Bringing Electronic Billing to the Online Banking Consumer
Electronic billing and payment (EBP) services, which were initially born within the telecommunications and credit card industries, are now being embraced by the banking community globally as a value added service to online banking offerings. It is a powerful business case for billers as it includes vast amounts of potential savings in invoice production, delivery and call centre overheads alongside an opportunity to achieve more effective customer communication and loyalty-building service levels. It also provides additional benefits for the global banking community. For banks looking to attract and tether customers to their online banking offerings, the addition of e-billing services has proven a positive influence to customer adoption and convenience.
In Europe, the business case for online banks offering e-billing services to their customers has become so compelling that in 2004 CheckFree and Voca (formerly BACS) launched a joint initiative, now named OneVu, to provide e-bill consolidation to high street banks and billers in the UK – a service whereby most personal and household bills such as telecoms, utilities and credit cards – can all be viewed and paid from the customer’s online bank of choice. OneVu already counts among its early adopters high street banking groups such as Lloyds TSB and HSBC.
Since the US is arguably a year or so ahead of Europe in the consumer adoption of electronic bill presentment and payment (EBPP), we will start by examining trends across the pond. In a survey conducted last year1 consumers in the US who currently receive and pay their bills online through their bank, brokerage or Internet portal ranked the top benefits of the service:
Overall growth in EBP indicates that many payers will consolidate their bill viewing and payment behaviour as part of online banking. According to the same study, the next wave of consumer payers in the US are those who have indicated a high likelihood of subscribing to an online bill payment service within the next year. Characteristics of this trend include those who are seeking to take control of their finances – 71 per cent say they hate to feel behind when paying bills. Many are just sick of buying stamps for posting cheques – this is less of an issue in Europe because of the higher levels of direct debit penetration. Then there are those who already use a biller’s website to view, or view and pay their bills electronically. Of those customers using a (typically bank) bill consolidation service, 50 per cent have tried paying bills online by first paying a bill using one or more individual biller websites, be it their telephone company, utility, credit card provider or other.
The adoption of e-billing within the banking industry is of course dependent on the uptake of Internet banking. By the middle of 2004, Bank of America had over 10 million active online banking subscribers (up from 4.7 million at the beginning of 2003). These clients use online banking services to order new products, transfer money, and check balances. Out of that 10 million, 4 million receive and pay bills (up from nearly 1.8 million during the same period). In Europe, where consumers have traditionally been more comfortable with transacting their financial affairs online, the uptake of online banking is fuelled by the existing familiarity with electronic payment methods such as direct debits, standing orders and electronic funds transfers. In both cases, e-billing is proving to be a major value-add to these services, a factor which has prompted the direct involvement of central bank payment processors in the provision of EBP services in a number of European countries
In Europe particularly, customers already make extensive use of online banking to view most recent transactions, money transfers and access to financial data, including until now, limited forms of online bill payment. In many ways fully-fledged EBP is a natural extension of these services. When it comes to paying bills online, payers today will often view bills at a biller’s site but pay the bill at their bank’s website. However, according to the study sited above, those who view bills at their online bank in the first place have a higher propensity to also pay them at the same site.
Banks, always on the alert for competitive edge customer services, loyalty-building incentives, operational efficiencies and opportunities for new revenue streams, are seeing multiple advantages to be gained by providing e-billing and e-statement services within the online channel. As a customer’s use of online banking services increases, it has been found that the likelihood of switching banks decreases by 23 per cent. The study also highlighted the popularity of bill consolidation, revealing that more than 50 per cent of those who paid multiple bills from one banking site were less likely to switch to another financial institution. As far as customer satisfaction ratings are concerned, it also revealed that ratings virtually doubled for e-bill payers compared to those not using online services.
Banks are also finding that because of the repetitive nature of billing, the e-bill experience is a way of attracting customers to their website more frequently, thus exposing them to further customer touch-point opportunities. While customer retention rates within Europe tend to be much longer than in the US, banks in the region are nevertheless witnessing the same growth in added value that can be gained from delivering e-billing and payment services through their websites.
From Scandinavia to southern Europe, it is the Internet banks, very often fuelled by national payment initiatives that are now setting the pace for e-billing adoption. Banks offer a tried and tested core competency in payments and are best equipped to handle the end-to-end payment transaction cycle from presentment at the front-end, to transaction settlement in the back office. Regarded as a trusted third party, financial institutions have a reputation for providing a stable, secure and trustworthy platforms, offsetting the reluctance some customers still feel about sharing their financial information online. By providing bill and statement aggregation portals, online banks thus become a viable new route to market for high-volume billers keen to reduce their paper billing costs and improve customer service channels.
While bill consolidation continues to grow in the US, these services are notably now on the increase in Europe. In the US, e-bill consolidation is now reaching critical mass, driven largely by the educational and marketing efforts as well as technology advances of EBP specialists.
One of the most exciting e-billing trends in banking is the emergence of payment processors and central clearing houses as ‘bank and biller neutral’ e-bill consolidators, as can be seen in the example of OneVu, in the UK. For national payment processors acting as a central service provider and e-billing host, the significant investments required to develop and manage an e-billing infrastructure is fronted by a single institution on behalf of several banks and billers together which individually may not have the capital, expertise or necessary connections with each other to undertake a standalone service. By providing a one-stop-shop for integrated bill viewing, e-payment and transaction processing, organisations like OneVu are also able to realise major operational and cost efficiencies which they can pass on to their bank members and to local billing communities.
Cost savings and efficiency improvements are the most obvious benefits to be gained through online billing and payment. Paper-based bill and statement production costs European banks and billers billions of euros every year. This being the case, it is no surprise that customers are being proactively encouraged online by billers eager to ‘turn off the paper’. In the study cited above, it has been found that people are more likely to settle for a paperless transaction environment if they have paid bills via their e-bank than at a biller site, since they tend to have more confidence in their bank’s ability to retain payment records and archives. The online customer care features of e-billing (bill querying, dispute handling, data downloading, data storage, etc.) also have a major impact in reducing customer service and call centre overheads for local billers.
Today, an increasing number of companies and consumers are opting to go online to manage their monthly accounts and perform customer self-service activities via the online banking channel. By viewing and paying all bills this way, there is no need to remember multiple passwords for each bill site, no need to write cheques, or miss a payment. Clearly there are enormous business advantages for billers and banks in promoting the adoption of e-billing. For payers, online billing and payment inside the online bank is fast becoming the preferred way of doing business.
1This US survey was produced by CheckFree Analytic Research Services with the Marketing Workshop and Harris Interactive (January 2004).