Q: With the continuing development of online capabilities and increased competition forcing free service offerings, how can financial institutions maximize the profitability of their bill payment channel? Do you think the fees will return? And if so, in what form?

A: As bill payment has gone free for most banks and led to increased user adoption, industry online bill payment processing costs have skyrocketed, approaching $1 billion on an annual basis. Many banks are responding by taking more control over payment operations, which have historically been outsourced. The opportunity to take more control of the payments process through in-house payment warehousing and "on-us" processing can ensure processing costs remain low, and pave the way for higher-retention applications that can have a fee-based component. We will see a trend away from subscription-oriented monthly fees toward more transaction-oriented "Fed-Ex" like fees that associate a payment transaction with the level of service that a consumer specifies.

Q: What audiences do you see offering the greatest growth opportunity for financial institutions with regard to online banking and bill payment? And how can financial institutions capitalize on this opportunity?

A: Next year, 39% of all foreign-born households will perform some level of online banking, up from 25% at the end of last year. Many of these households have a need to send money internationally and often use a traditional money transmitter such as Western Union, rather than their own bank. There is a terrific opportunity for banks to offer more robust global interinstitutional funds transfer services online. Over half of Western Union's customers today that transfer money abroad from the U.S. are already banked. Most do not have an alternative product marketed by their bank that is painless, quick, and cost-effective. That will change as banks offer transfer services through their online channel.

Q: As a growing number of value-add online banking and bill payment features are being developed and considered, what additional online tools and/or services do you believe consumers will be looking for from their financial institution?

A: Changes in mobile adoption, technology standards, industry dynamics, and business interests have paved the way for the introduction of mobile wallet applications, already very successful in Asia. This can allow consumers the option of loading money onto their phones, which can then be used to pay for goods at physical or digital point of sale. Users will also have a strong interest in performing "anytime, anywhere" online bill payment transactions and account queries that do not tether themto their desktop.

E-mail will finally become a viable channel for billing communication and payment, now that some vendors have determined ways to overcome phishing tactics and make document encryption more user-friendly. If given a secure option to view and pay a bill through e-mail, many consumers would jump at the chance.

Q: As more consumers realize the value of financial institutions' online offerings, how has online banking and bill payment functionality begun to advance personal financial management?

A: The next generation of bank personal financial management services will combine consumer payment data with insightful charting and tracking of account balances and transactions, which will ultimately impact retention, cross-sell, and revenue generation for first-mover banks. More advanced integration and interoperability with vendor applications will pave the way for such things as real-time alerts. These would allow banks to inform users if they're exceeding their budget—if a particularly large transaction has just taken place, or if a consumer is about to run over their allotted cell phone minutes—so they can better manage their expenses. Whatever the preferred form of electronic payment, data can be captured and pushed into applications that give users up-to-date financial management information every time they log in to their banking application.