and primary credit card account by havingtheir checking account debited. Forother credit cards, the figure is 52%; forcar loans, 49%; for utilities, 41%; andfor health-insurance premiums, 31%.“About 6% of those surveyed paidbills using their debit card and 5% paidusing their credit cards,” says MarkSchwanhausser, a research analyst forJavelin. “Consumers do use cards to paybills, but it’s far from the mainstream.”One risk banks face by promotingcard payment is that billers mayopt not to participate in their serviceif too high a percentage of customerspay using plastic. “Billers don’t wantto up the cost of accepting paymentonline and banks need their cooperationto grow their online bill-paymentservices,” says eCom’s Brothers.One solution is to provide consumersthe option and let them choose theirpreferred payment method. “We havesome customers that pay bills onlineby only card, some that use a mixof cards and their checking account,and some that pay only by checkingaccount,” says Adam Vancini, seniorvice president in the Internet servicesgroup at Wells Fargo & Co. “We feelit’s best to let the customer choosetheir preferred payment method.”‘Massive Challenge’While the convenience of paying alltheir monthly bills online througha single site, having multiple paymentoptions, and electronic access tothe bill are all prompting more consumersto pay bills online throughbanks, those features alone will not beenough to sustain long-term growth.Banks will likely have to enhancetheir bill-pay sites with personalfinancemanagement tools that satisfya growing need among consumers tomanage their money online. That’ll betough to pull off, given that few bankscan extract much revenue from onlinebill payment as it is.“Banks are going to have to figurea way to position their bill-paymentsites as a personal-finance managementportal,” says Schwanhausser. “Consumersnot only want to know theycan pay all their bills last minutethrough a single site, they want accessto information about their finances toavoid overdraft fees and better managetheir cash flow. It won’t be longbefore the convenience of online billpayment itself is not enough to movethe needle in favor of banks when itcomes to online bill pay.”Banks Vs. Billers(households in millions)• Pay at bank sites • Pay at biller sites43 4144 4346 45Indeed, transaction processorssuch as Metavante Corp., which offersbill-payment solutions to both billersand banks, say that personal financial-managementtools offered in conjunctionwith bill payment throughaggregator sites is a service consumersare starting to demand (FidelityNational Information Services Inc.bought Metavante in October).“Consumers want to know whatbills are pending and what the paymentof that bill means to their cashaccounts, especially if they need topull money from somewhere otherthan their checking account to coverthat bill,” says Jeff Lewis, presidentof the e<strong>Payments</strong> Solutions divisionfor Metavante. “They also want to beable to see their entire financial status,including brokerage accounts andCDs, plus tools to manage their budgetand track all their spending, and theywant to do it all around the checkingaccount, which they use to pay bills.”To get this information, banksmust work with a processor such asMetavante or third-party bill-paymentprovider, such as Yodlee to leveragetheir direct connections to banks, brokeragehouses, and billers to facilitatethe flow of account data.49 4852 5055 532009 2010 2011 2012 2013 2014Source: Javelin Strategy & ResearchThis could be a lot of work. Consumerswould provide their banks withtheir account information, includinguser name and passwords. Once the consumer’sfinancial-services providers andbillers are contacted about transmittingstatement data and account data, theyverify the request with the customer.Once the data transfer is approved, theservice provider pulls back all data elementsof the customer’s monthly orquarterly statement, right down toper-transaction charges. All data transfersare encrypted to secure the data.“It’s a massive challenge to pullall this data together,” says Yodlee’sPolverari. “We do about 60% of itwith direct connections and categorizethe data in a meaningful way.”A sample statement on brokeragehouseactivity would show the number18 digitalDecember 2009
of shares owned, bought, or sold permonth for each stock and the totalvalue of those shares.Wowing the CustomerMetavante plans to add an applicationthat consolidates information aboutall of a consumer’s financial accounts.The service will be bundled with electronicbill presentment and payment,and will send consumers reminderswhen a bill is due or an account isapproaching a balance that will triggeran overdraft fee. Consumers canset the parameters for the reminders,such as date to send, and the type ofalerts they want to receive.Such alerts are expected to be highlyattractive to consumers as public outcryabout rising bank fees, especially overdraftand late fees, has increased thepast year. “In today’s economy, consumersare very sensitive to overdraftand other penalty fees,” says Lewis.Households ThatPay by ACH DebitsBill TypePctMortgage 53%Primary credit card 53%Other major credit card 52%Car loan 49%Store card 46%Student loan 45%Car insurance 41%Internet Service Provider 40%Utilities 40%Mobile phone 40%Cable TV or satellite 39%Tuition or education fees 32%Health insurance 31%Rent 13%Source: Javelin Strategy & ResearchWhere Banks Havethe Edge in Bill Pay ...Bill Type Banks BillerMortgage 41% 20%Car loan 38% 25%Utilities 35% 27%Car insurance 31% 27%Health insurance 23% 11%... And WhereBiller Sites DoBill Type Biller BanksOther majorcredit card42% 35%Mobile phone 39% 28%Store card 36% 32%Student loans 34% 24%Tuition oreducation fees28% 21%Source: Javelin Strategy & Researchdigital19
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