David Albertazzi

David Albertazzi

Banks and billers have long focused on outsourcing payments capabilities to third parties, largely to provide as much flexibility as possible to consumers while minimizing overhead costs. But as consumerization in payments evolves, driven by factors such as shifting customer expectations and emerging technologies, banks and billers are reassessing their bill pay service capabilities.  

Consumer power is growing and switching providers is becoming easier than ever in most industries. As a result, bill payment providers are seeking to place more control into their customers’ hands. The growth of real-time payments and the demand for contextually relevant data that can be used by consumers, banks, and billers means bill payment services now need to focus on changing how payments fundamentally work and how they integrate into the broader experience. This means investing in back-end capabilities and reassessing how payments function, as this has a core impact on the overall payment experience. 

To gain a more thorough understanding of the current U.S. bill payment market, Aite Group conducted interviews with payment executives from 12 leading organizations, including banks, utilities and telecommunication companies, insurance firms and healthcare and education service providers from February 2018 to March 2018.  

ACH is a market trend that dominates the payments landscape. Check use is still significant but is in decline, and electronic payment methods are on the rise.  

ACH makes up close to half of all bill payments by volume. Although other tools are gaining ground, they have some way to go before displacing ACH transactions. Checks are a major cost center for both banks and billers, and they remain a pain point despite the decline in usage. One implication to the rise of ACH is that electronic bill pay represents significant cost benefits for banks and billers while also improving the customer experience. 

Consumers are also increasingly shifting to biller-direct payment channels. Cards are more widely used at the biller-direct level and represent a major competitive point against bank bill pay services. Banks and billers are increasingly looking at modernizing their bill pay capabilities. 

The growth of digital channels alongside ingrained consumer habits means that a growing volume of consumer bill payments is now done biller direct. Although many banks interviewed by Aite Group state they are currently looking or have previously looked at offering some form of card-based bill pay service (cash advances) it remains low on the agenda. Both billers and banks are now focusing on enhancing their bill pay capabilities, primarily through greater use of digital channels as well as better integration and use of real-time data capabilities. 


Gilles Ubaghs

Gilles Ubaghs

Consumer Expectations Drive New Payment Strategy 

As consumerization in payments evolves, banks and billers are reassessing their bill pay service capabilities. 

The variety of factors affecting consumer expectations continues to evolve, and these factors will continue to change in the near term. Banks and billers need to focus on an adaptive technology strategy in bill pay that meets these needs head on and that reacts to future shifts. Although undoubtedly a major driver of digital transformation and investment activity for banks and billers, an increasingly customer-and mobile-centric approach also provides the potential to significantly reduce overhead costs particularly for customer support staff both on-site and in call centers. 

Aite Group recommends that payment executives should explore partnerships. The road to get there will not be easy or inexpensive, particularly for setting the technology stack and infrastructure to facilitate real-time payments. Banks and billers need to think strategically as to how they want to play and compete in this market. They should look to partner with payment providers to fill out their product offerings and to develop and implement these new payment services.  

Payment executives should also assess back-office capabilities. As the bill pay space becomes more data rich, flexible and functional to its end users, it will place growing pressure on existing legacy infrastructure. Tinkering with front-end technologies will help improve the experience and create efficiencies, but long-term development will necessitate an appraisal and likely modernization of back-office capabilities.  

Aite Group’s findings suggest that payment executives should focus on real time and learn from other markets. They should implement a strategy that allows customers to easily, safely and securely originate and receive faster payments can be complex, as they are irrevocable. U.S. banks and billers should learn from other countries that have already rolled out real-time payment systems so that they know what to expect and can learn from missteps in other implementations.  

By taking advantage of the value-added messaging capabilities, payment executives could get more out of their payment process. Standards like ISO 20022 can provide transparency and efficiencies to the entire order-to-pay process; banks and billers should fully leverage these standards to provide additional insights and context to the payment experience. 

David Albertazzi and Gilles Ubaghs are senior analysts on  Aite Group’s banking and payments team. To learn more about Aite Group’s research coverage of banking technology and retail banking, please contact Aite Group at info@aitegroup.com. 

U.S. Bill Payment Transformation: the Momentum Accelerates

by Banker & Tradesman time to read: 3 min