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Americans still shying
away from online bills -- but getting acquainted
By Holden
Lewis • Bankrate.com
 A
decade ago, Erika Lockhart had a financial problem: When paying
her bills, she often omitted the final step. "I
would write checks for bills," she says, "but I would
forget to mail them."
The notion that writing a check
and mailing it were one action was "like a mental fault,"
she says.
Years before the Web was born,
Lockhart discovered that her Quicken software allowed her to pay
bills electronically through a company called CheckFree. She could
enter transactions into Quicken, and the software would dial into
a server and pay the bills. Writing a check and sending it became
a single, paperless action, and she was content.
Now the San Francisco resident
plans to stop using CheckFree, which she says charges $9.95 a month
for the privilege of paying bills electronically through her Quicken
software. She has used CheckFree for 10 years, with only an occasional
mix-up, but she figures that she's paying too much.
Instead, she'll pay some bills
online through her credit union (it's free for the first six bills
a month) and pay others, mainly utilities, by automatic deduction
from her checking account.
Many options
Those are just a few of the online bill-paying options. She could
sign up with CheckFree through a bank, which would cost less but
would sever the link to her Quicken software. She could visit a
few billers' Web sites (electric utility PG&E, for example)
and pay there.
Lockhart could even fill out some
change-of-billing-address forms and have all invoices mailed directly
to Paytrust or Cyberbills. Those companies would scan the bills
and allow her to view them on her computer screen -- and then allow
her to pay the bills electronically.
There are a lot of options out
there, but not tons of takers. This year, less than 7 percent of
consumers pay bills online, and most of those people pay only a
few bills online. They pay the rest by mail.
Even when people pay bills online,
they almost always receive those bills in the mail. Then they log
onto a Web site, enter the billing information, and pay. That's
as much work as writing a check and stamping an envelope.
"If you want people to get
their bills online, you have to be better than their mailbox,"
says Ed McLaughlin, head of Paytrust. Consumers go online "to
save time, not to waste it," he says -- and he argues that
receiving and paying bills over the Internet is part of this trend.
But no one knows for certain how
-- or even if -- consumers want to receive and pay bills online.
People in the industry have conflicting theories to explain why
online billing is unpopular and what it will take for it to succeed.
The numbers
In 2000, American consumers will receive a total of 15.4 billion
bills, estimates the TowerGroup, a financial consulting firm. Less
than 1 percent are sent and paid online, without killing any trees.
The TowerGroup estimates that in 2005, consumers will receive and
pay about 10 percent of bills electronically.
If that educated guess is right,
the U.S. Postal Service will still have a hand in delivering 90
percent of bills or payments five years from now.
"Were still in the phase of
establishing momentum," TowerGroup senior analyst Beth Robertson
says. "We're not at the point where the pendulum has started
its downward swing."
To the contrary, says Randy McCoy,
a vice president of CheckFree. Consumers are about to embrace electronic
billing and bill payment because the second-biggest bank in America
-- Bank of America -- is beginning to offer the service to its accountholders
through CheckFree -- and will spend $45 million to advertise it,
he says. Ads are important, he says, because "it always takes
a couple of minutes to explain what CheckFree does."
A generation
gap
Some believe that there's a generation gap at work. "Younger
generations are more technologically inclined," Robertson says.
"They're more aware of technology and they're more interested
in using it to conduct day-to-day transactions."
Curt Welling, head of Princeton
eCom, which provides electronic billing and payment services to
financial institutions and billers, says the children shall lead
us. "Once your kids start to make decisions for themselves
and come of age as far as entertainment and communications, you'll
find that the pen and the checkbook are things of the past for their
generation," he says.
Welling hopes his 13-year-old will
pay bills electronically in five years, and says that widespread
adoption of online bill-paying is "an inevitable thing"
that will come when today's middle- and high-schoolers become tomorrow's
adults.
Another CEO in the business, McLaughlin
of Paytrust, isn't so sure he sees a generation gap. It's more of
a gap in behavior and experience, he says, explaining that his company's
typical customer has been online for more than a year, has shopped
online and uses e-mail frequently.
"We don't see that so much
as being age-based," McLaughlin says. "If you're in the
AARP and you're an active trader who checks the portfolio every
day, we see this as the perfect bill-paying solution."
He says people don't want to pay
bills online until they can receive, file and view all their bills
online. Partial solutions, he says, "are inherently unsatisfying"
because they don't address the filing and paperwork hassles of dealing
with bills. "It's the process of dealing with bills is what
people complain about the most."
Imperfect
services
But people who pay bills online have their own complaints about
the services. Says Lockhart, "If things are going well, it's
fine, but whenever there's a problem, it's a real problem."
She's had a few problems using
CheckFree, and they're not always CheckFree's fault. Occasionally
she accidentally tries to pay a bill twice. When that happens, the
bill isn't paid at all. And when billers change addresses or account
numbers, payments don't go through. She finds out when she gets
late notices.
Customers of services like Paytrust
sometimes have trouble getting packages delivered. If you have your
credit card bills mailed to Paytrust, your billing address is Paytrust's
address. Because some online and mail-order retailers prefer to
send items only to the buyer's billing address, it often takes a
time-consuming phone call or two to customer service to get something
shipped.
Making bills
useful
Maybe the solution lies in creating online bills that are more useful.
Princeton eCom is proud of its technology, which allows the recipient
of an online bill to view it and manipulate it in many ways. You
can look at a Verizon cell-phone bill created by Princeton eCom
and analyze phone usage in dozens of ways. You can separate personal
from business calls, or sort calls by phone number or time of day.
The same technology could be used
to make other kinds of bills interactive: You could compare last
month's electrical usage with your usage a year before, or you could
sort credit-card purchases into categories.
It sounds cool, but Lockhart is
unconvinced: "That would be a nice feature," she says,
"but I wouldn't have much use for it."
Indeed, billers might be more enthusiastic
about interactive electronic bills because they could be used as
sales and marketing tools. "You'll see more one-to-one marketing
happening," says Erin Giordano, spokeswoman for Princeton eCom.
For example, a phone company could suggest ways to save money based
on a customer's calling patterns, she says.
"It's a great tool to build
your brand, to maintain customer relationships, and to build the
loyalty that you need," she adds.
Of course, some customers might
not like what this means to privacy. "Billers are cognizant
of the fact that if they bombard consumers with unwanted offers,
they have a lot to lose," says McCoy of CheckFree.
He's certainly right. If consumers
believe that online bill-paying benefits the business more than
it benefits the customer, the bright future it looks to will never
arrive.
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