EBPP Continues To Grow -- But Growth Is Flattening

I've been paying bills online for 20 years, since my days in the trenches at Citibank working on Direct Access. And I have a confession to make: If it weren't a professional obligation, online bill pay would be gone from my financial life -- because it has often been more trouble than it's worth.

I'm not alone in that feeling. By our estimates, more than half of all online US households will never pay bills online. The adoption curve is already starting to flatten, and we expect annual growth rates to decline from 30% in recent years to just 8% by 2008.

Even with flattening growth rates, the market remains attractive, nearly doubling in the next five years. That should be great news for banks and other financial firms. Alas, most of the growth is happening at billers' sites.

Banks are losing ground to billers

Banks and other financial firms have seen their share of new bill payers drop every year. For example, just 23% of online bill payers who enrolled in 2001 or later have chosen to pay bills at their banks' sites.

Instead, most consumers bypass their bank and head to billers' own sites like verizon.com. Why? Consumers who only use biller-direct sites tell us they do so because its free and because biller sites make the process easier.

That's bad news for banks, credit unions, and other financial institutions, because households that pay bills online establish deeper banking relationships and display higher loyalty than other households.

What banks and credit unions need to do

Banks and other financial institutions face an uphill battle to win back biller-direct consumers. It can be done, though. Our advice to firms that want to get more bill payers: drop the fees and push bill presentment.

Firms like Bank One, which dropped bill presentment this summer, is pursuing a strategy that most other banks shouldn't follow. In our latest consumer survey, 36% of those who pay at biller-direct sites said that they'd be willing to switch to their banks' sites if bill presentment and payment were free.

Presentment will also draw new customers: Consumers who are not yet receiving or paying bills online are twice as interested in bill presentment as bill payment.

Young adults and women will outpace their counterparts

Although growth in the number of new online bill pay households is slowing, there are segments that will grow faster than others: Gen X/Y households, for example, will outpace baby boomers' and seniors' households; and women, who've lagged men, will represent the majority of online bill payers in five years.

We've got more to say about payments

We'll continue to answer your bill payment questions in our research. In the next few weeks, we'll be writing about why consumers abandon online bill payment. We'll also forecast adoption in the Canadian market.

Need advice on your firm's particular bill payment challenges? We'd be happy to help. Contact your account manager or drop me a line. Tell me, too, about other topics you'd like to see us write about. Send me your thoughts at billdoyle@forrester.com.


Bill Doyle
Financial Services Research Director

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