Judge's Ruling to Change Economics of Bill Payment
The pace of change for CFOs and others responsible for accepting bill payments continues to increase. The federal judge's ruling on debit card interchange rates could significantly alter the economics of accepting card payments.
Debit cards are consumers preferred form of payment, but the costs associated with accepting debit cards have historically limited some consumer finance, insurance, utility and other biller's acceptance of card payments. While the new interchange rates have not yet been set, preparations can begin today. To prepare for future disruptions, move towards a single integrated bill payment system that will increase responsiveness to market changes.
The exact impact will vary by industry, geography and average payment amount. Many industries such as consumer finance, insurance and utilities have special interchange rates with the card associations to take into account. Depending on the geography a biller may have a larger percent of debit card payments from large banks vs. small banks, which has impacted their interchange rates. If the new interchange rates include a fee for the percent of the transaction amount, then the average dollar amount of the bill payment will determine whether a biller's costs go up or down as a result of the judge's ruling.
No matter what the final rates become, one thing is clear, the way payments are accepted is rapidly changing. Many billers lack the agility to quickly adapt their payment systems to take advantage of new opportunities because they use multiple non-integrated systems for different payment channels and lines of business.
Those billers who use a single integrated bill payment engine across their enterprise will be able to quickly adapt to the pending changes. For example, the decrease in debit card revenues at large banks could lead the banks to charge more fees with their checking accounts and which ultimately drives more consumers out of the formal banking system. The increase in unbanked and underbanked consumers begs the question, how will they pay their bills? While the traditional thinking was they would primarily use walk-in payments, new research from TowerGroup has uncovered they are also heavy users of the mobile channel paying their bills with prepaid debit cards. CFOs should examine their payment options to ensure they have convenient walk-in and mobile payment options to serve the unbanked and underbanked population.
To respond to the judge’s ruling while preparing for the increasing rate of change, deploy a single integrated bill payment engine that offers walk-in and mobile options integrated with call center, IVR, web and online banking payments. The CFOs and other leaders who do will reap the biggest reward in growing consumer satisfaction, optimizing their costs and lowering their PCI risks.
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