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Online bill pay is opportunity for card issuers

Dove Consulting's Richard Crone says that more billers are considering accepting cards for online payments, which would present benefits for billers and issuers alike. In particular, Crone says, it offers a strong opportunity for issuers to increase charge volume and reduce churn.

August 13, 2002

Dove Consulting's Richard Crone

Registering customers for electronic payment will promote -- and virtually guarantee -- active, regular use of online account management (OAM). This "active use" of OAM translates into even greater benefits for both billers and issuers -- from reducing contact center calls and increasing customer self-care, to dynamic online cross-sell and personalized affiliate marketing opportunities. 

Because payment cards are the preferred method for making purchases over the Internet, billers are now considering (or reconsidering) card acceptance for online bill payment.  By accepting payment cards, billers can tap into consumers' familiarity and high comfort levels.

This presents a unique opportunity for issuers to refine their positioning for credit and debit card use in the recurring bill market. Not only does card-based input offer a fast, easy and familiar process, it also streamlines electronic payment registration. 

A host of other benefits accrue to all parties that use and accept card-based payments for recurring bills:

• Billers get improved cash flow since e-payments typically post to accounts faster than other forms of payment. 
• Bank card issuers earn interchange revenue from each card transaction accepted by a biller.
• Card issuers build a loyal customer base and increase card usage.
• All parties avoid the cumbersome and expensive paper trail of checks (i.e. from the consumer to the biller to the Fed to the bank back to the consumer). This can decrease the cost per payment process by over 50 percent.

With more than 16 billion transactions valued at more than $1.3 trillion, the recurring bill payments market offers a huge, new opportunity for issuers to increase charge volume and reduce churn. For the top six card issuers in the U.S., we estimate at least $1.2 to $2.6 billion in new gross revenue potential from these two areas alone.

With more than 100,000 customers activating OAM daily, speed to market is key. The first step for issuers in locking in this transaction base in advance of their nonbank competition is to execute a coordinated, cross-functional business plan.

Dove Consulting is a Boston-based strategy firm specializing in market growth strategies and organization effectiveness. Dove's Financial Services practice is renowned for its expertise in e-payments, retail banking and distribution, and Internet and online financial services. American Express, Bank of America, Capital One Financial, Charles Schwab & Co., Diebold, eBay, S1 Corporation, and Boeing are among the clients served by Dove.

Dove's Richard Crone helps large financial services institutions and technology providers apply online account management and other new technologies to reduce costs and open up new markets for growth.  For more information, contact Richard Crone at (650) 592-4006 or visitwww.consultdove.com