Previously, CAPE discussed rational and sensible reasons why utilities often charge their customers “convenience fees” when customers pay utility bills using debit or credit cards. This article discusses benefits to utilities who decide to absorb the costs of debit and credit card payments made by their customers.
Penelope Conner of Eversource Energy wrote a series of articles on this topic for Electric Light and Power. Her articles can be found at http://www.elp.com/Electric-Light-Power-Newsletter/articles/2018/02/fee-free-credit-and-debit-cards-case-study.html. The reality for utilities who pass on card payment fees to their bill payers is summed up by NiSource’s senior vice president of customer service and new business, Chuck Shafer: “Most customers simply do not expect to pay fees to pay people, and when they are forced to their satisfaction takes a big hit. They don’t understand or care why we charge fees. How they pay for other goods and services sets their expectations, and charging fees violates their sense of fairness.”
Limited numbers of entities can charge payment fees when they accept card payments. Exceptions are made for utilities and some governmental agencies. However, as Mr. Shafer accurately points out, paying a fee to pay someone seems unfair to most bill payers. Ms. Conner articulates multiple advantages resulting from the elimination of customer payment fees at utilities. Perhaps the greatest advantage is significantly lower payment costs absorbed by utilities who elect to pay for accepting card payments internally.
Visa and MasterCard provide lower payment rates to utilities who do not charge their customers payment fees. American Express has lately shown a potential willingness to do the same. The savings to utilities who absorb card payment fees are significant. Because payment costs are lowered for utilities who do not charge their customers card payment fees, the internal costs are less than many utilities realize. CAPE calculates the costs of absorbing card payment fees for utilities. CAPE insures its utility clients receive the lowest costs available from all card brands before a utility makes the change to “fee free” card payments. Engaging an independent payment expert who is not a payment processor is the right move for utilities pondering the decision to eliminate “convenience fees”. CAPE’s goal is to drive card payment costs assumed by utilities to their lowest achievable level.
The driving forces behind fee free utility card payments are increased customer satisfaction and higher card utilization. Mr. Shafer of NiSource: “As expected, we have seen an increase in customers choosing this channel. In Pennsylvania, we have seen a 25 percent increase in credit card usage. This increase is significant, but is much less than the adoption we expected. Correspondingly, with the adoption of fee-free service, we have seen increases in customer satisfaction in JD Power in ease of paying bills and the variety of methods to pay a bill. We believe there is a lot of opportunity for increased customer adoption. But we want to ensure we are positioned to support this service offering. Our plans are to enable recurring payment within the next year. We believe customer adoption will increase with a recurring payment option.”