Stormy Forecast: Electronic Services Success Clouds Over

State and local governments are betting heavily on electronic service delivery to cut costs and provide taxpayers with more options, but a lack of interest has officials scratching their heads.

by / February 28, 1998
For the 1996 tax season, the California Franchise Tax Board (CFTB) introduced a new telephone filing system for personal income tax returns, and instructions were mailed to 1.6 million taxpayers eligible to use the system. By the time the April 15 deadline had passed, barely 14 percent of the eligible taxpayers used the electronic service. "The response rate was atrocious," recalled Frank Lanza, director of processing services for CFTB. "Customers had concerns about using technology to file returns."

CFTB isn't the only agency to see a promising electronic service run into user resistance. The Massachusetts Department of Revenue saw its
Telefile service jump off to a promising start during the first two years of
operation, but user growth has slowed dramatically. In 1994, the National Institute of Governmental Purchasing (NIGP) launched an electronic purchasing service based on electronic data interchange (EDI). Within a couple of years, the service died a quiet death due to a lack of interest.

Today, virtually every state government and many local governments are banking on the Internet as the means for delivering electronic service to the people; but while government Web page counters indicate a large number of hits, it's still not clear whether the public has warmed to the idea of receiving electronic services via the Internet. "The average person doesn't know what the Web is, much less how to use it," said Francie Mendelsohn, president of Summit Research Associates. "The Web doesn't reach a huge segment of the population. And it's not just poor people. Many affluent people don't want to use the Web."


The automated teller machine, or ATM, is considered one of the great successes in electronic service delivery. Financial institutions have invested about $23 billion in approximately 150,000 ATMs, which are used by about 60 percent of banking customers.

However, ATMs have not become the electronic banking centers that many banks originally envisioned: Nearly every ATM transaction is a cash withdrawal, with deposits comprising less than 1 percent of ATM transactions. Because of their limited use, ATMs have not done much to reduce costs. As a result, banks lose an average of $23,000 a year on each ATM, according to a study by McKinsey & Company.


There's little evidence showing that state and local governments lose money with their electronic services, but there are signs that the public is finicky about how and when they use electronic services.

Unlike banks, governments are in a somewhat better situation in dealing with a fickle public. Banks must invest large sums, on top of what they have already spent, to turn ATMs into profit centers. State and local agencies, just beginning to invest in electronic services, can spend relatively small amounts of taxpayer money to get an electronic service up and running. "It doesn't take much [money] to get a new service online," said Lanza.

The bad news is that government projections on customer use of electronic services may be off. For example, in the mid-1990s, CFTB released a report, Filing 2010: The Future of State Income Tax Filing, in which it forecast that as many as 60 percent of taxpayers will file their taxes either electronically or by telephone. According to Lanza, the report was "a gutsy look at the trends."

However, CFTB's electronic filing service, which requires taxpayers to use a third party to file returns electronically, has not taken off as expected. The telephone filing service raised expectations among officials but generated only a modest response. Only a couple of years old, the Filing 2010 report already appears over-optimistic. One reason the numbers don't add up, according to Lanza, has been the public's concern about using technology. Another problem has been the limitations imposed on who could use the service.

There are other factors thwarting the best efforts to expand a service, such as telephone filing. Lanza and others mention the difficulty government agencies have in reaching senior citizens uncomfortable with the electronic service concept. Then there are those citizens with rotary phones or no phones at all. In localities and states like California, cultural differences can impose significant barriers to who uses electronic services. These jurisdictions have large populations where English is a second language. While interactive voice response (IVR) systems can be programmed to handle a second language, the cost and practicality of having four or five languages may be too much.

Then there's the sensitivity issue. People don't want to listen to recorded voice scripts or read Web pages when they are emotional. "Automation
doesn't work when a person is angry or upset," said Patricia Pavone, director of CFTB's Filing Services Bureau. Government agencies -- tax departments in particular -- also must be sensitive to citizen concerns about access to confidential information. "People equate electronic services with intrusions into privacy," Pavone pointed out. "You can't make it too easy."

That was the lesson the Social Security Administration learned last year, when it began allowing anyone with a Social Security number to check the status of their retirement account on the Web. The service was quickly shut down when concerns were raised about the security of the information, despite the fact that no system tampering was ever uncovered.


In spite of government's modest level of experience with electronic service delivery, certain best practices are emerging. Take IVR, which is used to run telephone filing and payment
services. Studies and experience in the field show that callers have a certain comprehension threshold beyond which they have difficulty following spoken instructions. The best IVR services are those that are short and to the point. Too many options only confuse callers.

Flexibility is another virtue of successful electronic services. NIGP's first electronic purchasing service failed because it was too inflexible for people's needs, explained D'Arcy Roper, NIGP's vice president for services. NIGP learned from its mistakes, however. In the fall of 1997 and with the help of Public Technology Inc., NIGP launched EC4GOV -- an electronic commerce service that offers something for everyone.

Government purchasing agencies that use EC4GOV can conduct electronic procurement via EDI, the Internet or fax. Agencies can contract with EC4GOV to come in and develop an entire electronic procurement system, or they can simply buy the products they need to build their own system. "It's very flexible, said Roper. "It allows customers to embrace electronic commerce in whatever measure they want."

CFTB is also learning from its experiences. By offering services based on what customers want, not what the agency believes should be automated, CFTB believes it has become more adept at electronic services. "We're relooking at our customer surveys to find out what they want [in the way of online services]," said Pavone. "We are having lots of success when we meet the customer service expectations. It doesn't work when we just automate a service."

"The best way to ensure the success of an electronic service is to make sure it delivers value," said Mendelsohn. Nowhere is that more abundantly clear than with kiosks. In operation since the late-1980s, kiosks have gone through several transformations: first as stand-alone information centers; later as networked multimedia/ transaction booths with a limited number of services; and now as Internet-based services with a well-focused number of applications.

Mendelsohn explained that all sorts of factors can doom a kiosk to failure, such as positioning the booth in such a way that glare from the sun makes the screen unreadable, or failing to market the services to the right customers.

But nothing is worse than creating a service that has no value, such as a kiosk that's loaded with video messages from local politicians or bland tourist information designed to entice the very people who are already in town, which happened in a resort community in Colorado.

By contrast, Mendelsohn cites Ontario, Canada's kiosks as an example of a service with value -- and smart marketing. For example, whenever a driver's vehicle comes up for renewal, the province sends a small notice with the standard form stating that the car owner can renew the vehicle's registration at a kiosk. Included in the notice is the location of the nearest kiosk within their postal code. "It makes a lot of sense," said Mendelsohn. "People want it short and sweet and to the point."

Other jurisdictions with thriving kiosk systems include New York City and Fairfax County, Va. In both cases, government officials give customers a range of applications relevant to their daily lives as well as those that impact them less often, such as obtaining copies of birth certificates. The best systems are also linked to the Internet, expanding the range of kiosk-based services.

In fact, Mendelsohn believes that the kiosk, with its easy-to-use touch screen, is possibly the best interface for governments that want to bring Internet services to their citizens. For many people who have never used a computer, an Internet browser can be as intimidating as MS-DOS, but a touch screen is as friendly -- and as simple -- as a computer is going to get (for the time-being). By linking the Internet to a kiosk, governments have a great way of keeping the information displayed on the public screens accurate and current.

The bottom line for kiosks and other forms of electronic services, said Mendelsohn, is that "you have to know who your audience is. The people who need government services the most are not like you and me, who speak Internet. It's the Joe and Sally citizens who don't understand all the technology. You can't expect the Internet to do it all. You will still need more traditional ways of serving these people. Tools like the kiosk can help."

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