INDUSTRY INSIGHTS Q and A with Beth Robertson Trends and Strategies in Online Bill Payment As a senior analyst in the TowerGroup Global Payments practices, Beth focuses on value-added online financial services, including electronic bill presentment and payment, person-to-person payment, and other Internet payment applications for both the wholesale and retail markets. She currently serves on the Steering Committee of the NACHA Council for Electronic Billing and Payment. Q: What are the key contributing factors to the growth and acceptance of online bill payment? How can financial institutions accelerate consumer migration from just accessing account information online to bill payment? A: The key contributing factors to the growth and acceptance of online bill payment are also the means by which financial institutions can accelerate consumer migration to online bill payment. These include: Offering free online bill payment to consumers. This is a growing practice among financial institutions and includes totally free online bill payment, free to certain relationship account categories, and free for a trial period. Free online bill payment offerings have also had a demonstrable effect on the conversion rate of those who simply access account information online to paying bills online. The conversion rate to online bill payment among consumers who bank online averages 22% among the top 50 financial institutions who charge a fee for online bill payment and 38% among the financial institutions that offer the service free of charge. Improved performance. Online bill payment must meet and exceed consumer expectations. Providers can accomplish this through lower error rates, higher rates of electronic delivery, improved user interfaces, and screening of payees and account data. Education to improve consumer awareness. Bank campaigns are an effective means of consumer education, particularly those where bank staff are incented to use the services themselves so they in turn become more knowledgeable “evangelists” for the service. Prominent consumer protection and liability policies and practices. By prominently placing this information before consumers, financial institutions can ease consumer concerns about safety and paradigm change. Q: How can financial institutions measure the success of their online channel? A: Financial institutions can use the following means of measuring the success of their online channel: Customer adoption: Customer adoption as a percentage of online banking users. This includes the conversion rate of customers accessing account information online to paying bills online. The adoption growth rate is also a good measure, focusing on active users and not just enrolled users. Reduced attrition rate: Customer retention to the online bill payment service and to the bank overall. Cross-sell rate: Customer account and service usage and balances. Decreased servicing costs: The cost involved with servicing online bill payment customers. This tends to be lower than the cost of servicing those customers not using this service. Comparative competitive performance metrics: Customers' performance and usability of the site, as well as customer usage measures. Q: As presentment and other technological enhancements to online bill payment at a financial institution's site come into play, how do you think this will affect the battle between consolidator and biller-direct? A: I believe that over time, consolidated delivery will become the preference of many consumers for some or all of their bills and bill payments. I also think that billers will find it necessary to utilize a variety of delivery options, in addition to biller-direct, to meet customer demand and to expand use of their electronic presentment services. As more bills are available electronically, consumers will see greater value in consolidated delivery. At the same time, many consolidator sites are actively working on significant improvements to their user interface, which will contribute to an improved user experience that many individual billers will not be able to replicate (or be interested in replicating).