How technology can reduce the cost of payments during the cost of living crisis

The cost of living crisis in the UK has reached new heights. Inflation stands at its highest since 1982 at 10.1% and experts predict that the economic crisis will continue to worsen and rates will continue to rise to 18% by 2023.

There are a number of contributing factors to the challenging economy. We are experiencing the after-effects of the global COVID-19 pandemic, supply chain disruptions and an increase in National Insurance resulting in cash flow pressures. For example, 6 million UK household are currently struggling to pay their telecom bills alone.

As it continues to become increasingly challenging for consumers to pay their bills, businesses are feeling the strain. A lack of certainty for businesses to  pay on time results in stalled cash flow in the short-term and delayed growth in the long-term. More than ever, businesses must adapt to these challenges and look for ways to gain greater certainty and insights around payments. So how can this be done?

The obstacles businesses and consumers face

When people can't afford to pay their bills, it is a common behaviour to try to find ways to feel in control of the situation. In addition people tend to pay a bill or make a payment solely depending on what they can afford at the time. Not only is this a very stressful experience for the payer but also for the businesses looking to be paid, who heavily rely on a consistent and predictable incoming cash flow.

Another issue for customers is that many businesses use inflexible payment systems, with restrictive collection windows and a lack of personalisation. The solution? Greater personalisation. Customers with payment options on their terms have a far higher likelihood to pay their bills on time.

Moreover, tight control over cash flow has never been more important. Some businesses lack strong security systems, opening themselves up to the growing risk of fraud. Businesses with manual, disconnected processes have higher error rates, making collection more time-consuming and costly. Businesses need alternatives that can ensure higher levels of security and a digitally connected approach that supports automation and ultimately a lower cost to serve.

Flexibility and inclusion for customers are key 

During the current economic climate, financial inclusion for consumers is crucial. According to Deloitte, 45% of people said financial concerns from the COVID-19 pandemic negatively impacted their well-being. Businesses must learn from this as complex and less flexible payment methods coupled with the current cost of living crisis will deter customers from choosing a business if they feel their financial control is at risk.

Delivering flexible and personalised billing solutions will help to simplify the relationship and make it one they favour. Businesses can reduce the cost to serve customers and remove some of the many errors inherent in more manual processes by putting the power in customer hands. This results in efficiency and, with the right technology, rich and actionable insights into customer behaviour.

Billing technology improves the customer experience, placing businesses at the top of the queue to get paid. According to the “State of Consumer Report” of the 15,000 consumers and business buyers surveyed globally, 67% stated they would be willing to pay more for a better experience. Happy customers are more likely to stay (cheaper), to advocate (better) and to pay you on time (certainty).

The answer lies in automation and AI

Automation allows for cheaper and more efficient business transactions as it automates the collection and the payment process in one go. It provides transparency on who has paid their bills and who has not, allowing businesses to focus their resources and be proactive elsewhere. 

AI-powered data can also be used as a tool to automatically flag those who have not paid their bills and are also likely not to pay, based on trends in past behaviours. Businesses gain valuable insight into their future transactions and who they must reach out to far in advance, reducing the chance of defaults and overdue balances. 

As we see more technological advancements with billing methods, businesses unwilling to adapt are less likely to cope in this new landscape.

Adapting to change

The world has digitised rapidly over the last few years, with customers having higher expectations about the experience they want. Consumers will compare and contrast their best payment experiences and not just what immediate competitors are doing. 

The effects of the cost of living crisis are and will be felt by both payer and payee long-term. As people struggle to pay their bills, businesses will face increasing late payments, or worse, none at all. 

Complicated payment procedures are discouraging for people who are already struggling financially. Most customers want to pay, but the current economic times make this process much more difficult. Businesses need to focus on their customer experience, and billing is a critical and frequent engagement point that presents a huge opportunity to do so. It’s a win win.

Businesses unwilling to adapt to new billing technologies such as Request to Pay will struggle in the future. Such new billing technologies remove many of the barriers set by traditional solutions. Flexibility and personalisation will lead to businesses’ achieving that critical end goal - actually getting paid.