By: Antone Gonsalves
Consumers are growing fonder of online bill payment.The number of people clicking through bills in the United States will increase nearly 38 percent from 2002 to 40 million, according to market research firm Gartner (Stamford, CT). In 2001, only 15 million used computers to pay bills.
Online bill payments have been a boon for billers. In a survey of more than 100 major online billers, Gartner analyst Avivah Litan found they spent an average of $1.1 million on Web payment-processing systems. Because it's cheaper to process e-transactions, that money can be recouped in a year by getting 200,000 customers to pay their bills online.
While billers have been aggressive in attracting customers to the Web, banksand especially insurershave been slow to react, according to Litan. A Gartner survey of more than 1,000 online adults conducted in September 2002 found 79 percent view bills at a biller's site, versus 10 percent using a consolidation service from a financial institution.
"Only 17 percent of insurers are presenting bills on the Web, as opposed to 75 percent of banks," she says. Also scoring ahead of insurers are credit card companies (60 percent), utilities (50 percent), and telecom (47 percent). "Overall, about one percent of insurance bills are viewed online."
And because financial services companies are dragging their collective feet when it comes to online bill viewing and payments, they may be losing their best customers.Offering online bill presentment and payment may help insurers keep and even attract the best and most profitable customers. Consumers who signed up to pay bills online were more than twice as likely to stay with their banks to avoid the hassle of setting up and automating their bill-payment preferences and payees again, Litan reports. In addition, online customers on average had 40 percent higher checking and savings account balances, compared to other customers.
However, one thing financial service companies shouldn't do is charge for the service. "The main reason people go to biller Web sites is because the service is free," Litan says.
Her findings coincide with what startup bill-consolidation firms, banks, and portals discovered in the past. Bank of America, for example, saw a 70 to 80 percent jump in enrollment after it dropped its service fees, Litan reports.
In fact, although the number of insurance companies offering the service is still very low, Litan says that some carriers have begun to offer online consolidated bill statements, complete with explanation of benefits. "Insurance customers are more concerned with understanding the benefits," she says. "Some health companies are offering consolidated statements," such as Blue Cross Blue Shield of Minnesota. "They are not unlike banks in that they are trying to gain customer loyalty."
Among banks, Bank of America has been most aggressive in marketing its online service, while Wells Fargo has done the best job of melding its offline and online services, according to Litan.
Editor's Note: This article originally appeared on TechWeb.com, a sister CMP Media property of Insurance & Technology. Greg MacSweeney ([email protected]) also contributed to the article.