September 17, 2008

Banks will essentially lose the payments franchise to billers, says Javelin Strategy & Research (Pleasanton, Calif.), if they don't take advantage of the opportunities around expedited payments.

In its latest report titled "2008 Expedited Payments Forecast: Banks Must Add Expedited Payments Now or Lose $5 Billion in Fees to Billers," Javelin says that banks are missing out on billions in fee revenue because consumers are turning to their billers in order to avoid costly late payments. Therefore, banks need to incorporate this service into their offerings now before it's too late.

"Most consumers currently initiate expedited bill payments directly with the biller versus their financial institution," said James Van Dyke, president of Javelin, in a statement. "However, financial institutions have the opportunity to directly offer expedited payment services, reaping fees and strengthening their payments franchise." The research emphasizes expedited payments as a logical source of fee revenue, especially as they seek new ways to make money in a troubled marketplace. According to Javelin figures, nearly 32 million consumers are active users of online banking bill payment in the U.S., and the volume of expedited bill payments will reach as high as 400 million transactions by 2013.

The firm also suggests that banks incorporate this feature into their mobile banking applications. Currently, 45 percent of existing mobile bankers use expedited payments at least once a month, says the firm.

Javelin maintains that the current economy is also a motivating factor for consumers' acceptance of expedited bill payments. They will accept higher fees associated with expediting bill payments rather than facing costly late payment charges. Furthermore, those consumers who continue to stretch out their bill payments until the last minute by using expedited payment could face a doubling in the price of the service over the next five years, from $8 on average to $16 in 2013.

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