Transforming government payments: From convenience to customization in the digital era

Before the COVID-19 pandemic, many customers engaged with government sectors via physical payments of some kind, whether by mail-in checks or standing in line a...

When we think of government services, we don’t typically jump to the word “customers.” However, most of us are customers of the government regularly, whether we realize it or not. Utilities like water and waste management are often paid directly through government agencies. Whether paying for utilities through an online portal or standing in line at the post office to buy stamps, customers today expect more payment options and ease of use, even in the government sector. For many state and local governments, these demands are hard to meet as their regulatory software solutions are inflexible and often only support a small number of payment processing options. With just a handful of options available, payment integrations can be feature-limited, expensive, time-consuming and not forward-compatible.

Leaving the past in the past

Before the COVID-19 pandemic, many customers engaged with government sectors via physical payments of some kind, whether by mail-in checks or standing in line at the utility office to pay in person. Since the start of the pandemic, digital interactions with government services have increased by 36%, and that number is expected to continue to rise. Though the increase is significant, only 23% of people say they always choose the digital option when paying for government services, primarily because of the difficulty of navigating government payment portals and sites.

Like any other interaction where a customer is paying for a service, ease of use is an expectation rather than a bonus feature. In the case of services like the U.S. Postal Service, there are numerous private sector options available to customers, and because the private sector must operate at a profit or go under, they’re much more customer centric. For instance, think of an experience at a UPS or a FedEx as compared to an experience at a USPS location. There’s a significant difference in customer service and experience. One glaring issue that many customers don’t experience in the private sector is credit card fees, or “convenience fees,” which are the third largest business expense in the government sector, and one that is often unloaded directly to the customers.

In the wake of the post-pandemic rapid digitalization, customers suddenly didn’t have the option to pay by check or cash in person like they used to in order to avoid these fees. In a recent survey CSG did, customers overwhelmingly preferred to use their digital wallets to pay for that exact reason. In the latest U.S. Bank Payment Strategy Report, 77% of government respondents acknowledged they needed to transform the way they accept payments so they can continue to meet business objectives and prevent previously loyal customers from leaving government institutions for the private sector. It’s easy to say you need to transform payments, but what does that actually look like?

The new era of payments

The evolving landscape of government services and digital payments will require a shift in the way customers perceive and interact with these institutions. The traditional notion of government as a distant and static entity is fading and replaced by customers who seek dynamic, efficient and user-friendly experiences. As we traverse this new era of payments, it’s evident that ease of use and convenience stand as the cornerstone of successful payment solutions. In addition, particularly in government sectors, security is of the utmost importance, and security is also at the forefront of this new era.

Although 74% of consumers prefer auto-pay for their bills, much to their dismay, some government platforms don’t even provide auto-pay as an option. This is in part due to the public sector’s need for standardization across services, so progress will be slower than implementation throughout a private company. Currently, less than half of survey respondents using government services say they think government agencies are keeping pace with payment options, and that’s a perception the public sector can’t afford. This doesn’t mean government agencies are out of the running. However. It just means they’re at a “now or never” critical point in their digital transformation. The pandemic may have triggered the transition to primarily digital payments, but the public sector still has a way to go before digital payments are smooth and convenient. Digital payments would also have the benefit, however, of more security, which could encourage the public sector to speed things along.

All excellent customer service starts with personalization and truly understanding your customer base, and customers of government agencies are no different. Because personalized customer service is based on user data, government agencies may actually have a leg up here: Users will already expect the government has their data, more so than a private business. For instance, if auto-pay were to fail or not yet be implemented, a government organization could instead text out payment reminders or QR codes to pay online using data they already have on their customers. With this data, government agencies can also better tailor payment experiences to the demographic they’re serving. For instance, auto-pay might make sense for a static water bill, but it wouldn’t for a quarterly sewer service charge. In addition, most government agencies don’t need to strike out on a whole new endeavor to collect this data. They already have decades of it stored as compared to newer and younger private businesses.

Personalization is modernization

The COVID-19 pandemic acted as a catalyst for the digital transformation of government services, prompting a surge in online interactions, but the journey toward a seamless digital payment experience is far from over. Government agencies must rise to the occasion, recognizing the expectations of their customers are the same as the customers of any other service provider. Personalization, fueled by the wealth of data at their disposal, should be a strategic advantage rather than an insurmountable issue. By leveraging all available user data, government agencies can craft tailored payment experiences that cater to diverse needs, offering solutions like autopay for recurring bills or flexible options for periodic charges.

Just like private businesses adapt to customer demands to remain competitive, government agencies must also redefine their approach to payment solutions to keep up. The path forward entails more than technological upgrades; it will require a cultural shift on the part of traditionally static agencies by placing user experience at the forefront. By doing so, government institutions can secure the continued loyalty of their constituents, preempting any migration to the private sector by offering a level of service that is not only efficient, but also tailored to individual needs.

The transition toward seamless, user-centric digital payments represents more than just a modernization endeavor. It’s an acknowledgment that government services aren’t the only option anymore, and a declaration of commitment to serving the public effectively. No matter the sector, customer experience should remain a priority, and the digital payments experience should reflect that.

Sukanya Madhavan is VP, Product Management & Engineering at CSG.

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