Commentary: Banks just don't get it

By Avivah Litan, Gartner Analyst

The bank seems the logical place to pay your bills. That's where your money is, after all, and it would make sense to centralize your bill payments there. But so far, it isn't working out that way, and the reason is that the banks just aren't trying hard enough.

More and more consumers are choosing to at least view their bills--whether from the phone company or L.L. Bean--online. Gartner forecasts that 97.5 million consumers will be taking advantage of that Internet service by 2005. But the bill-viewing trend is not yet translating into an overwhelming rush to pay bills online. And the overwhelming majority of online billing activity will continue to occur at the billers' sites, not the banks'.

The reason: Banks' online

	See news story: The check's in the Net

bill payment systems are clumsy, time-consuming and expensive, with few exceptions. Most banks deliberately keep their payment sites separate from their main online banking sites, make them far too difficult to set up, and charge too much for consumers to use them.

The billers themselves certainly seem more motivated than the banks to address the needs of this market. Of course, they probably see themselves as having more to gain in cost savings and organizational efficiency by moving their bill payments to the Internet. Banks, by contrast, really don't stand to make or even save much money from online bill payments. They generally see these functions as a tool for retaining customers, rather than growing new revenue. That's probably the main reason they haven't bothered to make online consumers a compelling offer.

Gartner research suggests that, at least for the foreseeable future, only the most financially and technologically sophisticated consumers will take the time and trouble to consolidate their bill payment activities at their banks' online sites. Despite the explosive growth in online bill presentment and payment, banks will continue to take away only a small fraction of that market: 20 percent at most. Billers, especially credit card companies, will continue to capture most of this market.

Some banks are "getting" it, however. The Bank of America, often a technology leader in the financial services industry, has bundled bill payment functions with its mainstream online banking system and also has waived fees for new customers trying it out.

These are all essential steps that banks have to take if they are serious about winning a piece of this market. Ultimately, however, all banks will have to do more. They need to streamline their bill payment systems--making them far more accessible and user-friendly for mainstream consumers--and then market them as if they were serious about it. One concrete step they could take: going directly to their customers and telling them what bills they can pay at their sites. Until then, they'll continue to lose out on "their" share of this fast-growing market.

(For related commentary on financial service providers operating in an uncertain economy, see Gartner.com.)

Entire contents, Copyright © 2002 Gartner, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.