the likelihood of bills being paid on time, it is also a differentiator for suppliers and grows their target market.

One method that would be of particular benefit to utility companies is to accept cash payments online. Not only is cash more ubiquitous than any other payment method, it is also the clear preference for many consumers when making either offline or online payments.

Here are three reasons utility providers need to consider offering a cash payment option in their online checkout.

The simplicity of paying online

Paying a utility bill isn’t fun at the best of times, so for utility companies it is most certainly in their interest to make the experience as painless as possible. By doing so it not only benefits the relationship the consumer has with the provider, it also increases the likely the bill will be paid on time.

Payment preferences are increasingly moving in the direction of digital checkouts; appetite for older payment methods such as cheques is in sharp decline. So for customers that want to pay their bill in cash, giving them the opportunity to do this digitally is almost certainly going to be the most frictionless customer experience.

Promoting financial inclusion

A lack of access to financial services is still a critical concern for a substantial portion of the global population.

For example, over a million adult consumers in Germany and Austria don’t have a bank account, and millions more don’t have the same access to financial services as the majority of consumers.

Being underbanked (having a lack of access to some financial services) or being completely unbanked (having no access to financial services) can severely impact a consumer’s ability to make payments online, because their finances are almost exclusively comprised of holding and spending cash.

And the number of consumers that are dependent solely on cash is increasing due to a number of factors including the proliferation of the Gig Economy, where paying wages in cash are particularly common.

For these consumers, only being able to make a utility bill payment using a method where having a bank account is a requirement (bank transfer, debit or credit card payment, cheque) is unscalable obstacle. Offering a payment solution that is centred on cash, rather than access to a bank account, gives these consumers a mechanism to overcome that hurdle.

By doing so, utility companies aren’t only serving an altruist purpose of promoting financial inclusion (which is a worthwhile exercise in itself, particularly as the provision of utilities can be considered critical to a reasonable standard of living) but also but also increasing the size of their target market. For this reason, offering cash payments is a legitimate way to expand a target customer base and grow revenue.

The majority of utilities companies do have to offer cash as a payments option due to their status as a basic services which means that they cannot discriminate against consumers without a bank account; for full financial inclusion utilities companies should do this digitally as well as on paper.

Consumer payment preference online is moving away from a dependence on cards

Necessity isn’t the only driver for consumers to make payments online using cash; increasingly priorities such as security and privacy, or preferences for a better user experience, are resulting in new payment methods gaining popularity.   

Where card payments were once the default payment method online for the vast majority of consumers, this is no longer the case. The adoption rates of alternative payment methods continue to rise, and the benefits of these alternatives to card payments are accelerating the fragmentation of the online payment landscape and consumers discover new preferences.

This is particularly true in Austria and Germany, where habitual use of credit and debit cards to make online payments is relatively low. According to a research report published by Paysafe last year, Lost in Transaction: Payment Trends 2018, only 25% of German consumers and 49% of Austrian consumers use a credit card to make online payments on a monthly basis. Even fewer use a debit card to do so; 20% of German consumers and 18% of Austrian consumers told us that they had made a payment using this method in the previous month.

In line with this shift in consumer expectation, merchants and service providers such as utility companies need to seriously consider the number of payment methods they offer. According our 2018 business research, Lost in Transaction: The future of payments for SMBs, on average businesses accept four payments in their online checkout, but they expect to offer six methods before the end of 2020.

According to our research, 5% of German consumers and 8% of Austrian consumers habitually make cash payments online, because they either prefer the experience of doing so or they simply don’t want to share their financial details online. So it shouldn’t be a surprise to see this payment be offered by more and more retailers in the coming years.

For utility providers, not keeping up with this emerging trend will become an issue; when a product offering is relatively homogenous such as electricity or gas supply, consumers will gravitate to the suppliers that they connect with and that provides them with the best user experience. Forcing consumers to pay online using a card is the opposite of this.