Expedited Bill Payments Grow at Double-Digit Rates, Go More Electronic

So-called expedited bill payments are rapidly growing in volume in the U.S., and are also becoming increasingly electronic as remote-payment channels like the Internet gain transaction share from traditional walk-in channels. That's one conclusion TowerGroup, a Needham, Mass.-based payments-research firm, has come to in two studies released this week. Expedited bill payments?which include transactions made by consumers to pay bills at the last minute?will total 554 million transactions in 2005, TowerGroup says, up 29% from last year. This volume is expected to grow another 28% next year, to 708 million, and will reach 1.7 billion by 2010. Although the payment method began as a tool to collect debt from delinquent consumers, “last-minute convenience and emergency payments have become the key drivers for this payments market,” says one report, entitled “Expedited Bill Payments: The Basics of Convenience.” And these transactions are becoming more and more electronic. So-called walk-in payments, where consumers pay in person at designated facilities, account for more than half of the volume now, but by 2007 remote channels, including the Internet and voice-response phone systems, will overtake walk-in volume, says the second report, “Expedited Bill Payments: The Market for Convenience.” By 2010, remote channels will account for 55% of expedited bill payments, up from 48% now. Payments in these remote channels are overwhelmingly electronic, whereas about 46% of walk-in payments occur on cash and check. Of particular interest, TowerGroup says, is the potential for so-called PIN-less debit, payments consumers make online or on the phone using their ATM debit cards but without giving their PINs. These already account for 2% of all expedited bill payments, according to the firm's research. This equals the volume for signature debit, while credit cards account for 13%, and the automated clearing house 43%, of volume. With walk-in volume excluded, signature debit's share rises to 9%, and that of the ACH goes to 54%. “The introduction of online debit for paying bills has improved real-time functionality for consumers while creating better funds availability for billers,” TowerGroup says. “This will replace the paper check option and may also be offset by some declines in ACH or even credit card and signature debit.” The reports from TowerGroup, a unit of MasterCard International, indicate transaction processors recognize expedited payments as a market with big growth potential, leading to deals such as the acquisition this summer of BillMatrix Corp., a processor of electronic convenience payments, by Fiserv Inc. (Digital Transactions News, July 28). “Recent acquisition and transaction activity in the expedited bill-payment space in the United States indicates a dynamic market poised for continued expansion,” TowerGroup says. The research points to increasing consumer comfort with electronic bill payment generally as a primary reason for the growth of expedited payment volumes. The firm adds that rules from the card associations–including a Visa USA policy that requires billers to charge the same service fees for all so-called alternative bill payments, whether card-based or processed via online debit networks or the ACH?may be a “barrier” to alternative payments in the expedited-payments market. “In the long run, TowerGroup believes these policies will not restrict the growth of expedited bill payment services, but they could be challenged as being anticompetitive relative to other payment options,” the firm says. Some 72% of expedited bill payments now incur service fees, with most fees falling into the $3.95 to $6.95 range, the research says.