Young Consumers Are In Sync With Online Banking
Over the next five years online bill payment will grab the attention of roughly 47 million U.S. households, primarily young, tech-savvy consumers, according to a new report. The number represents a 75 percent growth surge from the end of 2004 in the amount of people who will make online payments. The figures are derived from "EBPP Forecast: 2005 To 2010," based on a survey of more than 68,000 households and authored by Catherine Graeber, principal analyst at Forrester Research.
By 2010, generation Y (born between 1976 and 1990) and generation X (born between 1964 and 1975) will represent the bulk of all e-bill presentation and payment (EBPP) users, comprising 67 percent of that base, according to Forrester. Gen Yers will experience an EBPP five-year growth rate of 219 percent, "due in part to the doubling of generation Y households in the U.S.," the report states. "Although gen Yers will represent just 24 percent of U.S. households, they'll account for 39 percent of all online bill payers." Over the next five years Forrester expects the amount of gen X EBPP users will rise by 52 percent, representing 28 percent of the EBPP user base.
Examination of more mature consumer sects tells a less growth-optimistic story, as the number of Boomers (born between 1946 and 1963) making online bill payments will experience a more moderate five-year growth spurt than younger consumers, with 32 percent, according to Forrester. But by 2010, EBPP adoption among seniors (born in 1900 to 1945) will have dwindled by 5 percent, according the report. In 2010 Boomers will represent, like gen Xers, 28 percent of EBPP users, while seniors, who will comprise 21 percent of U.S. households, will represent only five percent of EBPP users. Among older consumers Forrester attributes their propensity to stick with old habits, such as writing checks, which may take more time, but isn't bothersome enough to shift to online banking.
Forrester also expects that banks will surge ahead in growth as more follow the examples of firms including Bank of America, Wachovia, and Washington Mutual to provide free online bill payment, a significant shift as banks were generally late to recognize consumer demand for online banking. Over the past few years most new online bill payers turned to their individual billers' sites, such as credit card companies and cell phone carriers, for online banking, according to Forrester. "In 2004, for the first time, the EBPP growth rate at bank sites was higher than at biller sites," the report states. "If banks continue down the path of offering free online bill pay, Forrester predicts that they will achieve twice the five-year growth rate of biller sites by 2010. Banks will have nearly 30 million EBPP users in 2010, closing in on the nearly 32 million who will pay bills at biller sites."
By the end of the decade, 52 percent of online households will pay bills online, but the research firm contends that annual EBPP growth rates are slowing dramatically and will continue that pattern over the next five-year span. The 26 percent year-over-year growth rate in 2004 will decline to about 7 percent in 2010.
To sustain growth Graeber suggests that banks strive to fulfill customers' needs. "Giving customers what they want starts with free bill pay," the report states. "It's time for laggard banks like SunTrust and Wells Fargo to get with the program. In addition, banks must eliminate the hurdles preventing consumers from paying bills online by shortening payment lead times, improving secure site usability, and offering eBills." For billers, however, "to maximize the number of eyeballs viewing and paying their bills online, billers will need to acquiesce and agree to distribute their bills to banks."
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