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Gen Y Will Fuel Online Banking
Banks need to do a better job of making consumers aware of online payment options and benefits.
Posted Dec 1, 2005
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Twenty million more Americans will pay their bills online over the next five years, according to a new forecast report by Forrester Research. Today's younger tech-savvy consumers, as they seek the ease and convenience of online bill payment, will fuel much of this growth. By 2010, approximately 47 million U.S. households will pay bills online, which is a 75 percent increase from the end of last year, according to the report. Over the past several years, most new online bill payers have gravitated toward individual billing sites, such as credit card companies and cell phone carriers, to view and pay their bills online, because their banks have been charging them for the service. According to Catherine Graeber, principal analyst at Forrester, banks, which traditionally have been late to recognize consumer demand for e-bill presentation and payment (EBPP), will grow over the next five years. These banks will likely follow Bank of America, Wachovia, and Washington Mutual, which have moved to free online payment. According to Forrester's "EBPP Forecast: 2005 To 2010," which surveyed 68,000 households, the EBPP market will be split in half between banks and individual billing sites. "Smart banks have stepped up their efforts to grow their base of online bill payers by eliminating the monthly fees because they now understand the impact these customers have on the bottom line," says Graeber. "These customers buy more products, they do more self-service, and have higher retention rates." By the end of the decade 52 percent of online households will pay bills online, but with annual EBPP growth rates slowing dramatically over the next five years, the 26 percent year-over-year growth rate in 2004 will decline to just seven percent in 2010. Forrester says a generation gap in electronic bill payment adoption over the next five years is the cause. For baby bombers, old habits die hard. While writing checks at the kitchen table may be time-consuming, it's not enough of a pain to persuade them to move online. Growth in online bill payment among baby boomers will be just 32 percent over the remainder of the decade. For consumers under the age of 30, adoption will soar 219 percent as gen Y's wealth and spending habits mature.
"Online bill payment is becoming a commodity product. What will differentiate providers in the future is ease of use, the speed of payments, and security," Graeber says. "Banks haven't done a great job marketing EBPP because they're using a one-size-fits-all message. They need to emphasize speed and convenience to young consumers and highlight simplicity and security to boomers and seniors." Related articles: Credit Card Woes Continue For Consumers Online Insecurity Is Eroding Consumer Confidence
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