KEY POINTS

  • Issuers need to drive digital bill pay adoption. Digital bill payment volume is growing at a rapid clip — half of all bills are now digital, and that share will likely expand to over 75% by 2022. Banks that capture this volume can increase customer stickiness, boost digital engagement, and solidify primary bank status.
  • But most banks’ bill pay services aren’t resonating. Thirty-eight percent of all digital bills were paid via bank services in 2010, but that decreased to 27% by 2016 — a figure that's even lower among younger generations. The issue is that most bill pay implementations are bare-bones: They don’t incorporate cash-flow projection, fail to port full functionality to mobile, and don't effectively market their benefits.
  • Meanwhile, biller direct is growing its share. Because banks offer only basic, transactional bill payments, more consumers are finding it easier to pay bills at their billers — either through one-off or recurring payments. Meanwhile, billers are using email and push notifications to nudge smartphone owners to pay a range of bills, from credit cards to utilities, on time. Both of these factors are eroding the bank-customer relationship by robbing banks of engagement.
  • To regain their lead, banks should focus on three key strategies:
    • Achieve the convenience and perceived security of biller direct. For types of bill pay that are already largely digital, issuers need to make their services as convenient and safe as biller direct offerings.
    • Market digital bill pay across channels. Banks need to look at the areas of bill pay that remain highly analog, and then work to rapidly convert them to bank-based digital payments. They can do so by using a multichannel marketing approach to educate and onboard billers.
    • Attract new users with digital money management. Issuers should look at behavioral trends among younger consumers, who increasingly turn to third-party financial offerings that allow them convenient overhead insights into multiple accounts, and attract share away from players like Intuit.

Introduction

There’s an inherent opportunity for issuers in the bill pay market. Save for cash, all types of bill payment represent a touchpoint for banks, whether directly or indirectly. But, as more customers pay their bills digitally, and as online and mobile banking users and usage grow at major banks, that opportunity is expanding. Issuers should naturally be able to [...]