Pros and Cons of Electronic Bill Payment

Mankind has wrought a great many changes over the preceding centuries. He has graduated from simple earthen dwellings to prefabricated houses made of composite materials; from walking where he wished to go to flying with the birds and even breaking through the upper atmosphere to float in space. Over the centuries, mankind has worked to develop his ability to communicate more effectively, from telling stories via cave drawings to talking over great distances by way of digital text messaging. Even paying one’s creditors is transitioning from hand-delivered cash at the point of sale to electronic bill payments via computers. The question is, are modern electronic payment systems, for all their self-professed time savings and conveniences to consumers, all they’re cracked up to be?

Over the last seven years I have had the opportunity to try electronic payment services through three different banks. What I have learned is this: for all the existing electronic capabilities, paying bills online has not improved on the more direct-to-creditor payment methods used in the past. As services go, the electronic systems still require the same amount of effort to set up and manage creditor information and input payment data each month as it takes to write out a check, and the lead time required before the creditor actually receives and processes the payment is the same or worse than the now “old-fashioned method” check payment. Why then should consumers invest their time and effort in setting up all their creditor information with their bank’s contracted electronic payment service instead of simply writing and mailing a check or money order, or paying cash in person?

I took some time to carefully critique the three services I utilized. After setting up my creditor information I looked down the list and was surprised to find that only a small number of my creditors could be paid by means of electronic funds transfer directly from my account. The majority had a notation in the “payment method” section of “check.” The third-party electronic payment service contracted by the bank would, just as I had done in the past, write checks and mail them. I was also disappointed to find that the lead time required by the electronic payment service for processing and mailing payments to my creditors was no better than I could do myself. I actually had a creditor complain to me, when I told them payment would go through my bank service, that it would take as long as four days to reach them and could result in a late payment charge to my account if it failed to get processed promptly. Payments through that particular service, as well as the others, according to the user agreement, had to be scheduled 3-7 business days in advance, the electronic version of mailing post-dated check via the U.S. Mail. I had to ask myself, where is the convenience of this electronic service to me and my creditors? And really, were the time savings to be realized either?

With one particular service, it took four emails and three delayed payments before the service was able to correct their computer information to ensure that my payments got sent in a timely manner to the correct creditor. The creditor information had been entered right by me the first time, as evidenced by the screen shot I took of the creditor list. However, in processing the payment the third-party service had selected an entirely different payee, wrong name and wrong address. This caused difficulties for my creditor who never received the payments I was sending them and caused confusion for the payment recipient, who was receiving them for an account and payer that did not exist in their system. Whatever time savings initially been hoped for were quickly consumed as I had to take time, not once but four times, to educate the payment services personnel. There too, as that creditor had to be paid by check and the checks were made out improperly there was an additional delay to the creditor while the checks were rewritten and mailed out a second time. The only bright spot in the whole matter was that my creditor was willing to reverse the late payment fees assessed to me. I learned a valuable lesson the hard way. Don’t delegate tasks, such as paying creditors, to anyone else. Handwritten checks, money orders, or cash payments direct to the creditor are still the most reliable methods of attending one’s monthly financial obligations.

Anyone considering using an electronic payment system for paying monthly bills should carefully consider how that bank’s contracted service works. They should first learn how many of their creditors can be paid by way of electronic funds transfer direct from the account and how many will still be paid by a check. Consumers should ask what lead time the payment service will require from them in order to process those payments. And, most importantly, consumers will want to know what safeguards are in place to resolve payment conflicts and what protections they will have as the consumer with respect fees and penalties applied by the creditor due to improperly processed payments. Every consumer’s financial obligations are different, and for some the electronic payment services may be of great help. As for me and my house, for the time being, we’re sticking with what works best: direct consumer-to-creditor payments.