How Five Common Payment Pitfalls Impact Customer Retention

It’s an exciting time to work in the payments industry. Technology is evolving incredibly quickly and every week brings more options for payments. Yet the payments process is often disjointed from the rest of the brand experience, particularly for companies that have to collect regular payments from customers, such as in the telecoms, utilities and financial services sectors. Recent research from Teradata revealed that becoming more customer-centric is a top two priority for 49% of large global enterprises, as consumers expect and are more vocal about the level of brand experience they receive in every single contact they have with their suppliers.

In this article I cover the five main mistakes in the payments part of that customer experience, together with advice for organisations to help improve the end-to-end payments process:

1. Believing Direct Debit is always the best payment method

The benefits of direct debit are widely accepted – including that they remove risk on both sides and reduce collection costs – and so most organisations that collect regular payments from their customers insist on direct debit to secure the service. But did you know that up to 10%[1] of direct debits are cancelled after the initial sign up and 3-5% can fail every month, for example because of insufficient funds in the account? With this in mind, organisations need to look at offering a variety of different payment methods which, across the customer mix, will increase customer satisfaction and revenues and reduce the need to charge additional fees and extra time spent on collections. Just one example is to look to mobile payment technologies, like paying for unpaid bills with a one-click SMS.

2. Classing bill payments as ‘just’ a transaction

Companies like utilities, telecoms and financial services providers have a large proportion of customers on a contract or regular billing cycle, so the most frequent engagement with the customer will be paying their bills.

More customers leave their service provider because they’re dissatisfied with the quality of service, including payment options rather than what they’re actually paying for. Every time a customer makes a regular payment, they consider whether they’re happy with that service-value exchange and the next step is deciding whether to move to another organisation. To avoid this risk, work hard to personalise every interaction with your customers and make it easy for them to contact and pay you.

3. Not recognising the value in customer communications

Why is it that customer communications are still often seen as less high-profile than marketing communications within most companies? These days it’s now a given for marketing content to represent the brand promise and values, provide consistent messages to customers, listen to their feedback and create exciting promotions which go to the right customers at the right time.

We still see that customer communications like account, payment and collections notifications, surveys and new service promotional messages are not coordinated. Can you try and collate all the payment and customer behaviour data with information collected from other areas of the business to better inform and personalise your communications output? Encourage all teams in the organisation to live and breathe omni-channel and you’ll benefit.

4. Misunderstanding customer payment preferences

It doesn’t matter what you’re selling to customers and whether it’s at a premium or value price, they still fully expect to have some say in how they engage with your company. Whether that interaction is about marketing preferences, service methods or billing, having some intelligent systems in place can help measure and predict customer behaviour, gaining insights that help your business to be more responsive and successful. In a 2013 JD Power Electrical Utility Residential Customer Satisfaction Study, customer satisfaction increased by 42 points when customers could select their own payment method. Understanding customer preferences and designing your business operations in response can really help increase the quality of communications you have with customers and reduce churn.

5. Failing to anticipate customer collections

Organisations that can predict and engage earlier on with customers who might be in danger of missing a payment, with positive communications, will foster better relationships with them and reduce cost of serve.

It might be that a payment is always due at the end of the month so analysing the customer’s payment history and simply moving the payment soon after payday means a recurring issue can be averted. For one of our utilities clients, high risk customers receive a friendly reminder before their account becomes overdue, offering payment by card on an automated line. For anyone whose account then falls overdue, further automated reminders are arranged across multiple channels to encourage resolution before more formal contact begins. Using intelligent predictive engagement and payment solutions across the volume of individual customer accounts can really reap rewards.

[1] Direct Debit statistics are based on detailed information from TALKINGTECH clients - primarily in the financial services, telecoms and utilities industries. This includes data from ADDACS (Automated Direct Debit Amendment and Cancellation Service) where providers specify Direct Debit as the only regular payment option. Whilst 100% of customers might be approved as paying by Direct Debit at the time of joining, the data shows that around 90% of those remain on Direct Debit after 6 months.

The above article is a guest article and is being written by Grant de Leeuw, General Manager Europe, TALKINGTECH. Grant de Leeuw is responsible for the commercial and financial management of TALKINGTECH across Europe. A highly skilled sales director with a deep understanding of the telecoms market in EMEA, Grant drives the growth and expansion of TALKINGTECH through the development of new revenue streams.