During 2004, more than 90 percent of the bills presented online will be delivered at biller Web sites, evidence that the so-called biller-direct model has gained a strong foothold with consumers. At the same time, consumer use of consolidator and hybrid consolidator models, which offer access to bills from a variety of billers and also enable the initiation of payments to multiple biller recipients, has climbed rapidly. Nevertheless, biller-direct sites have attained a position of relatively unquestioned dominance in the electronic bill presentment and payment (EBPP) market.
It is said that biller-direct delivery is successful for five key reasons. TowerGroup's examination of leading biller-direct sites raises doubts, however, about the full verity and reliability of these hypotheses. In an attempt to separate truth from fiction, TowerGroup reviewed the features and functionality of 80 leading U.S. biller sites, examining each of the five rationales for biller-direct success to determine if they hold water.
Rationale #1: Billers credit consumer accounts immediately.
Fiction. Many consumers use their billers' sites for payment purposes because they believe that they will receive more timely credit for their online payments than they would through a consolidator. To some degree, this is true. Today, the top 10 bank consolidator sites require consumers to initiate online bill payments an average of at least four days before the payment due date to ensure that their biller accounts are updated on time. Many biller sites promise a shorter posting time than this, although among the top biller-direct sites that TowerGroup reviewed, just 31 percent update their customer accounts the same day the transaction is initiated. Often that is only if the transaction is initiated by an early to mid-afternoon cut-off time, typically 1:00 p.m. to 3:00 p.m. In reality, both billers and consolidators have some work to do to enhance posting speeds for payments initiated online. Notably, many of the consolidator processors are vastly improving their average delivery times to billers by increasing electronic payment rates and by building direct remittance relationships to enable automated posting.
Rationale #2: Consumers can use credit cards to make online bill payments at biller-direct sites and do not have this option at consolidator sites.
Fiction. Another frequently cited benefit of using biller-direct sites for online bill payment is that these sites offer consumers the option to pay by credit card. In comparison, bank consolidators typically do not offer this alternative, although the option may be available at brokerage, portal, or other consolidator sites. However, TowerGroup's review of leading biller sites found that, contrary to popular opinion, many billers also do not offer the option of credit card bill payment. Just 33 percent of the biller sites reviewed currently offer credit card as a payment alternative. In addition, some of these firms charge customers for the right to use credit cards for online bill payment purposes. Further, several banks, bank card issuers, and a consolidator processor are known to be actively working to address any existing disparity by facilitating access to the credit card payment option through consolidator or hybrid consolidator platforms. TowerGroup anticipates live initiatives in this area by mid-2005.
Rationale #3: Consumers can access more of their electronic bills by visiting biller-direct sites than by using a traditional consolidator.
Truth. Today, a majority of billers make their bills available only at their own Web sites and do not utilize outward delivery alternatives such as consolidator services or e-mail. As a result, more than 1,200 billers (and an even larger number of biller brands) make electronic bills available through biller-direct channels. (These bills can also be made available through hybrid consolidator models, which access bills directly from biller-direct Web sites.) In comparison, only 350 to 450 billers utilize some outward delivery option such as a traditional consolidator or e-mail option. However, while consumers can access a larger number of bills through biller-direct channels, the bottom-line is that many do not. Consumer demand for and use of electronic bill presentment services is still evolving, and consumers who use presentment services currently access an average of just 10 percent to 15 percent of their total monthly bills electronically. Therefore, although the sheer number of bills available at biller-direct sites is far greater than at traditional consolidator sites, the use of this information by consumers is still relatively low.
Rationale #4: Biller-direct delivery and bill payment is free at biller sites, but consolidators charge a fee.
Fiction. The contention that bill payment is free at biller sites but offered for a fee by consolidators has actually been one of the drivers for banks and other consolidators to move to offering online bill payment free of charge. At the beginning of 2004, TowerGroup found that 78 percent of the top 50 US banks and thrifts offered online bill payment services free to some or all of their customers. In November, Wachovia became another prominent convert to offering totally free servicing in this area. In comparison, TowerGroup's review of leading biller sites found that many billers offer both free and for-fee alternatives for payment, with fee-based options typically supporting the immediate credit and credit card payment paradigms that many associate with biller sites. In other words, many billers currently charge consumers either to receive same-day credit to their biller accounts or to use credit cards for payment.
Rationale #5: Biller-direct sites offer deep value-added functionality and information associated with billing and payment.
Fiction. The high-value functionality at biller-direct sites is another factor said to drive biller-direct success. But TowerGroup found that while some biller sites offer very deep features and functions, most do not. Telecommunications providers and credit card issuers are more likely than other biller categories to provide sophisticated features, such as transaction sort functionality or reverse/transaction detail look-up, to support electronic billing. Many of the leading firms in these industry groups also offer near-real-time or same-day transaction updates. But these attributes are rare in the larger population of leading billers, in part because most utility, finance, and insurance bills do not require this level of functionality. Among the sites that TowerGroup reviewed, the vast majority offer "plain vanilla" features and functions associated with billing and bill payment. The strong functionality at some biller sites, however, has provided impetus to consolidators to continue to upgrade and add value to their interfaces. In a recent review of what is known as the consumer service provider (CSP) interface of leading consolidators, TowerGroup found a stronger overall level of features and functions designed for both users and nonusers than is available at most biller sites.
While the touted benefits of biller-direct sites are collectively available at some biller Web sites, biller-direct site functionality and capabilities vary widely. The evidence shows that many biller sites fall short of providing an optimal consumer experience and are not consistently superior to consolidator sites. Today-s successful online bill presentment and payment models are incorporating the best features and functions of individual sites and delivery platforms while continuing to develop and implement new innovations that drive value. This practice, in turn, will dramatically improve consumers' experience, regardless of the interface option they select.
This article is based on TowerGroup research by Elizabeth Robertson, a senior analyst in the Global Payments research service at TowerGroup, a leading advisory research and consulting firm focused on the global financial services industry. Ms. Robertson can be reached at [email protected].