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Online bill payment to overcome consumer hesitance

Despite current hesitation by consumers to pay their bills electronically, a new study foresees a bright future for the young market.

Despite current hesitation by consumers to pay their bills electronically, a new study foresees a bright future for the young market.

Electronic bill payment and presentment (EBPP) will reach significant online penetration in the next few years, accounting for more than 40 million online households in 2005, according to a new report from Jupiter Communications.

The market for EBPP, by which consumers can view and pay their bills online, has seen a slew of mergers, acquisitions and new partnerships, yet consumer adoption of the process remains almost nonexistent, the study found. A lack of consistency in execution has positioned billers and consumers on the sidelines, waiting for the market to take shape.

Although consumers have been slow to jump onto the EBPP train, net portals Yahoo and America Online, financial institutions such as Bank of America and Citibank, and other companies are bullish on getting people to pay bills electronically.

Late last year, 11 major U.S. banks said they were teaming to create online banking consortium Spectrum, enlisting Sun Microsystems and Netscape Communications to help create an Internet billing system.

And because snail mail--mail sent through the postal service--is quickly losing its position as the preferred way to pay bills, the U.S. Postal Service has also made moves in the EBPP market.

The reason so many companies are eager to gain a foothold in the market is obvious: About 63 billion bills are issued in the United States every year, according to research conducted by the Sun and Netscape alliance.

But for the market to really take off, banks must forgo selfish interests and become fast-moving allies on EBPP services, the Jupiter study found.

"Banks are logical EBPP-enablers because of their trusted relationships with both consumers and businesses," James Van Dyke, a Jupiter analyst, said in a statement. "However, these financial institutions must stop watching this market and (start) driving it."

Although it has a low level of adoption, EBPP is expected to grow more rapidly than either online banking or online shopping over the next five years, according to the report. EBPP adoption will take off quickly in 2001, doubling in volume in the next two years.

In 2003, viewing and paying bills online will for the first time become more popular than conducting online payment of bills that arrived via traditional methods of delivery, according to New York-based Jupiter.

According to the Jupiter report, the financial market of the future will resemble a puzzle, with a Web storefront featuring a host of products, including insurance, mortgages, credit cards, checking and savings accounts, brokerage accounts, financial advice, and--the stickiest piece of the puzzle--EBPP. For financial institutions, online bill payment services will bring consumers back to their sites regularly.

With EBPP development, consumers will have a strong reason to establish an online bank account from which to deduct their electronic bill payments, the report said.

Technology-based services such as EBPP will determine the destiny of many banks, the study found. Slow-moving community banks and credit unions faced with eroding assets will all but vanish, allowing large banks to market Internet-based services to existing customers of small community institutions that fail to keep up with the needs of Internet-savvy consumers.