After all the hype, electronic bill payment and presentment (EBPP) will finally reach significant market penetration with more than 40 million US online households expected in 2005, according to a new report from Jupiter Research. However, banks must ally with online EBPP services if they are not to be left behind in the scramble to sign up bill payers.
EBPP, a process allowing consumers to view and pay their bills online, has spawned extensive supply-side mergers, acquisitions, and significant new partnerships in its name, yet consumer adoption remains almost nonexistent. A lack of consistency in deployment methods has positioned billers and consumers on the sidelines, waiting for the market to take shape.
"Banks are logical EBPP-enablers because of their trusted relationships with both consumers and businesses," says James Van Dyke, a senior analyst with Jupiter Research. "However, these financial institutions must stop watching this market and start driving it. Fast-moving technology companies that want to control the billing and payment process are poised to take over the online financial aspects of that customer relationship."
According to Van Dyke, the financial supermarket of the future will resemble a puzzle, with a Web storefront featuring a wide array of products, including insurance, mortgages, credit cards, Internet payment, checking and savings accounts, brokerage accounts, financial advice, and EBPP. For financial institutions, EBPP is the most valuable piece of the puzzle, bringing consumers back to their site on a regular basis.
With the development of EBPP, consumers will have a strong reason to establish an online bank account from which to deduct their electronic bill payments. The combined potential of EBPP and online banking provides Internet-savvy financial institutions not only with the opportunity to reduce servicing costs and expand existing relationships, but also the opportunity to generate incremental revenue.
With its current low level of adoption, EBPP will grow more rapidly than either online banking or online shopping over the next five years, states Jupiter. EBPP adoption will take off quickly in 2001 doubling in volume in the next two years. In 2003 the ability to view and pay bills online will, for the first time, become more popular than simply conducting online payment of bills that arrived via traditional methods of delivery. By 2005, Jupiter expects that just over 40 million households will view and pay their bills online.
Technology-based services such as EBPP will determine the destiny of many banks, believes Jupiter. Slow-moving community banks and credit unions, faced with eroding assets, will all but vanish. EBPP accelerates this eventual outcome by allowing large banks to market Internet-based solutions to existing customers of small community institutions that fail to keep up with the needs of Internet-ready consumers.