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Recurring Payments – A powerful customer service solution

With more than 3,100 utility companies across the United States, according to the American Public Power Association, and hundreds more in Mexico and Canada, the need to differentiate payment and billing offerings is becoming paramount in order to remain competitive in the marketplace.

Recurring payments offer the utility industry a simple yet powerful customer service solution that can yield hundreds of millions of dollars in cost savings, improve cash flow, increase productivity and provide a key competitive advantage.

Also known as automatic bill payment and direct payment, a recurring payments programme enables your customers to authorise a charge of the amount owed to a payment card automatically. Payments can be collected monthly, quarterly or at whatever interval the consumer and the service provider agree on; the billed amounts can be the same every time or vary from one payment to the next, such as with a utility bill.


A recent Jupiter Research study indicated that the traditional billing and payment method costs service providers more than $1 per transaction – including the expenses associated with preparing and printing paper bills and envelopes, postage, and manually processing paper cheque payments. The same study found that electronic bill presentment and payment, including recurring payments, slashes those costs to roughly 40 cents per bill.

Recurring payments offer utilities a guaranteed payment in full and on time, improved cash flow and collection, and reduced exposure to bad cheques and write-offs. The programme also delivers benefits to customers, including:

  • The convenience and security of knowing bills are paid
    automatically and on time.
  • The option to revolve balances if choosing a credit card for payment.
  • The opportunity to earn benefits and/or travel miles for paying
    their monthly utility bills with a payment card enrolled in a rewards programme.
  • The time and cost savings of not having to write cheques, purchase stamps and envelopes, and make trips to the post office or mailbox.


Despite the advantages, the utility sector lags behind other industries in the United States with respect to the percentage of its customers who use recurring payments. A 2003 survey conducted by MasterCard International showed that only 22% of utility customers use some type of recurring payment method to pay their bills, compared with 50% in the insurance industry and 43% for Internet services. One of the reasons for this is that overall payment card acceptance within the utility industry is less than 2%, with bank payment cards accepted only on a limited basis for security deposits and collections.

However, 26% of consumers surveyed said that they would switch utility providers if the option of paying bills automatically by payment card were available and if all other factors were equal.

MasterCard works with its partners to offer consumers a number of payment options, including card products. In 1998 MasterCard initiated the Service Industries Incentive Program (SIIP) to help its US business partners in the insurance, cable, utility and telecommunications industries adopt recurring payments. This programme offers companies an incentive rate on consumer transactions, only requiring participating organisations to encourage the use of MasterCard cards for recurring payments as part of their consumer marketing efforts.


Research and field experience indicate that the benefits of accepting cards for payment far outweigh the concerns. Merchants in a variety of industries have benefited from card acceptance, and consumers have shown a tendency to gravitate to those service providers who offer the greatest convenience, flexibility and choice.

Recurring payments can also help strengthen customer loyalty through the increased flexibility and convenience consumers experience when paying their utility bills. Additionally, consumers seem to enjoy the prospect of earning meaningful rewards for using a payment card. For example, in the current low-interest rate environment, consumers who use a payment card that offers a 1 percent rebate on purchases might see a better return on the payment of their utility bills than they would if they took the same amount and put it in a savings account. With utility industry experts forecasting an annual growth in US demand totalling only 1.7 to 1.8 percent through 2010, recurring payments provide additional cost savings that may offset sluggish financial growth.