By Eric Fosselman
Whether it is the current state of the economy forcing consumers to live paycheck to paycheck or the growing number of consumers who simply prefer to pay in cash, it is clear that walk-in payments are becoming more prevalent. Financial institutions, big or small, need not be left out of the opportunity to provide consumers with this flexible, convenient payment option and should consider a walk-in solution to keep pace with consumer demand and remain competitive.
As an alternative payment solution, walk-in payment services enable financial institutions to offer a valuable service for their own customers and also serve the growing unbanked and underbanked community. Walk-in payments also aid financial institutions in the collections arena, providing another convenient option to collect and, thus, generate ever important fee-based revenue.
According to a 2006 report from Aite Group, an estimated 1.2 billion walk-in payments were performed in 2007 and this figure is expected to grow at a compounded annual growth rate of 5 percent. Consumers are primarily using the walk-in channel for three types of payments including convenient bill pay, prepaid wireless phone card reloading and expedited payments.
Who are these individuals using walk-in payment services? In 2006, MoneyGram International conducted a survey among users of its MoneyGram ExpressPayment® Service, which enables consumers to make same-day, cash payments at any of MoneyGram’s 33,000 retail agent locations such as Wal-Mart, Advance America and Albertsons stores nationwide as well as leading financial institutions, including all U.S. Bank and National City branch locations. Interestingly, MoneyGram found that 69 percent of its walk-in users did indeed have a bank account. Also noteworthy was that these users had a 95 percent likelihood to reuse the service and the average purchase frequency was 14 times in one year.
These “in-person” bill payment users often use the service to pay financial bills and prefer cash for a variety of reasons – they want proof of payment and take comfort in getting an immediate receipt, “good funds” helps to mitigate the consequence of late or no payment because funds are cash there is no risk of non-sufficient funds (NSF), or they may have cash flow issues and need to make a last-minute payment to avoid significant late penalties. Another reason consumers may opt for a walk-in service is that they need to make a cash payment outside of their bank’s normal business hours.
Getting Into the Race
The increased usage of walk-in payment services provides financial institutions with an area of opportunity to grow their business and enhance customer relationships. From a retail perspective, financial institutions can increase revenue and attract new customers who may not otherwise use traditional bank services. In addition, walk-in services provide the financial institution’s own customer base with another convenient and valued option to make an expedited payment.
The expedited payment component, in particular, can be a strategic channel for collections. Walk-in payment services help to aid collections by providing a helpful tool to collect guaranteed, cash payments in a highly efficient manner for a variety of bills, including bank-issued loans and credit cards. New payment tracking technology enables collectors to track these cash payments online, giving them the ability to accept or reject a payment. This is an important benefit when dealing with payments in delinquent status and when accepting a payment may have legal implications and penalties.
One Foot Forward
Once financial institutions determine that walk-in services will bring value to their organization, there are a few considerations to keep in mind as they embark on the implementation phase.
Determine collection rates and what will be feasible for customers. How much will customers be charged per bill payment?
Consider the level of reporting the organization needs.
Make sure the services are regulatory compliant.
Consider the local service area to determine if national coverage is needed. For example, for a transient customer base, it may make sense to partner with a third-party payments processor who can provide additional walk-in locations nationwide – locations that customers may already frequent such as popular grocery stores or retail chains and locations that remain open to serve customers during hours when financial institutions are typically closed.
Consumers’ increasing use of walk-in cash payment services should not be discouraging to traditional banks and credit unions. Instead, it represents an untapped opportunity for financial institutions of all sizes to better serve their own customer base with additional flexible and convenient payment options and delivers an important channel for the business to benefit from this emerging growth opportunity.
Eric Fosselman is a director of sales with MoneyGram Payment Products Group of MoneyGram International, Inc., and works with corporations, financial institutions and retail customers to provide walk-in payments, electronic payments, and paper payment options. Eric can be reached at 610-274-8220 or firstname.lastname@example.org.