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Chris Musto, Gomez Inc.
Chris Musto, Gomez Inc.
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Bill Pay: The Troubled Savior Of Web Banking

Banks are in a remarkable position from a competitive standpoint to dominate the EBPP market, but need to work hard on increasing customer acceptance, beginning with efforts to entice those already banking online.

Our recent report, Web Banking: Elevating Customer Usage and Business Results, confirms that bill payment drives customer profitability, but that newer enrollees are not as ready to use bill payment. It also reveals that many Offline Bankers cite the potential for unreliable bill payment as a reason they haven't enrolled in Web banking at all.

Meanwhile, bill presentment has failed to catch on with banks' customers, even among Active Bill Payers (those who pay at least one bill a month using Web banking). With these data points as a backdrop, here's Gomez's updated assessment of the electronic bill payment and presentment (EBPP) space.

Bill Presentment Isn't The Near-term Answer
Bill presentment is given low priority by Web bankers; according to consumer data analyzed within Elevating Customer Usage and Business Results only 16.9 percent rate themselves as interested in the service. Moreover, previous Gomez research revealed that the biller-direct model is doing comparatively well, particularly in the credit card realm. For instance, even among Online Bankers, more consumers pay their credit card bills by going to the issuer's Web site than through Web banking.

Credit card issuers, however, are generally not cooperating with consolidated bill presentment. In the meantime, some banks and EBPP vendors are attempting to jury-rig credit card bill presentment, but poor execution isn't helping matters. As a leading instance, Bank of America and CheckFree's solution to lack of credit card billing content is to present this content anyway by framing issuers' sites within the Bank of America Web banking session. Recent inspection shows that this framing is far from seamless and not highly reliable. The customer must view a number of disclaimers and potentially confusing instructions, and testing the service revealed issues with the hand off to issuers' sites.

Spectrum, meanwhile, is not the answer. Bankers tell us that Spectrum's roster of bank owners/participants will result in a critical mass of presented credit card bills that will force the hands of the monoline issuers. But on top of all the other issues Spectrum faces, we must remember banks are large entities. The retail or corporate bank's interest in Spectrum (for customer service or biller service opportunities) does not equate to interest from the credit card division. This is one reason why credit card bills aren't being presented live through Spectrum, two years after they were originally slated to appear.

Another reason to go slow: If consolidated bill presentment does come into its own, Gomez research shows that consumers aren't likely to flock to places other than banks' sites to use it.

But there's also a caveat to our advice: We've also seen that interest in bank-sponsored bill presentment drops among even Online Bankers if they are paying their credit card bills at their credit card Web site. What does this mean? Well, paying a bill at a credit card Web site is not actually leading Online Bankers to say, "Ah, if only my bank offered consolidated bill presentment, this would be so much easier." Biller-direct isn't paving the way for acceptance of the consolidated model; it's simply competing with it.

Portals Are No Competition
Gomez research has also shown that financial hubs are not a near-term answer to increased bill pay usage. MSN's bill payment usage rate is so low that when Microsoft announced a year-over-year doubling in users this spring, it repeatedly declined to even ball park how many users it was talking about. Recently, the Intuit manager who oversees Quicken bill-pay declined to estimate how many households were still using bill payment through Quicken products such as Quicken.com and the PFM, suggesting that Web banking is facing little competition in attracting the next users of bill payment.

Gomez consumer research shows that online users are not looking for bill pay solutions or for account aggregation at portals, so the ability of their owners to grab bill pay traffic is indeed quite limited.

Today's Online Bankers Are The Best Prospects
To increase usage of bill pay, banks should foist it upon their current Online Bankers, bribe them into using it (if necessary!), and make the experience seamless, pushing bill pay functionality into the account summary page while considering how to reposition bill pay so it's not marketed as a separate Web banking decision. These are customers who, unlike Offline Bankers, figure bill pay through Web banking is likely to be reliable. Meanwhile, Online Bankers don't quit Web banking because they found the bill pay offering unreliable, so banks risk little in encouraging Online Bankers to try bill payment.

Only 28 percent of Gomez's estimated 28 million Online Bankers are Active Bill Payers, but with Active Bill Payers showing strong improvements in accounts and balances held, satisfaction and channel usage, as described in Elevating Customer Usage and Business Results, Online Bankers are where banks should be pushing bill payment the most.

To the extent that banks market bill payment to Offline Bankers, banks should be vocal about guaranteeing payment. Indeed, banks that offer delivery guarantees might try turning the tables on the USPS and tout their guarantees to skeptical Offline Bankers.

So how does Gomez see bill payment evolving? Banks are in a remarkable position from a competitive standpoint, but need to work hard on increasing customer acceptance, beginning with efforts to entice those already banking online. And while bill presentment will emerge as an important component of Web banking, banks should not try to force the issue faster than billers' readiness to cooperate.

Meanwhile, guarantees, seamless integration and even making it free at low relationship levels are significant part of the solution.

Chris Musto is vice president of research at Gomez, Inc., an Internet quality market research and advisory services firm in Waltham, Ma. He can be reached at cmusto@gomez.com.

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