Press Releases

SURVEY: CHALLENGES IN PAYMENTS AREA
EMERGE
AS SMART GRIDS TAKE SHAPE

Economy, new regulations are impacting utilities

Mosinee, WI - 10/27/2009 Impacts of a difficult economy. Increased regulation. Consumers demanding many more payment options. Aging IT resources. Uncertainty about what smart grids will bring.

These are some of the many challenges facing utilities in 2009, and the pressure will only continue into 2010 and beyond, based on preliminary results of a survey commissioned by WAUSAU Financial Systems and Sierra Energy Group / Energy Central.

“In a stressed economy, smooth payment processing and timely information about transactions is crucial, yet that’s not what many utilities are experiencing,” said Mike Tallitsch, Vice President – Corporate Solutions of WAUSAU Financial Systems. “In fact, their performance is handicapped by outdated technology. Utilities can’t thrive if they don’t have the right information or the ability to offer the many payment channels their customers now require.”

The research analyzed payment processing trends in the utilities industry; identified areas of concern for utilities of all sizes; and noted economic implications on customer payments. More than 100 utilities responded, with a majority in the independently owned utility area. Most of the respondents hold senior leadership positions.

The major initial findings:

• Nearly two in three (65 percent) of utilities interviewed reported the current economic environment is affecting the industry and making processing customer payments more difficult.
• Billing and cash flow were identified as major concerns impacting a utility’s ability to make accurate business decisions. There is a lack of information about daily investible dollars, driven by the fact that 85 percent use dated, legacy systems.
• As just one measure of the impact of inadequate payment systems, 10 percent or more of payments take more than three days to process.
• Two-thirds of utilities lack confidence in their ability to new meet demands due to market volatility, new regulations and pressures. This includes demands related to green energy, cap and trade, and smart grids.
• Smart grids will create new billing demands, such as two-way billing and demand response reconciliation. But because smart grids are still being built, utilities have not yet turned attention to the billing requirements they will face. Lack of cash flow and access to capital adds to the challenge.
• Even if demand for utilities’ services is down, operating and maintenance costs remain constant. In addition, delinquencies are up by 20 percent over previous years, according to companies surveyed.
• Nearly 33 percent of all utilities say the mobile payment option is rapidly emerging, with customers increasingly demanding the service.
• Utilities’ outsourcing of payment services is slow to gain momentum, largely because the process is so complex. Only about one in three utilities outsource any part of their payments processing today.

The need to modernize receivables processing technology is clear. From its peak in 1995 (according to the Federal Reserve), the number of paper checks has diminished as electronic payments transform payment operation requirements and economics. According to Aite Group, paper checks and money orders’ share of bill payments are projected to fall from 54 percent in 2006 to 37 percent in 2010. Meanwhile, trying to manage many payment channels without a resource to seamlessly integrate them results in negative financial consequences, the survey shows.

A single receivables solution – sometimes known as a hub – can collect all types of payments including check, cash, card and electronic, plus automate imaging, routing and validation. Such a process takes hours rather than days, and lessens the demands on information technology resources.

The survey found that given the economic environment and increasing regulatory pressures, utilities are more likely to buy or switch to a new system if it met certain qualifications. These include guaranteed lower transaction costs; lower costs than the existing system or other vendors competing in a bid process; a quality system; a system that meets all RFP requirements that is easy to use, has low maintenance costs and requires minimal changes to the overall system.

WAUSAU Financial Systems, which serves for more than 45 utility companies, processing more than 500 million annual transactions each year, offers the UtiliWorksTM solution. It’s a hub that has delivered significant benefits to customers willing to change course. For example, American Electric Power in Ohio reduced staff by more than 40 percent, including full-time and part-time employees.

Meanwhile, CenterPoint Energy of Houston eliminated Pass 2 operations with ARC, decreasing the use of hardware and staff by more than 26 percent while significantly improving daily investible cash.

PSE&G of New Jersey, a top-10 utility, was burdened by legacy systems and processes that delayed payment processing, required significant labor to maintain and limited the system’s performance metrics.

Since adopting UtiliWorks, PSE&G has reduced employment, provided the ability to process 100 percent of payments within 24 hours, eliminated courier costs, raised the level of security and increased daily investible dollars by 31 percent – to $8.8 million. In all these cases, electronic deposit has accelerated funds availability.

“What these successes demonstrate is that utilities that decide to adopt the hub concept can enjoy very real, immediate benefits. Such positive results can help alleviate the anxiety that we all experience within today’s rapidly-changing utilities industry,” said Tallitsch.

WAUSAU Financial Systems has set up a new Website, www.utilityreceivables.com, to provide details about challenges utilities face as well as solutions that can make a difference. To learn more about the research, email utilities@wausaufs.com

About WAUSAU Financial Systems:
WAUSAU Financial Systems (WFS) is a premier provider of payment and receivables processing solutions, helping businesses of all types move money faster. With its products, services and consulting, WFS works with customers to speed check processing, electronic presentment, ACH payments, transaction processing, distributed capture and enterprise content management. WFS holds the No. 1 market share position in retail and wholesale remittance processing solutions. WFS processes more than $1 trillion in payments each year through its work with more than 650 organizations, and maintains more than 30 percent of all U.S. lockbox volume. The company works with 13 of the 25 largest financial institutions, 42 percent of insurance companies with more than 5 million customers and 24 percent of utilities with more than 100,000 customers. More than 200 financial institutions use WFS’ remote deposit capture service, and industry consultants Celent and Aite have ranked WFS’ remote capture functionality above all competitors. For more information, visit www.wausaufs.com.