Expert View: Supporting vulnerable customers through new payment options

There has been considerable talk within the financial service industry around what the new normal will be for payments post-pandemic. Factors include the reduction in the use of cash and cheques, the rise in contactless payments and the move to digital solutions. However, in a world of ever-changing, uncertain incomes, another change we’ll soon see is greater flexibility over bill payments, including within utilities.

In the UK alone, Citizens Advice estimates that more than 6 million people have already fallen behind on bills as a result of Covid-19 related issues, and research conducted during lockdown found that just under a fifth of UK households are not confident they will be able to pay their next energy bill. This uncertainty is particularly felt by those who have fluctuating incomes – such as the gig sector. In spring, 70 per cent of gig workers said that they currently had no income and only 23 per cent had money saved.

Many utility providers have been offering additional support to vulnerable customers in recent months but even outside of a pandemic, people with inconsistent or lower incomes can find themselves with insufficient funds to cover their monthly bill payments if they are ill or have an unexpected expense. Indeed, 2.2 million households were behind on council tax bills before the pandemic. Subsequent penalties or fines for late payments make the situation worse. However, new payments technology can provide a lifeline to those struggling to meet regular bill payments. It can be designed to adapt to individual people’s ability to pay, which results in a more empathetic approach from companies – and this additional choice and flexibility is crucial at a time when arrears conversations are likely to be increasingly common.

People who receive an irregular income – such as gig workers, seasonal workers and people who work on zero-hour contracts – often need more flexibility over their outgoings on a month-to-month basis. While the UK’s existing bill payment solutions, such as Direct Debit, suit a large percentage of the population, these customers are more likely to make ad-hoc payments via bank transfer, using a card, or in cash, which requires a great deal of personal organisation. This can be inconvenient, time consuming and sometimes prone to error.

With Gartner analysis showing organisations will continue to expand their use of contingent workers post-Covid-19 – and therefore the number of gig workers potentially increasing significantly – it’s clear the new normal will require a shake-up to the traditional bill payments model.

For utility companies and other billers to stand out and deliver true value to the end user, they must adopt payment tools that are designed for the new norm and meet the needs of tomorrow’s consumer and business.

The good news is that the UK is responding with innovative solutions. In particular, Pay.UK’s initiative to develop Request to Pay, a secure messaging service that allows a person, business or organisation to request payment via a digital channel. This means billers, such as utility companies, can send regular bills and one-off requests for money using Request to Pay to customers. Customers can then choose to pay all, pay part, decline or send a message to the biller. Then, the biller can either choose to grant an extension, discuss it further with the payer, or close the request once the payment has been received in full. According to Pay.UK, this solution could save billers an estimated £1.3 billion per year – potentially even up to £3 billion.

At Mastercard, we see Request to Pay as an important development for the payments industry. As the next phase of the development of Request to Pay, Pay.UK has recently released the Rules and Standards Framework, enabling solutions – including ours – to launch as part of this Framework. Our solution is a key part in Mastercard’s wider strategy to increase choice for consumers and support greater innovation in digital payments.

The ability to reduce a bill until income is received helps individuals with budgeting, and being able to discuss options before arrears mount up is valuable as arrears are costly to both the company and customer. During this time of economic crisis, this ability to work out solutions with customers in financial difficulty is even more important for businesses who want to ensure they treat people facing arrears fairly.
Today’s situation couldn’t have been predicted but, fortuitously, Request to Pay solutions are coming to market at the ideal time. They are increasingly needed in the new norm where people need greater control and flexibility over their outgoings, while allowing billers to improve their customer experience and billing efficiencies. And by making it intuitive for all demographics — from the digital natives to less tech-savvy groups – we should see large-scale adoption in the UK, offering people far greater convenience and choice over their bill payments.

For more information about Mastercard’s Request to Pay solution visit: