US Consumers Pay Less Than 2% of Their Online Bills at an Internet Portal

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 billers or financial institiutions 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 billers site compared to 12 million at a consolidators site. Forresters 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. This 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: - 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?