Online Bill Payment: The Road to Increased Profits: Industry Research Report

Online Bill Payment: The Road to Increased Profits

Published Date: October 2004

Published By: eMarketer

Page Count: 16

Order Code: R203-351

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Online bill payment is gaining momentum. Banks are doing it. Even AOL is getting into the act. Driving the activity are consumers who are increasingly comfortable making financial transactions over the Internet. As a result, businesses are using e-payments as a strategic tool for retaining and deepening customers relationships.

Attention: Financial Institutions, Online Retailers, Telecoms, Utilities, ISPs, Portals and Marketers.

Online bill payment is gaining momentum. Banks are doing it. Even AOL is getting into the act. Driving the activity are consumers who are increasingly comfortable making financial transactions over the Internet. As a result, businesses are using e-payments as a strategic tool for retaining and deepening customers relationships.

Attention: Financial Institutions, Online Retailers, Telecoms, Utilities, ISPs, Portals and Marketers.

The Online Bill Payment spotlight report analyzes the burgeoning electronic bill presentment and payment (EBPP) category, and the many opportunities it provides for businesses to target marketing campaigns, collect customer data and communicate directly in a real-time, interactive environment with customers. All of which help to retain and deepen relationships with customers.

But billers are not the only ones to see the benefits of this market. Banks and other financial institutions, which are aware of their unique position as trusted companies, sense an opportunity, as they begin to realize that their online customers are more profitable than their offline customers.

Currently, the average US household pays 200 bills annually, spending more than $70 in postage. Finance, insurance, telecommunications and utilities companies generate most of these bills. But that is about to change. And while many billers see electronic bills as a potential cost saver, other firms are beginning to envision e-payments as a revenue opportunity.

Questions Addressed by the Report:

What is the outlook for the online bill payment market?
How is online bill payment a revenue opportunity for billers and banks?
What is the economic justification for offering online bill payment?
What are consumers' attitudes towards online bill payment?
Why is the "pay anyone" functionality offered by banks so slow to catch on?
And many more...

eMarketer Reports-On-Target and Up-to-Date

Drawing on aggregated data from leading marketing research, investment bank and technology research firms, in combination with eMarketer's proprietary projections and analysis, the Online Bill Payment spotlight report gives you the intelligence you need to survive and thrive in this fast-changing and growing environment.

Excerpt

Market Segmentation

There are two main online billing models: biller-direct and consolidated. In the biller-direct model, the biller-i.e., a utility, telecom service provider, credit card company-presents bills and statements on its own Web site. In industry parlance, this service is known as electronic bill presentment and payment (EBPP).

In the consolidated model, a third-party-usually a financial institution or an Internet portal-collects billing information from multiple billers for presentation on its own Web site. For a consolidator to offer EBPP, it must receive detailed billing statements from original billers. If it has this capability then it is known as a thick consolidator. If instead it can only offer a summary statement, then it is referred to as a thin consolidator.

Research from the first half of 2004 by ComScore Networks of consumers with direct deposit accounts (DDA)-defined as checking, saving, checking/saving and money market accounts-at the top 10 US retail banks uncovered significant data related to online bill payment. Consumers pay less than 2% of their online bills at an Internet portal. All other online bills are paid at either a biller's or financial institiution's Web site. Between these two options, bill pay at financial institutions represents just 16% of online bill payers. Though these customers account for 38% of total payment dollars and 43% of all payments.

Forrester Research forecasts that this year nearly 16 million US households will pay a bill online at a biller's site compared to 12 million at a consolidator's site. Forrester's data show that from 2004 to 2008, the biller-direct model will grow at a 9.3% compounded annual growth rate while the consolidator model will growth at a slower CAGR of 7.1%. Of significance is the overlap caused by households that pay some bills at biller sites and others at a consolidator site. This suggests that many consumers will choose to exploit the best features of each bill pay option as needed-such as the capability of timing a last-minute payment at a biller site.

Research from TowerGroup reinforces Forrester's finding that consumers pay most of their online bills at a biller's Web site. If Forrester's numbers are converted to percentages, they then show that in 2003 households paid 56% of their bills at a biller site, and that by 2006, this figure should increase to 58%. This data closely parallels TowerGroup's estimate of the percentage of bills paid online by delivery method. TowerGroup data is notable for showing a big consumer shift in 2003 towards payment at biller sites and a slight retreat in 2007.

The disparity between billers and consolidators comes into glaring focus over the issue of bill presentment. Last year 1.5 million electronic bills were issued to consumers with 98% of these presented directly through biller sites, according to TowerGroup. While TowerGroup data shows consolidators' share of bill presentment increasing out to 2007, the snail's-paced growth comes as a surprise to many industry experts. The Online Bill Payment spotlight report analyzes the burgeoning electronic bill presentment and payment (EBPP) category, and the many opportunities it provides for businesses to target marketing campaigns, collect customer data and communicate directly in a real-time, interactive environment with customers. All of which help to retain and deepen relationships with customers.

But billers are not the only ones to see the benefits of this market. Banks and other financial institutions, which are aware of their unique position as trusted companies, sense an opportunity, as they begin to realize that their online customers are more profitable than their offline customers.

Currently, the average US household pays 200 bills annually, spending more than $70 in postage. Finance, insurance, telecommunications and utilities companies generate most of these bills. But that is about to change. And while many billers see electronic bills as a potential cost saver, other firms are beginning to envision e-payments as a revenue opportunity.

Questions Addressed by the Report:

What is the outlook for the online bill payment market?
How is online bill payment a revenue opportunity for billers and banks?
What is the economic justification for offering online bill payment?
What are consumers' attitudes towards online bill payment?
Why is the "pay anyone" functionality offered by banks so slow to catch on?
And many more...

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