Mobile Access, Rising Fees Lift Potential in Expedited Payments

A new study by Javelin Strategy and Research has a bit of good news about last-minute, or expedited, bill payments and about another hot topic, mobile payments. Some 45% of the consumer group Javelin calls “mobile bankers” make an expedited payment at least once a month compared with only 30% for all consumers. But there's some bad news too: Javelin estimates the mobile-device channel used without making a phone call accounts for only 3% of expedited payments. The most popular channel is the Internet, accounting for 38% of expedited payments; the telephone, 32%; in person, 17%; overnight mail or rush delivery, 8%; and other, 2%. Those are some of the findings about expedited payments from Javelin's random samples of 2,350 online consumers in March and 3,367 in August. “We're still not overly bullish on in-depth financial activity in the mobile channel,” Bruce Cundiff, senior analyst at Pleasanton, Calif.-based Javelin, tells Digital Transactions News. He adds, however, that mobile devices enhance the immediacy of expedited bill-payment services, a factor that could spur usage among consumers trying to dodge an imminent late fee. “Consumers readily understand that value,” says Cundiff. “It certainly is something if financial institutions want to expand usage.” One way institutions could drive mobile bill payments is to send alerts to consumers' mobile phones advising them of upcoming due dates, the report says. With mobile payments still a ways off for most consumers, the study shows providers have more pressing concerns. Financial institutions still have a long way to go in gaining market share from billers in the expedited market. Only 25% of online consumers execute an expedited payment through their bank or credit union's Web site, compared with 74% who make such payments directly through the credit card issuer, utility, or other biller. The entrenched consumer perception that the only way to make a last-minute payment is through the actual biller is the reason for the biller-direct mode's high market share, according to Cundiff. Regarding expedited payments at financial institutions' online-banking sites, “either it's not offered or it's not marketed well,” he says. Yet gaining market share in expedited payments is something banks and credit unions ought to be concerned about because of the potential fee revenue, according to Javelin. “Under the current revenue percentage splits, financial institutions stand to cede $5 billion in expedited fee revenue over the next five years to billers under the most conservative revenue estimate, and up to $6.25 billion under an optimistic revenue scenario,” says the survey's executive summary. Revenues, however, will vary depending on a complex interplay of competition, pricing, and economic conditions. Counter-intuitively, Javelin predicts fewer households will use expedited payments if the current economic slowdown continues. The firm's reasoning is that out-of-work consumers are less concerned with making on-time payments than they are with making the payments at all. The current economy, on the other hand, could support higher expedited bill-pay fees. Mean pricing is $7.95 per payment in 2008, up from $5.64 in 2006. Average pricing might slip to $7.74 next year if the economy improves but rise to $10 if what Javelin calls a “struggling economy” persists. “Javelin forecasts that cash-strapped consumers using expedited payments as a way to hold onto bill payments longer could face a doubling in the price of expedited payments over the next five years, from $8 on average to $16 in 2013,” the report says. But higher pricing also will reduce usage, Cundiff says. Javelin says its March and August samplings have margins of error 2.86 and 1.70 percentage points, respectively, both at the 95% confidence level.