3 keys to reducing bad debt for utility companies in Latin America

Created 14 Mar 24

Reducing debt ratios represents a significant challenge for utility companies in Latin America. According to the Economic Commission for Latin America and the Caribbean (ECLAC) in its study; "Dynamics and challenges of investment to drive sustainable and inclusive recovery", the inability to collect on issued service bills has negative repercussions and can affect multiple aspects in a country, such as the quality of services, the economy and the cost of living.

According to the same study, in 2021 it was recorded that the default rate of essential services in the region was 30%, which translates to three out of every 10 users not meeting their payments for water, electricity, gas, public transportation, or telecommunications bills. It also revealed that the main reasons for non-payment were due to prioritizing other expenses during the pandemic, increased unemployment, high inflation levels in the region, and the war between Ukraine and Russia.

In this context, it is possible to highlight 3 major challenges that utility companies must address to directly confront the payment default levels of their services:

  1. The persistent digital gap in utilities integrating new technologies into their collection and billing processes.
  2. Flexibility and payment options that fit the needs and realities of each user.
  3. Lack of integration of digital and physical payment methods at key moments of user consumption.

How to address the issue of bad debt?

Bemobi has developed a solution that combines three essential elements to optimize the payment process, integrating various functionalities that enhance conversion rates, reduce the levels of arrears and improve the user experience.

Easier payments

  • Understanding utility consumers and offering channels, methods and payment conditions according to their needs increases the likelihood of them paying their bills. An intelligent, integrated, and orchestrated combination of physical and digital payment channels ensures a consistent user experience and reduces processing complexities for companies.

Payment flexibility

  • The reality of households is diverse and the reasons for incurring debt vary. Understanding these contexts and providing users with the option to choose from various payment methods and terms for their bills is essential. Whether through a one-time payment, recurring mode, or the possibility of splitting the bill into multiple payments of up to 24 installments, the user must have the freedom and ability to choose the best payment option.

Seizing key moments

  • Knowing the needs and consumption habits of consumers allows identifying crucial moments to improve their experience. Such is the case of a possible service interruption. Providing convenient payment facilities at that moment not only prevents the suspension of the service but also contributes favorably to their financial well-being. Additionally, it allows for the optimization of operational costs by avoiding future expenses related to reconnections or activations. Bemobi offers a physical solution through smart POS, which allows the workforce to receive payment easily and automatically cancel disconnection orders directly on-site.

A model with social impact

For Denis Maia, Vice President of Corporate Development at Bemobi, the digital payment solution is not only limited to bill payment but also plays a broader role in offering various payment options and flexibility, which translates to financial relief that significantly improves the user experience and allows the consumer to keep their service connected.

The social impact on the lives of our public service customers is quite impressive. When we consider that we offer all possible payment methods, including up to 24 installments, it can change their economic situation. We can see in our statistics that almost 50% of our transactions are made in installments. Therefore, we provide a cash flow solution for these customers to avoid disconnection.

In one year, Bemobi processes over 1.3 trillion dollars in payment transactions in Brazil alone.

You may also be interested in watching Denis Maia's Bemobi Sessions: "The social impact of omnichannel utility bill payments."

If you want more information about Bemobi's digital payment solutions, you can fill out the following form, and we will contact you shortly.