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Adopting modern payment systems in local governments is still in its early stages.
A recent survey of 2,500 government payment collection administrators and payment processing officials nationwide in July 2024 highlights the significant challenges and inefficiencies plaguing the current city and local payment systems.
As of 2024, only 19.6% of government agencies characterized their payment collection systems as efficient, while 51% described them as inefficient or “neutral.”
Furthermore, just 4.9% of local governments have implemented online payment systems, which are essential to taxpayers and revenue collection efficiency. This extremely low percentage highlights the slow adoption of modern payment technologies and opportunities to improve operational efficiencies.
Key Learnings from the 2024 survey data:
60% of government finance teams still rely on manual reconciliation processes.
Only 28% of government agencies currently offer integrated central payment systems, with 24% planning to implement them in the next 1-2 years.
While there is a growing recognition of the need for modernization, many government agencies have set goals to increase digital payment adoption. Some aim for 75-100% of payments to be made digitally within a year, but the pace of adoption remains slow.
Government agencies continue facing significant hurdles in payment collection.
Delinquent Payments
Delinquent payments are the primary challenge, affecting 28.4% of agencies. These late payments force agencies to allocate additional scarce resources for collection and hamstring cash flow.
Non-compliant Payments
Non-compliance represents the second most significant issue, with 19.6% of agencies reporting it as a major concern.
These payments should not have been made or were made in incorrect amounts. They can be overpayments, underpayments, or payments where insufficient information was provided to determine whether the payment was proper. Again, agencies must allocate scarce resources to resolve these challenges and to research and process refunds.
Fee Structure Complexity
The complexity of fee structures impacts 15.7% of surveyed agencies, particularly in areas like permits and licensing. This complexity frequently results in processing delays and revenue collection challenges.
Payment Options
Citizens expect their local government to provide the payment convenience and flexibility they experience elsewhere. Yet only 9.8% of surveyed agencies offer modern payment methods.
Expected Payment Options
- Online payment portals: Secure websites where constituents can pay for services, taxes, fines, and licenses using credit cards, debit cards, and electronic funds transfers.
- Mobile payment apps: Smartphone applications allow citizens to make payments anytime, anywhere, often with features like payment reminders and digital receipts.
- Contactless payments: Tap-and-go or mobile payment options provide a consumer-centered experience similar to local businesses.
- Automatic payment options: Recurring payment setups for regular bills like utilities.
- Digital wallets: Integration with services like Apple Pay and Google Pay, which are increasingly popular among smartphone users.
- IVR (Interactive Voice Response) payments: Automated telephone systems allow citizens to pay bills without internet connectivity or speaking to an agent.
- Cash payments at retail locations: For un- and underbanked residents, options like ecash allow cash payments at participating stores.
- ACH (Automated Clearing House) payments: Direct transfers from bank accounts for various government-related bills.
Citizens now expect 24/7, mobile-friendly payment options for a wide range of municipal services, including utilities, property taxes, parking tickets, and permit fees. Citizen payment trends are accelerating away from traditional in-person or mail-in payments, with over 80% of consumers preferring to make payments digitally on their phones or online platforms.
The True Cost of Outdated Government Payment Systems: A 2025 Perspective
Municipal budget constraints are directly linked to inefficient payment collection systems. According to the U.S. Government Accountability Office’s 2023 report, local governments lose an estimated $13 billion annually due to delayed or uncollected payments.
The National League of Cities reported in its 2023 State of the Cities report that 67% of municipalities struggle with revenue collection inefficiencies, which impact essential services from road maintenance to emergency response times.
Comprehensive Approach
To help resolve these challenges, local government treasurers and revenue leaders need a single centralized payment system across all departments. This system should have accessible APIs that allow integration with existing systems for real-time payment reporting. Real-time payment data eliminates over-, under-, and missed payments by providing citizens with a clear view of what they owe at that moment.
The American City & County Digital Services Report 2023 indicates that municipalities using digital payment platforms have 15% higher compliance rates.
That comprehensive system should support parent-child file architecture, allow reporting by agency, location, on and down to staff members, and provide greater control over payment processes. The system architecture is often overshadowed during payment system demonstrations by features that have minimal or no impact on improving day-to-day operations, reducing manual processes, and improving cash flow for essential services.
Many agencies use a piecemeal multi-system payment approach, complicating collections and reconciliation by requiring access to multiple systems and reforming government-wide file formats. This reformatting and manual data manipulation leads to wasted effort and human mistakes, delaying crucial information for timely reporting and decision-making.
McKinsey’s 2023 Government Digital Transformation Survey shows modern payment systems reduce processing time by 40%
An automated system that provides all the payment options citizens expect has a clean interface and is easy for them to use, which will drive digital adoption, further reducing in-person payments’ long lines and manual or paper processes. It will also speed up collections.
According to NASCIO’s State CIO Survey 2023, governments implementing mobile payment options report 28% faster collection rates.
Another area to look at is reporting. Does the platform offer the reports you need, or can needed reports be easily created or format customized at no cost to your agency? How accurate and up-to-date the reporting is is another key thing to consider in an automated platform.
One challenge agencies face is not only finding the right automated payment platform that has the feature set you need and U.S.-based support that responds to questions and resolves service challenges quickly, regardless of the size of your agency or government. Companies Like IntelliPay are large enough to provide a platform that changes your needs but values its relationships with local governments.
For more information on IntelliPay customized payment options for agencies and local government, contact adam.hensleigh@intellipay.com