A new report released today by the Los Altos, California-based Internet Research Group shows that 25 million American households will be using the Internet to pay bills by the year 2003.
Although online check writing and bill payment has been available to consumers for more than a decade, the report says that Web technology, new spending by banks and billers, and improved consumer comfort with online financial transactions is quickly creating a critical mass for the newest Internet “killer application.”
Market Primed To Explode
“Online billing has always been a chicken-and-egg market,” said John Katsaros, president of Internet Research Group, “with banks and billers waiting for the consumers to come, and consumers waiting until they could view and pay all their bills online.”
New Internet bill payment technology allows consumers to do just that. In fact, over the past six months, bill paying services on such Web sites as Yahoo! and PayMyBill.com have made it possible for consumers to redirect their paper bills to the sites — where they are scanned and presented on the screen. Consumers can then pay each bill from their designated checking account, thereby eliminating stamps, paper checks, and bill storage hassles.
Along with the click-to-pay convenience, the new e-commerce services give consumers the ability to pre-schedule payments, set recurring payments, and download complete records of transactions into popular financial management programs such as Quicken and Microsoft Money.
By 2002, the report projects that 25 percent of all U.S. households will have the ability to view and pay at least eight monthly bills online, and more than half of all U.S. households will be able to view and pay as many as four bills online.
Online Billing Will Stimulate E-Commerce
Still, the report shows that the real benefit to providers of billing services will be the boost to their online sales.
“By offering online bill payment, a Web site creates guaranteed, regular visits from consumers who already have their checkbooks out,” said James Van Dyke, co-author of the report. “It’s a Web marketer’s dream, and it’s one that a lot of major Web portals will rush to offer.”
In addition to Web portals, Van Dyke says, financial institutions and makers of personal finance programs will also begin offering online bill payment if they do not already.
Service Will Be Given Away
“Because the process of forwarding your bills to a specific site is fairly time-consuming, customers are probably in for a long-term relationship with whichever site they choose,” said Van Dyke. “These high-value, long-term customers are something every big Web site wants, and that means that competition for users will heat up. While we now see monthly charges to the consumer for bill payment services — we could easily see free online bill paying in the near future.”
The report also predicts that in the rush to implement online bill paying, Internet portals, monthly billers, and financial institutions will be investing heavily into the technology that makes it happen.
Leading the charge into cyberspace will be telephone companies, public utilities, and financial services firms, which will account for 83 percent of the $1.4 billion in online bill paying technology expenditures in 2002.