Balancing Innovation With Digital Adoption Lags

Instant payments have become an expected part of doing business, across the sharing economy and digital commerce, as well as for the public utility sector.

According to the Making Instant Pay Global Playbook, public utility companies are innovating their payment methods to include online and mobile options to meet consumer demand and stay competitive. Yet they also have to balance innovation with traditional payment methods like cash and paper checks so as not to ostracize underbanked users and older demographics.

“In traditional utilities, and in probably many customer service industries, our cycle of changing or refreshing our technologies used to be 10, 15 years, and that would be fast-paced,” said Louise Scott, vice president of customer experience for Southern Company Gas, in an interview with PYMNTS. “Today, we have to rethink that.”

Digital payments have become the norm quickly. Ten years ago, 30 percent of payments that Southern Company Gas processed were digital, which hit close to 50 percent five years ago and now currently makes up around 65 percent.

The company is exploring mobile payment apps and chatbots while juggling the cost of maintaining contact centers for customers who still rely on them.

According to the May Unattended Retail Tracker, cash is still a very popular bill payment method in the U.S. Approximately 8.4 million households were unbanked in 2017, and about 66 percent of these households paid their bills in cash.

Chicago’s Department of Finance has installed kiosks around the city for customers to pay utility bills. Nearly half (47 percent) of bill are paid in cash.

Like Southern Company Gas, National Grid also wanted to build a mobile payment app but was held back by legacy infrastructure. The energy company eventually partnered with Western Union to offer a smartphone payment system.

Consumers not only want digital payment methods from utility companies, they are also engaging with companies via apps like Nest that track power usage from smart meters, smart thermostats and connected appliances to provide insights into consumption and potentially save customers money.

Startups might seem to be more nimble than traditional industries like utilities, but they share some of the same challenges in balancing innovation with still serving users that might not be ready yet to go all-digital.

For Lime, the scooter rental company that is looking to expand globally, localized payments are also important. Ryan Foutty, the company’s senior director of business development, told PYMNTS, “Accepting legacy payment methods like cash and checks is just as integral as taking mobile and digital payments.”

Lime accepts mobile wallet payments, but had to allow for cash payments in Latin America where that’s the norm.

The Making Instant Pay Global Playbook also explored challenges of instant payments in the gig economy. Beyond building trust between two parties who may never meet in person, enabling payouts in multiple currencies has been an issue, particularly for global marketplaces.

Instant pay is also important in the gig economy because that’s what users want; 84 percent reported they would do more gig work if they were paid faster.

According to Andy Schabelman, vice president of international expansion for freelance marketplace Fiverr, “The thing we also have to keep in mind is that we have a two-sided marketplace. We also have intricacy that involves being able to offer the local currency of the buyer, which can [sometimes] be different than the local currency of the seller.”

Local currencies and local payment preferences also affect digital commerce marketplaces.

Electronics and software marketplace Newegg found that cash or payment on delivery was preferred in parts of the world like Southeast Asia and the Middle East. And when Jiji, a Nigerian digital marketplace, was building a payments solution the ability to accept cash was vital. When the company entered Nigeria in 2014, smartphone penetration was only at 10 percent.

Whether in the gig economy, digital commerce or public utilities space, the uptake in consumer mobile and digital usage is driving payments innovation. Broader customer bases and geographic expansion, however, are influencing how instant payments are being rolled out.