Banks cash in as more bills are paid online

That's the gist of a new study by ComScore Networks, which examined the bank accounts of thousands of people with online bank access and found that those who pay bills online through their bank have twice the account balances of those who don't and are less likely to bank-hop.

The study comes amid other evidence that paperless bill-paying is hitting its stride and becoming a standard operating procedure for an increasing number of consumers.

"The growth rates aren't showing any (sign) of slowing down," Mike Sinco, director of analytics for ComScore Financial Services Solutions, said in an interview. "Online banking and bill (paying) are two of the fastest-growing activities online. And online bill payers are more attractive demographically. They're younger, have higher incomes, and they're more likely to have broadband Internet access."

In addition to having higher incomes, people who use their bank's online bill-paying services have higher bank balances than do those who bank online but don't use those bill-paying services. At $4,800 for combined checking and savings accounts, the figure is twice as high for online bill payers, ComScore found.

The study looked at the 11 biggest U.S. banks--including Bank of America, Citibank and Wells Fargo--and "tens of thousands" of accounts. It found that between the second and fourth quarters of 2002, 20 percent of people with Internet access used some sort of online banking service.

Of that group, 12 percent used their bank's own bill-paying service, according to ComScore. That represents a jump of 42 percent to the fourth quarter from the first quarter of 2002. Other online banking services, apart from bill-paying, include checking balances and transferring funds from one account to another.

Other recent studies support the idea that online bill-paying is reaching the mainstream. Jupiter Research in October forecast that in 2006 U.S. consumers would pay 3.5 billion in bills, or 32 percent of all U.S. consumer bills, online, up from 643 million bills, or 6 percent, in 2001.

Some consumers only use online bill-paying services offered directly from vendors such as telecom companies and retailers, rather than from banks themselves. But ComScore was not able to break down the numbers for that group.

Banks have long suspected what ComScore's study shows and have launched a number of incentives to get people to pay bills online. Bank of America last year made its bill-paying service free, having first charged a fee for it, according to ComScore. And a current Citibank promotion offers $75 to people who open an account with a minimum initial deposit of $1,500 and subsequently pay two bills online.