In Santa Barbara, California, online bill payments help city leaders fulfill key goals.
Less reliance on paper bills and mail trucks helps the city meet its environmental and sustainability initiatives and reduce operating and material costs, Santa Barbara Finance Director Keith DeMartini told Smart Cities Dive. Not having to staff a bill-payment desk lowers labor costs, said the city’s Assistant Finance Director Lyndsay Maas. And encouraging constituents to pay online for everything from business licenses to summer camp fees is in keeping with the city’s forward-thinking philosophy, Maas said.
So, when COVID lockdowns led more residents and businesses to turn to online bill payment rather than in-person or mail transactions, DeMartini saw an opportunity. The city had long accepted online credit card payments for some municipal bills, but the finance department began prioritizing online payments for a wider variety of bills and services.
Today, Santa Barbara accepts online payments for utility bills, business taxes and licenses, permits, parking tickets, sewer inspections, harbor slips, summer camps, and parks and rec programs.
“Out of our 18,000 business tax renewals, 82% are electronic,” DeMartini said. And 80% of the city’s utility payments are paid online or through autopay, text or automated phone systems, he said.
Here’s what the Santa Barbara finance team, other local government representatives and industry experts recommend municipalities consider when developing or expanding their own online bill-payment systems.
1. Decide whether you need a payment-processing vendor.
Some municipalities have robust information technology departments that can build a website to accept bill payments. But there’s more to online bill payments than that.
Maas said Santa Barbara contracts with online payment vendor Neumo to handle complicated payments like utility user taxes, business tax administration, and parking and business improvement assessments. Neumo manages online payments and back-office work like sending out payment reminders, answering constituent phone calls and making collections.
“They can do it for less cost than we can,” Maas said. “Back-office work is cyclical, so we used to have to ramp up staff for busy times.”
2. Double down on cybersecurity.
Preventing data breaches targeting residents’ financial information is a key consideration when bringing payments online.
“In research that I did with colleagues, we found that most cities in the U.S. have cybersecurity policies, but they fail to effectively implement and manage cybersecurity protocols,” said William Hatcher, professor of public administration at Augusta University in Georgia. “Online bill payment adds financial data that may be difficult to keep secure.”
Consequently, “most cities work with contractors to construct and run their online bill payment systems. And given the complexity of these transactions, it is most likely best for cities to contract out these services to experts,” he said.
3. Figure out what each department requires.
“For a city of our size, we have a complex payment system in place dictated by what the departments need,” said Santa Barbara Administrative Analyst Salvatore Parrilla.
For instance, he said, the city’s waterfront department handles everything from property management to slip fees, so it needs a different type of payment system than parking management does.
Different departments may also have different enterprise resource planning systems, said Mahala Johnson, Neumo’s general manager of payments. “Ask if [an online payment system] can integrate into your ERP system of record, or are you going to have to take some of your resources to do integration work?” she said.
While some municipalities prefer the ease of having one online payment system across departments, Santa Barbara uses a mix of vendors and platforms. “You don’t have to do all of your payment processing in one way — it depends on what a department’s needs are and what constituents want,” Maas said.
4. Prioritize accounting reconciliation.
Accounting may be the most important department when it comes to online payment processing.
Using different payment vendors could cause friction on the back end for your accounting department in terms of data analyzation and reconciliation, said Fran Falino, vice president of sales and payments at Catalis, a payment-processing company for local governments.
The solution could be one online payment platform that’s customized for each department’s needs. “If city departments are separate, you could have a unified strategy to have a unified website with one bank account/CRM (customer relationship management) service on the back end,” Falino said.
5. Green light online traffic and court payments.
When implementing an online payment program, the judicial system may be a good place to start.
“For a lot of our customers, if there’s a way they can make payments online and not have to physically interact with the court, it’s easier for them,” said LaTricia Kinlow, judicial branch administrator for the city of Tukwila, Washington, municipal court.
The Tukwila court takes electronic bank payments and credit card payments for fines and tickets. It also worked with Catalis to set up a unified payment system across courts in various Washington cities.
“If you have multiple traffic tickets in multiple jurisdictions, you can make one affordable payment of $25 at a time, and it’s equally dispersed among courts” that participate in the unified payment program, Kinlow said.
6. Evaluate credit card fees and collection.
Santa Barbara charges a processing fee for debit and credit card payments but also offers automated clearing house, or ACH, bank payment options with no fee, Maas said.
The city doesn’t collect credit card service fees directly, Parrilla said. Instead, constituents pay two charges in one credit card transaction — one payment for the city bill and one for the service fee, which the city’s payment vendor delivers to the processor. “Accounting-wise, it’s more transparent to separate the fees,” he said.
Credit card fees are usually 2% to 2.5% per transaction, Neumo’s Johnson said. That’s cheaper than fees for other online payment options like PayPal or Venmo, she said.
7. Consider digital wallets.
Johnson said Neumo is receiving more requests from its local government customers to add payments through digital wallets like Apple Pay and Google Pay. The fees are the same as standard credit card fees, she said, and younger people like the convenience.
Catalis data show that digital wallets now account for about 26% of all business transactions, Falino said, and consumers want that experience when they pay their city bills as well.
“It’s the Amazon effect — two clicks, you have your payment made, and it gets delivered,” he said. “That’s how your constituents see things.”
8. Don’t worry about payment apps — but keep your website current.
Apps are so pervasive that consumers are increasingly experiencing “app-athy,” Johnson said. In general, they’re fine with using a city website to pay their bills as long as it’s fairly intuitive to navigate and looks up-to-date, she said.
“Payment modernization sometimes feels like a buzzword, but it is really, really critical in my mind for constituent trust,” she said. “If a constituent has the same experience with your [online payment system] they had 10 years ago, they can feel like nobody is paying attention to it and that protecting their money is not important to the city.”
