New Research Reveals U.S. Payment Experiences Cost Over $100 Billion Annually

Poor Payment Experiences Cost U.S. Bill Pay Market Over $100 Billion Annually

Recent findings from a new report by PayNearMe highlight a shocking reality in the U.S. bill payment market: yearly costs associated with payment acceptance, beyond just transaction fees, exceed a staggering $100 billion. The report, known as the Payment Experience Gap, suggests that many businesses are vastly underestimating these expenses, which can be up to six times greater than the fees they track.

Understanding the Payment Experience Gap

The concept of the Payment Experience Gap provides valuable insights by illustrating the discrepancy between perceived and actual costs incurred during payment acceptance. Many organizations concentrate solely on transaction fees, neglecting to account for supplementary costs that accumulate throughout the payment journey. The report indicates that more than 80% of the total expenses tied to payment acceptance fall outside the realm of transaction fees.

For instance, an analysis conducted based on mid-market to large lending operations revealed businesses incur an average of $7.22 per payment. This figure consists of $1.20 in transaction charges and an additional $6.02, which encompasses costs related to customer experience, support, and operational inefficiencies. For a lender processing 500,000 payments in a year, this translates to around $3 million in excess costs.

Mike Kaplan, the Chief Revenue Officer at PayNearMe, stressed the importance of recognizing this financial blind spot. He pointed out that the high costs outside simple processing fees present an overlooked opportunity for businesses to enhance their cash flow and profitability by improving overall payment experiences.

Breakdown of Costs and Findings

One of the report’s key findings is that support costs emerge as the largest expense category, averaging about $2.70 per payment. Operational costs, which average around $2.01, include factors like ACH returns, chargebacks, and other handling and reconciliation processes. Meanwhile, customer experience costs average about $1.31, stemming from payment delays, abandonment, and increased servicing burdens.

Moving Beyond Transaction Fees

Recognizing the Payment Experience Gap necessitates a shift in how organizations perceive and manage payments. Instead of focusing only on individual transactions, businesses must adopt a holistic approach, considering payments as a comprehensive journey. This concept, termed Payment Experience Management (PEM), is supported by PayNearMe’s innovative PayXM™ platform, which aims to streamline and improve every interaction within the payment process.

Anne Hay, EVP and Chief Marketing Officer at PayNearMe, remarked, "For years, businesses have optimized for the transaction, not the journey. But transaction fees tell only part of the story. The next frontier of payments isn't about cheaper processing; it's about Payment Experience Management—a transformative approach that turns payments from a back-office cost center into an operational advantage."

Methodology Behind the Report

The Payment Experience Gap report draws on various operational benchmarks from PayNearMe, as well as third-party industry research, to evaluate the costs linked with payment friction and operational challenges. The analysis focused specifically on lenders handling roughly 500,000 payments annually, averaging around $640 per payment. This provided a conservative yet impactful analysis of payment intent and early stage recovery activities without delving into downstream collections or severe delinquency costs.

About PayNearMe

PayNearMe is at the forefront of redefining the payment experience landscape for businesses. With its PayXM™ platform, which stands as the first of its kind designed specifically for Payment Experience Management, companies are empowered to enhance customer interactions, accelerate payment processes, and significantly cut down costs related to acceptance. The platform effectively supports all prevalent payment types and channels, ensuring a seamless experience across the board.

This new research by PayNearMe highlights an urgent need for organizations to rethink their approach to payments, addressing both financial implications and customer satisfaction to ultimately drive better business results.