When it comes to providing online bill pay services, says one solutions provider, aggressive marketing pays dividends.

“You are seeing banks aggressively pursuing online business and making it a more fundamental part of the way they deliver their services,” says Matt Lewis, executive vice president and general manager of electronic commerce at Atlanta-based CheckFree Corp.. “You are seeing them gain share, so there is a price to be paid for being too conservative” about marketing the service.

Lewis said banks need to court customers via email, statement stuffers and media, promote bill pay in branches and reward customer usage. During a presentation Wednesday at the BAI TransPay Conference & Expo in Las Vegas, Lewis made the case that banks should concentrate on acquiring customers and leave the business of servicing the infrastructure to technology vendors.

“The value to the financial institution is in acquiring the customer relationship and offering the service,” Lewis said. “The value is not in building an application to do credits and debits, or building a solution for doing bill pay.”

Lewis cited estimates by Cambridge, Mass.-based Forrester Research Inc. that the number of bill pay users is expected to almost double from 27 million households in 2005 to 47 million by 2010. Lewis said each new customer improves four key metrics of profitability for the bank: average deposits, average number of products, retention and servicing costs.

“Every time a bank gets you to start paying your bills, those metrics apply,” Lewis said. “So the financial institution increases profitability for shareholders.”

Lewis added that CheckFree research shows that bill pay users visit their provider’s Web site an average of 13 times a month, compared to 6.8 times for non-bill pay users. This creates more cross-selling opportunity for banks, he said.

For example, 66% of bill pay users have a checking account vs. 57% of non-users, Lewis said. Likewise, 16% of bill pay users have a money market account, compared with 8% of non-users. And 11% of bill pay consumers have a first mortgage vs. 5% of non-users.

Bill pay users are also less likely to visit a bank branch, Lewis said, averaging 1.8 visits a month, compared to 2.3 for non-users. And bill pay also improves customer retention, with 55% of bill pay users saying they were less likely to switch banks.

As the expectations of customers keep growing, banks need to weigh what is worth doing in-house vs. outsourcing, Lewis said. “It points back to the importance of the choices banks need to make in their partners and technology infrastructures to meet the demand. It’s simply not possible to do it on your own.”

Outside providers can deliver more cost-effective solutions because a few providers dominate the market, including CheckFree, Metavante Corp. of Milwaukee, and Online Resources, of Chantilly, Va. While banks can do an effective job, Lewis said, problems in delivering a customer’s bill can divert valuable call center time and resources.

(For more about issues related to online bill pay, see “A Different Mousetrap Needed for Later Online Bill Pay Adopters” in the March/April 2006 issue of BAI Banking Strategies and “Segmenting Online Bill Payers” in the Nov. 17, 2005 issue of BAI Banking Strategies Retail Delivery Insights.)

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» WE'RE BRINGING IT ALL TOGETHER
Check, image, remote deposit capture, debit, ATMs, fraud, prepaid—BAI TransPay Conference & Expo 2006 is where it's all coming together this week. Follow the action with BAI Banking Strategies' coverage, including our daily e-mail newsletter, results of attendee polls, podcasts with newsmaking exhibitors and others, and exhibitor announcements.

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