Banks’ Online and Mobile-Based Payment Services Still Have Long Growth Runways, Study Finds

By Jim Daly
@DTPaymentNews

Web- and mobile-based banking and payment services still have large room for growth, although online bill payment seems to have hit an adoption ceiling, according to a new survey of banks’ usage of software-based services for consumers.

Chicago-based investment firm First Analysis Securities Corp. interviewed executives from 22 banks between May and early August for its study. Most were from small or mid-sized institutions, although two had more than $10 billion in assets. The purpose was to assess growth opportunities for financial software vendors, including payment processors that provide software-based services such as bill pay and remote deposit capture.

Ten of the banks indicated that less than half of their customers are enrolled for any Web-based services, but a majority expect enrollment to grow by more than 10% in the next year, according to First Analysis vice president and study author Lawrence Berlin. And 17 of 20 banks responding to a question about mobile financial services also said that less than half of customers have signed up for mobile banking, but 13 of 15 respondents expect mobile enrollment to grow by 10%-plus in the next 12 months.

The payment service with the most growth potential may be person-to-person payments, for which only one of 12 respondents said more than 10% of its customers were enrolled. Four banks said they had just introduced the service. “It’s a pretty light adoption,” Berlin tells Digital Transactions News.

With P2P payments, banks are keeping a close eye on a non-bank competitor, PayPal Holdings Inc.’s Venmo P2P service, which saw its transaction count grow 141% in the second quarter. “One sure sign of demand is Venmo, which is growing spectacularly,” says Berlin. “It shows there is demand for it.”

Seven of the respondent banks use Brookfield, Wis.-based processor Fiserv Inc.’s Popmoney P2P service.

Some 20 of the 22 banks offer Web-based bill-payment services and 19 offer mobile bill pay. Asked about adoption of online bill payment, 10 respondents put enrollment at 10% to 25% of their customer bases. Only five put it at 25% to 50%, and no one said more than half their customers used Web-based bill pay.

“It has not moved much over the past 10 years,” says Berlin, recalling a bill-pay inquiry he did a decade ago. “The numbers were very similar.”

The reason, he surmises, is the popularity and greater service features available through biller-direct than bank-based bill pay, and consumer habits that favor biller direct or old-fashioned bill payment by mail. For banks, the main way to change those habits may be to ramp up advertising and marketing. “It might take quite a bit of marketing,” says Berlin.

Mobile-based bill-pay, however, “is a little hotter,” says Berlin. Eight of 19 banks providing information about that topic said 10% to 25% of their customers had enrolled for mobile bill pay.

Another software-based bank service with little penetration so far is remote deposit capture. Of 13 banks replying to a question about that service, six, or nearly half, said under 10% of their customers used it, and another three said it was a new service and had no adoption figures yet. Only four said 10% to 25% of their customers used remote capture.