Taking a more customer-friendly approach to electricity prepayment

Prepayment for goods and services is on the rise across the globe, and there’s been plenty of discussion about how this trend could impact the retail electricity sector. Many believe that energy prepayment, boosted by the advanced metering systems that are being rolled out worldwide, could eventually reach similar penetration levels to mobile prepayment. But what will it take for this to happen? In this article we discuss five ways in which suppliers can make their prepayment schemes more customer-friendly, so that prepayment works better for users and can broaden its appeal.

(1) Offer competitive tariffs

Traditionally, a need for dedicated prepayment meters (PPMs) and the associated processes and systems pushed up the costs to serve prepayment customers. As a result, the prepayment segment has had to live with tariffs that are higher on average than those available to postpaid users, and consumers have also had a more limited choice of suppliers as well as tariffs. Keypad meters and smart meters can both contribute towards a lower cost to serve, and enable suppliers to offer more attractive tariffs for prepayment customers. For prepayment to reach its full potential, rates will need to compare well with those for credit customers.

(2) Make topping up more convenient

One of the main gripes with traditional PPMs is that customers can find themselves unable to buy credit outside office hours and left stranded without power until their local pay-point reopens. While these days many suppliers do promise not to disconnect customers out of hours, the risk – or fear – of being disconnected is a feature of PPM systems that customers clearly do not like. Supplementing the traditional pay-points with new payment methods, such as topping up online using a debit card or via a mobile smartphone app, can go a long way towards making it easier and more convenient for customers to keep their accounts in credit. Online and mobile payment methods also overcome issues with meters sited in hard-to-reach locations (e.g. high up on a wall), which can cause problems for customers needing to insert keys or cards into the meter to activate their top-ups.

(3) Provide friendly credit

While providing 24/7 payment methods can reduce the risk of self-disconnection, there still needs to be a buffer to protect customers in case of systems failures that could leave them unable to recharge their accounts. Emergency credit out of hours is also important to avoid discriminating against people that do not have Internet access or smartphones. Suppliers can even achieve some differentiation through their friendly credit policies, for example by giving customers until late morning on a Monday before supply is cut off.

(4) Align with customer preferences

Some prepayment users may struggle to keep the power on if their supplier sets a minimum top-up amount that they find too high. Utilities should align with what their customers need and allow smaller top-ups, if that helps their PPM users stay connected. The same applies to friendly credit: a study in New Zealand found that some users could not afford to repay the emergency credit when they next needed to top up.

(5) Inform and engage

Self-disconnection is not uncommon among prepayment electricity users but this is not due to financial constraints alone. Forgetting to top up, not keeping an eye on the balance or not realising that credit is low are also very common causes of self-disconnection. With improved awareness of their power usage and balance statuses, prepayment users could reduce the incidence of self-disconnection due to these reasons and be better placed to stay on top of their consumption and spend – which for many users is one of the main benefits of a prepayment arrangement. In-home displays and customer engagement through web portals, smartphone apps and notifications by email or text messaging are all tools that suppliers can use to help their prepayment customers budget more effectively and keep in control.

These principles are starting to find their place among the emerging smart electricity prepay programmes in the USA, Asia and elsewhere, but the emphasis for now is largely on dealing with debt issues and encouraging energy conservation rather than on expanding the prepay customer base. However, we believe that if suppliers focus on a customer-centric approach it will be only a matter of time before prepayment starts to fulfil its wider potential.