How Much Longer for Transaction Mail

The Postal Journal has just posted three recent studies looking at the changing ways that consumers and businesses receive and pay bills.    The articles as a group suggest that consumers are increasingly looking toward web and mobile methods of handling bills and web, mobile and in-person methods of paying bills.

The studies, listed in order of their publication and their relavent conclusions are as follows:


Consumers Shift to ePayment to Get Control Over Finances 

 With the release of the 2010 Billing Household Survey by Fiserv Corporation provides a significant update on how the availability of multiple web and mobile based payment and bill presentment delivery modes has changed consumer use of traditional and new modalities. The survey, conducted by The Marketing Workshop, showed that consumers that have online access are gravitating toward payment options that provide them more control and allow them to hold onto their money as long as possible. In particular, the number of online consumers that use checks declined to 54.5 million households, below the 65.0 million households that use either biller direct or financial institution bill pay services.


Federal Reserve Study Shows More Than Three-Quarters of Noncash Payments Are Now Electronic

The Federal Reserve’s 2010 study of noncash payments revealed that in 2009 more than three-quarters of all U.S. noncash payments were made electronically, a 9.3 percent annual increase since the Federal Reserve’s last study in 2007. This growth and other statistics in the study emphasize consumers’ increasing adoption of electronic alternatives for payments in the United States. The 2007 study revealed that in 2006 roughly two-thirds of the payments were made electronically.







e-Bills Will Surpass Paper Bills By 2016

This study conducted for NACHA, the national electronic payment association by Blueflame consulting showed that 26.6% of all bills are now sent electronically with the largest percentage among customers of educational institutions and wireless telecommunications companies.  The study also showed that on average firms surveyed had e-bill volumes grow by 32.3% on average over the past two years.   The study indicated that at this point consumers are more amenable to e-billing than businesses.

 Implications of These Studies


These studies confirm the Boston Consulting Group's (BCG's) conclusion that the primary purpose of mail in 2020 will be the delivery of advertising as the volume of bills and payments in the mail decline.   These three studies suggest that the Postal Service and others interested in the future of the Postal Market need to take a second look at the forecasts developed by BCG and presented publicly last spring in order to determine if the more recent data suggests a faster or slower decline in transaction mail than previously believed.

From a policy standpoint, these studies suggest that more information is needed about:

• the proportion of the population that are only using mail continues to handle bills and payments continue to shrink and better information is needed about the characteristics of U.S. households that continue to use mail as their primary means of handling transactions; 
• how the shift of the mix of mail senders affects demand for collection and delivery services and the accuracy of the Postal Service's understanding of the business needs of its advertising mailer and parcel shipper customers;
• the appropriate role of the Federal government regarding the maintenance of an infrastructure to deliver advertising containing media (both direct mail and periodicals) when the volume of printed communications handling transactions or information becomes significantly smaller; and
• the relevance of the Postal Service's money order product when unbanked individuals are increasingly using walk-up electronic payment services rather than mailing postal or private sector issued money orders.

Leaving the Mailstream: Verizon

Today, Verizon launched a campaign to convince more residential phone customers to both receive their bills electronically and pay electronically.   The press release combined by an analysis of Verizon's most recent financial statements provides some useful details that explain why transaction mail volumes are decline so fast.

• The number of Verizon's wireline (traditional) phone residential customers are declining rapidly.  In the 2nd quarter of 2010 Verizon had 17.4 million residential customers, 11.4% fewer than a year earlier.  Some of this decline reflects shift toward phone service provided by the cable company or on-line services like Vonage but most of the decline reflects residential customers unplugging from the traditional phone network.
  
• The number of business customers is also declining but nearly as quickly.  In the 2nd quarter of 2010 Verizon had 13.6. million business customers, 5.9% fewer than a year earlier.
  
• In June of 2009, 8 million residential customers paid their bills electronically or 46% of all Verizon residential customers are paying their wireline bill electronically.  
  
• Currently 2.4 million Verizon customers receive their wireline bill on line or 14% of residential customers receive their bills electronically.  
  
• Verizon expects the promotion will increase electronic bill presentment to rise by 250,000.  Following the promotion, Verizon will have around 16% of its customers both receiving bills electronically and paying electronically.

Verizon's effort is designed to reach web-connected wireline customers.   Given that the cost of prize money and advertising expense are modest, the potential return for Verizon is significant.   In all likelihood, Verizon will develop similar promotions in the future as it tries to shrink its paper billing and payment operations.

What does Warren Buffett know about the future of the USPS?

In his quarterly filing of investment holdings, Warren Buffett announced a new investment by Berkshire Hathaway in a competitor to the Postal Service.  That competitor is Fiserv. (FISV)   With this investment, Berkshire Hathaway becomes the 6th largest investor in the company.

Fiserv is not a household name . However, many of the services that it now offers were originally developed by a company called Checkfree that it purchased a number of years ago.   Fiserv has expanded those services and has continued to see its volume and revenue grow as consumers shift away from payments by mail.   Fiserv's clients include a full range of companies that send bills and receive payments including banks, other financial institutions, retailers, health clubs, and utilities.   Fiserv's services that compete with the Postal Service can be found on its page describing its biller solutions.  These solutions include:

• On-demand bill pay – agent, Web and IVR
• E-lockbox and remittance processing
• Walk-in bill pay – more than 20,000 locations nationwide
• Electronic bill pay (EBP) at your site
• Electronic bill pay (EBP) beyond your site
• Bill delivery – print and mail
• Bill delivery – paperless billing
• Targeted messaging – transpromotional, direct mail, e-mail or in-statement

Fiserv actually markets its services as solutions for what it calls the postal sector.   Its website touts its postal sector service as follows:

As e-mail and e-documents continue to flourish, they challenge the amount of physical mail being delivered. Fiserv can help you bridge the gap between physical mail and the electronic world. Whether you offer purely physical mail services, run a hybrid mail center and are looking to add electronic functionality to your existing service or are seeking to enhance your postal banking service, Fiserv has the solution for you.

With Fiserv, you can extend electronic delivery and payment capabilities to your customers, enhance your trusted client relationship, provide a centralized e-document repository and strengthen your brand and the value of your e-post portal.