Consumers Increasingly Pay Billers Directly Rather Than Through Bank Sites

Payment volume through biller-direct Web sites continues to grow at the expense of bank bill-pay sites, according to new findings from Boston-based Aite Group LLC.

Some 73% of the online bill payments made by consumers in 2016 went through biller-direct sites, up from 62% in 2010, according to Aite. Meanwhile, payments through bank bill-pay sites dropped to 27% in 2016 from 38% in 2010. Volume through third-party bill-pay websites—such as QuickBooks, MyCheckFree.com, or Mint.com—remained flat during that period, according the report.

The report is based on Aite’s interviews with executives from 12 organizations in the bill-pay industry in February and March as well as data from an Aite third-quarter 2016 survey of 2,429 U.S. consumers.

Key to the appeal of biller-direct sites is that they typically provide consumers with much more of the information they desire about their bill, such as a statement detailing their transactions and date of the last payment received, says Gilles Ubaghs, senior analyst for wholesale banking and payments for Aite. Ubaghs is co-author of the report titled U.S. Bill Payment Transformation: The Momentum Accelerates.

In addition, biller-direct sites provide consumers with faster payment posting than bank sites, often the same day. Speedier posting makes it possible for consumers to pay their bills on the due date. In comparison, bills paid through bank Web sites often take several days to post.

“There is a lot less friction paying through a biller-direct site than through a bank’s site,” says Ubaghs. “With a bank site, consumers are kind of flying blind when it comes to information about the bill, their account, and when a payment actually posts.”

Another advantage of biller-direct sites is that credit and debit cards are becoming a more common funding option, while the majority of bank bill-pay services do not accept cards for payments, according to Aite. Nevertheless, many bill-payment providers interviewed for the report said the cost of card acceptance, including interchange rates, remain a major concern, Ubaghs says.

Not surprisingly, the automated clearing house remains the most reliable and cost-effective bill payment option. Payments made through the ACH exceeded 6.8 billion of the 14.7 billion bills totaling $3.9 trillion that U.S. consumers paid in 2016, according to Aite. Of that total, U.S. consumers provided their debit card information to pay more than 2.2 billion bills and their credit card information to pay another 2.2 billion bills, according to the report.

Despite the popularity of biller-direct sites, they are not necessarily swiping volume from bank processors that provide the engines for banks’ bill-pay services, such as Fiserv Inc. “A lot of big processors work with biller-direct sites as well as banks, which makes them well positioned in this market,” Ubaghs says.

Looking ahead, Ubaghs expects banks and billers to put more resources into enhancing the customer bill-payment experience. Potential enhancements include offering real-time payments through services such as Zelle, a collaborative peer-to-peer payments service from some of the largest U.S. banks, and providing payment tracking and allowing users to update their preferences.

“The customer experience for bill-payment continually needs to be enhanced for direct billers and banks to attract more users,” says Ubaghs.