White Paper Ushering in the E-Bill Age: Driving Adoption through Financial Institution Websites
The Changing Payments Landscape A variety of factors indicate that now is the time for financial institutions to take a more proactive approach to encouraging e-bill adoption. Growing consumer interest, wider availability and the emergence of third-party electronic billing and payment providers indicate that e-bills merit deeper consideration as part of a financial institution s digital channel strategy. In a changing market, electronic bill presentment can play a significant role in retaining transaction volume, enhancing customer satisfaction and retention, and helping financial institutions stay relevant among consumers. Over the course of the last decade, online electronic bill payment has found favor with many consumers. Adoption has increased at a rapid clip and electronic bill payment is now a mainstream consumer service. On the flip side of the equation, electronic bill presentment, commonly known as e-billing, has been met with slow, but steady, consumer adoption. Even though e-bills have been available for nearly as long as electronic bill payment, there remains a widespread lack of consumer awareness about the availability of e-bills, how they work and the benefits e-bills provide to recipients. E-bills, which contain the same information as paper bills, can be delivered directly to consumers at biller websites or financial institution websites. Historically, many banks and credit unions have left e-bill promotion to billers. However, financial institutions have a vested interest in encouraging adoption since research has shown e-billing increases customer satisfaction and is correlated with deeper overall relationships. With consumer interest in e-bills growing, now is an ideal time for financial institutions to begin promoting the service. By spotlighting the availability and benefits of e-billing and bolstering customer confidence in the service through innovative tactics such as introductory periods, financial institutions can move e-bill adoption forward. Adoption and Interest in E-Bills is Growing According to the 2011 Fiserv Consumer Trends Survey, the number of consumers receiving e-bills at their financial institution is increasing, as is the number of consumers who are interested in e-bills. Between 2006 and 2011 the number of U.S. online households receiving e-bills through their online banking service more than doubled (see Figure 1). Approximately one-third of financial institution online bill payers now receive e-bills. 1
Figure 1: E-Bill Adoption Has Increased Steadily Number of households who receive e-bills through their online banking service (in millions) However, when given a choice between third-party service providers and their financial institution, the majority of consumers prefer to utilize their banks and credit unions for financial transactions. This is particularly true for bill payment. According to research conducted by W5 on behalf of Fiserv, 64 percent of consumers prefer to use their financial institution for electronic bill payment versus four percent who prefer a third-party provider. This preference for financial institutions held true across other transaction types as well (see Figure 2). Figure 2: Consumers Prefer Their Financial Institution for Transactions Source: Consumer Trends Survey, Fiserv, Inc., 2006-2011 Among online bill payers not already receiving e-bills, 38 percent said they were interested or very interested in the service. However, the study also revealed a lack of awareness about the service, with 30 percent of online bill payers saying they were not sure if their financial institution even offered e-bills. E-Bill has a Vital Role in the Battle for Payments From a revenue perspective, the payments business is the most significant single line of business in U.S. banking. According to First Annapolis Consulting, payments in the U.S. represent more than $282 billion in total annual revenue. Banks and credit unions are facing new competition from non-traditional payment providers, making the battle for consumer payments a legitimate concern. Source: W5 Online and Mobile Payment Marketplace Assessment, April 2011 Banks and credit unions can capitalize on these preferences to defend the payments franchise. For example, financial institutions can leverage e-bills to drive continued and increased usage of electronic bill payment. Bills whether paper or electronic set the bill-paying process in motion. It therefore stands to reason that the entity that delivers the bill has a natural advantage in the battle for the ensuing payment. 2
Receipt of e-bills has a positive impact on the number of electronic bill payments a customer makes. Based on a customer analysis conducted by Fiserv in 2011, financial institution online bill payment users who also receive e-bills made more payments than users who did not receive e-bills (see Figure 3). Figure 3: E-Bill Recipients Make More Electronic Bill Payments payment, e-bill and financial management tools. Providing customers with the ability to bank, view and pay bills, and manage their money through electronic channels can have a significant impact on the overall customer relationship. In addition to helping win the payments battle, e-bills offer financial institutions a way to establish deeper overall relationships with customers.the 2011 Fiserv Billing Household Survey showed that customers who receive e-bills are more likely to have savings, deposit and credit accounts with their primary financial institution than customers who do not receive e-bills (see Figure 4). Source: Internal Data Analysis, Fiserv, Inc., 2011 Over a four-year time period, e-bill recipients were more likely to continue using bill payment versus non e-bill recipients. When comparing user retention rates for online bill payment, e-bill recipients had a 12 percent higher retention rate than bill payment users who did not activate an e-bill during the four year time frame. Figure 4: E-Bill Users Are More Likely to Use Other Financial Institution Products What types of financial services accounts do you have with a bank, credit union, or brokerage? These findings are consistent with a study conducted by Javelin Strategy & Research in March 2010 that found 34 percent of consumers surveyed would be motivated to pay more bills online if they could view and pay most or all of their bills at a single site. The Value of E-Bills for Financial Institutions A key objective for any bank or credit union is to be a customer s primary financial institution. With the online and mobile channels playing a greater role in financial management, financial institutions must offer comprehensive digital banking services including Source: Billing Household Survey, Fiserv, Inc., May 2011 3
The Value of E-Bills for Consumers Consumers who receive e-bills give high marks when it comes to how satisfied they are with the service. More than two-thirds of e-bill users cited the ability to view and pay in one step as a reason they enrolled in the service, according to the 2011 Fiserv Consumer Trends Survey (see Figure 5). In addition, customers also identified reminders and the ability to manage their finances more efficiently and effectively as reasons for signing up for e-bills. Figure 5: Consumers See a Variety of Benefits in E-Bills Why did you sign up to receive e-bills? Marketing is Only Part of the Adoption Mix In his book, Diffusion of Innovations, Everett Rogers examines the process by which consumers decide whether or not to adopt a new product or service. According to Rogers, consumer adoption of technological innovations involves five stages: 1. Knowledge: obtain information about product value 2. Persuasion: generate interest in the product 3. Decision: weigh pros and cons and decide to try or reject 4. Implementation: evaluate usefulness of the product 5. Confirmation: finalize the decision to continue using the product Source: Consumer Trends Survey, Fiserv, Inc., August 2011 In order to convert growing interest in e-bills to action, consumers must be aware that e-bill is an option at their financial institution and understand the advantages of the service. These reasons for enrollment, as cited by e-bill users, can be used to develop messaging to market the service to prospective e-bill users. When it comes to marketing e-bills, most financial institutions have relied on traditional marketing strategies that focus on the first three stages of this process knowledge, persuasion and decision. The first step involves providing knowledge about what an e-bill is and what value it holds for the consumer. The second involves persuading the consumer to try e-bills by providing an incentive such as a free offer, charitable donation or credit. The third and final step is to provide a call to action asking the consumer to adopt the e-bill. Overall, these tactics have played a major role in producing positive incremental growth in e-bill adoption, and financial institutions should continue these efforts. A Multi-Pronged Approach to E-Bill Adoption While traditional marketing plays a role in e-bill adoption, it is far from the only factor (see sidebar Marketing is Only Part of the Adoption Mix ). User experience enhancements are also a proven way to boost e-bill awareness and adoption. However, for e-bill to become a mainstream consumer service, financial institutions should also give consumers a chance to experience and evaluate the usefulness of e-bills. This involves receiving e-bills and associated alerts and becoming familiar with the entire process while still receiving paper bills. Firsthand experience will give consumers the confidence to confirm the decision to opt out of paper and into e-bills. 4
Enhancing the User Experience Drives Results Financial institutions typically experience a sharp increase in e-bill adoption and sustained usage following the implementation of well-designed changes to the user interface. In 2008, the majority of the more than 3,000 financial institutions that utilized the CheckFree RXP payment service from Fiserv began displaying thumbnails of e-bills within the electronic bill payment interface. A thumbnail is a miniature version of a merchant s bill that displays while the customer is in the process of paying that bill. Thumbnails, which are displayed for all bills for which an e-bill is available, even if the customer has not signed up to receive an e-bill, help to increase awareness and show that the e-bill contains all the same information as a paper bill. Seeing the thumbnails had a significant impact on e-bill activation (see Figure 6): One week after thumbnails were introduced, consumer e-bill activations increased by 145 percent The average e-bill activation rate stabilized at a 30 percent higher rate than prior to the thumbnails More consumers signed up for multiple e-bills; e-bill activation requests per customer increased by 34 percent E-bill activation requests per customer stabilized at a rate 10 percent higher than the previous level Two years later, in 2010, Fiserv helped financial institutions enhance the user experience again by changing the e-bill icons used in the financial institutions online banking user interfaces. The new icons were more intuitive and descriptive, and provided consumers with a better understanding of what e-bills are and how they work. In this case, financial institutions that implemented the new icons experienced a more than 30 percent increase in e-bill activations (see Figure 7). Figure 7: Updates to the User Interface can Drive E-Bill Adoption Weekly E-Bill Activations Before and After New E-Bill Icons Top Four CheckFree RXP Financial Institution Clients Figure 6: Making E-Bills More Prominent in the User Interface can Significantly Impact Adoption Weekly E-Bill Activation Requests Top Five CheckFree RXP Financial Institution Clients Source: Internal Data Analysis, Fiserv, Inc. Source: Internal Data Analysis, Fiserv, Inc. 5
Utilizing Tryvertising to Drive E-Bill Adoption Tryvertising, a relatively new marketing trend borrowed from the broader world of retail marketing, is about enabling consumers to become familiar with new products by trying or previewing them before a purchase is made. Examples of this include: itunes allowing customers to listen to a 30-second clip of a song before purchasing and SiriusXM radio equipping new vehicles with an automatic trial of its service. The concept has met with wide appeal among consumers. Tryvertising takes a fresh approach to persuading consumers to switch to e-bills. Tryvertising promotes using e-bills side-by-side with paper bills for a specific duration so that consumers gain firsthand experience of the benefits of receiving e-bills. By experiencing electronic bill presentment and due-date alerts while still receiving paper bills, consumers are able to establish a comfort level with the electronic process. Trial also assures consumers that e-bills and the associated alerts provide the reminders necessary to help make certain bills are paid on time, eliminating one of the primary impediments to paper bill turn-off. Tryvertising is a proven way to provide consumers with a smooth transition from paper bills to e-bills. Putting the Theory into Practice Through consumer surveys and usability trials, Fiserv has found consumers do prefer and respond to the concept of tryvertising. According to the Fiserv Billing Household Survey, the biggest single motivator for online consumers to try e-bills is the ability to try e-bills while they are still receiving paper bills. In addition, Fiserv usability testing has shown that simply turning on a new feature and letting people try it is the best way to introduce innovation and drive adoption. Fiserv facilitates tryvertising for financial institutions through the E-bill Introduction program within CheckFree RXP, which allows bill payment users to try an e-bill from a common household biller during a 90-day introduction period. During the introductory period, bill payment users have the opportunity to experience e-billing before committing to turning off their paper bill. When the introductory period is over, the e-bill is discontinued unless the customer chooses to replace their paper bill with an e-bill going forward. By allowing consumers to try e-bills before turning off their paper bills, banks and credit unions can build consumer knowledge and comfort with the service, motivating more consumers to adopt e-bills and encouraging existing e-bill recipients to sign up for more e-bills. Pilot Program Sees Solid Results A series of pilots of the E-bill Introduction program was conducted with four top 10 banks and one top 10 credit union. Over 395,000 active online bill payment customers at the various institutions were included in the pilot. The e-bill used in the pilot was from a major communications service provider. On average, the participating financial institutions realized the following results: Activation Rate: the number of e-bill activations was three times higher for customers enrolled in the E-bill Introduction pilot than for customers who were not enrolled First-Time E-bill Users: 74 percent of those that activated an e-bill via E-bill Introduction were first-time e-bill users Draft Effect on E-bills: nearly 70 percent of pilot participants who activated an e-bill via E-bill Introduction activated at least one additional e-bill from another biller; on the average, two additional e-bills were activated 6
Draft Effect on Bill Payment: more than 60 percent who activated an e-bill via E-bill Introduction added an additional bill for payment through their financial institution These results are proof that an introductory period can have a significant impact on e-bill adoption, particularly among first-time users. E-Bill: A Critical Piece of a Bigger Picture As a leader in electronic bill payment and presentment, Fiserv is positioned to assist financial institutions develop a comprehensive e-bill strategy through the use of best-in-class technology, best practice advice, industry research and consumer marketing insight. If you have any questions regarding this paper, or would like to learn more about how Fiserv can help your financial institution with e-billing and payment, please contact your Fiserv representative. Faced with increased competition from traditional and non-traditional players, new regulations and ever-changing technologies, banks and credit unions are being compelled to employ a holistic approach when serving customers. E-bills are part of a holistic approach to drive more traffic to online and mobile channels while increasing satisfaction and deepening overall relationships. Research shows that e-bill users are more satisfied, conduct more online transactions, own more accounts, hold higher account balances and are less likely to leave. By offering and encouraging the use of digital channel technology such as e-bills, financial institutions can deliver a more complete personal financial management experience that will enhance the overall customer relationship. As consumer interest in e-bills is increasing and adoption is forecast to grow, now is the time for financial institutions to revisit their e-bill strategy. While consumers appreciate the convenience, financial organization and control e-bills provide, many still don t know if their bank or credit union offers e-bills, how e-bills work and how they can benefit from them. Financial institutions have the opportunity to help educate consumers and drive e-bill adoption by promoting e-bills through traditional marketing as well as new approaches such as an introductory period. 7
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