Friday , March 29, 2024

Consolidators To Take Greater Share of Slower-Growing Bill-Pay Market

Electronic bill-payment consolidators?notably banks?could finally claim at least half the market, but to hold on to their gains, banks will need to pay special attention to affluent young adults. That's a key conclusion in a new forecast for the growing bill-pay market by Cambridge, Mass.-based Forrester Research Inc. Forrester predicts the total number of U.S. online bill-payment households will increase from 48.3 million in 2009 to 62.7 million 2014 for a compound annual growth rate of 5.4%. (The U.S. Census Bureau estimates the nation had 112.4 million households in 2007, which means bill pay's current penetration is slightly more than 40%.) Some reasons for the rise include the increasing number of younger consumers who write few or no checks and are comfortable using the Internet, the increasing recognition by consumers of electronic bill pay's speed and convenience, and a combination of “green” appeal and the cost advantages of electronics over paper. But there are considerable differences within the bill-pay market. Despite direct billers' early lead, consolidators are gaining market share and have a “slight advantage” as the market grows, according to Forrester. Consumers who use biller-direct Web sites, such as those of utility companies, currently account for 51.4% of the bill-pay market versus 48.6% of consumers who use consolidator sites. But in 2012, Forrest predicts that the consumer market share of consolidators such as banks or tech providers exemplified by Yodlee Inc., will surpass direct billers' share for the first time at 50.5% versus 49.5%. Driving this trend is the convenience of paying multiple bills at one site and consumer aversion to the fees some direct billers charge. Bank, however, may have a tenuous hold on an important part of the bill-pay market. What Forrester calls “young affluents,” online users ages 25 to 34 in households making more than $75,000 a year in total income, as well as other young adults, are less likely to use banking sites for bill-pay than other online users. Some 35% of young affluents report that they pay bills through their primary financial institution compared to 39% of all online users and 46% of consumers who use online-banking services. Forrester senior analyst Edward Kountz tells Digital Transactions News that it's not clear yet why well-off young adults inculcated in the Internet wouldn't be gung-ho about the advantages of bank-based bill-pay. “My take on this is you're looking at people who make a little more money, they have greater stability, they may be more comfortable in going with what exists,” he says. “But that's jut a theory.” Future research may find an answer, he adds. To ensure the affluent young segment stays loyal to banks, Forrester recommends that financial institutions add debit card-based and expedited bill-pay services, deploy online and mobile bill-pay alerts, emphasize the free aspect, and create “layered” marketing messages that resonate with consumers on multiple levels. Besides price, these include the environmental benefits, security, and convenience of electronic bill pay. Earning and keeping the business of the young-affluent segment may be particularly important because Forrester says that while the bill-pay market still has room to grow, growth rates are slowing down. Forrester based the study on consumer and executive research, Internet traffic analyses, and proprietary models.

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