Big banks bet you'll pay bills online
By Holden Lewis • Bankrate.com

Maybe this year you'll start getting bills in the e-mail.

More competition is on the horizon for CheckFree, the 900-pound gorilla of online bill paying. By the end of summer or early this fall, your bank might persuade you to receive and pay bills online through a company called Spectrum.

Spectrum's three owners -- banking giants First Union, J.P. Morgan Chase, and Wells Fargo -- are testing the system by sending bills among themselves. Spectrum expects to roll out its service for more widespread use in late summer, after Citibank joins the Spectrum network.

Like an ATM, but different
Spectrum is an electronic exchange, like an ATM network. Users might not be aware that they are Spectrum customers, just as the holder of a bank's ATM card might not be aware of being a customer of the MAC or Cirrus ATM networks. Banks that belong to Spectrum will invite customers to receive and pay bills online, and Spectrum will handle the transactions in the background.

How will this affect you? Most likely, you'll notice a greater effort to advertise and market online billing. Banks will tout the ease of use and time-saving possibilities of receiving and paying bills online.

"People say, 'Geez, yes, it sounds like a good idea,' but a lot of them don't know how to get started," says John Perry, chairman of Spectrum. He expects Spectrum member banks to market aggressively and to try to push prices down so that paying bills by e-mail will cost about the same as buying postage stamps.

A number of companies allow you to pay bills online, and sometimes they allow you to receive bills online, too. The dominant company is CheckFree, which offers its service through many banks, brokerages and Web portals.

It's about price
Right now, CheckFree tends to charge less than banks in the Spectrum alliance. Bank of America offers bill paying through CheckFree; it's free to affluent customers and costs $5.95 a month for other customers. Bank One offers CheckFree bill-paying for $4.95 a month. Spectrum founders First Union and Wells Fargo charge $6.95 a month for online bill paying to customers who keep less than $5,000 in their checking accounts.

Perry, the head of Spectrum, believes that cost is one of the most important issues. "The product has to be very inexpensive; it has to be convenient and efficient," he says, adding that prices will drop as volume rises.

It probably will take a substantial price drop to persuade consumers to use online bill payment. A typical household sends about 12 bill payments a month. Postage on those payments costs $4.08. So sending a dozen bill payments electronically probably shouldn't cost much more than $4. Some in the industry believe that customers will pay extra for the convenience of online billing and payment. I doubt it.

Beth Robertson, an analyst with TowerGroup, expects Spectrum and CheckFree to compete and cooperate at the same time. They will have to cooperate on getting bills to customers and payments to billers regardless of alliances. For example, a CheckFree customer will have to be able to receive and pay bills online from a biller that sends bills and receives payments through Spectrum.

Goodbye, Wingspan
WingspanBank will fly into the sunset this fall. The online-only bank's parent, Bank One, never seemed quite comfortable with the fledgling Internet brainchild of its First USA credit card division. Every once in a while, rumors surfaced that Bank One was about to ax WingspanBank. Now it will happen.

Bank One executives say they no longer saw the point in keeping open two online banks -- bankone.com and WingspanBank -- that competed against each other.

Earlier this year WingspanBank started cutting the interest it paid on checking account balances and raising fees and balance requirements. Those are the typical warning signs that an online bank might not be around much longer. X.com displayed similar behavior before it closed its customers' accounts last year, and so did CompuBank before NetBank bought its accounts this spring. Last summer, the writing was on the wall for Citibank's online-only Citi f/i division when it stopped taking applications for new accounts.

With luck, customers won't endure hardship with the closing of WingspanBank. Their accounts are supposed to seamlessly become bankone.com accounts sometime this fall. Bank One promises to keep customers abreast of developments.

Today McDonald's, tomorrow the world
This isn't exactly about online banking, but it is about electronic banking, sort of. ExxonMobil, maker of the Speedpass, is expanding use of the diminutive payment device to 400 more Chicago-area McDonald's restaurants.

The Speedpass is a piece of black plastic shaped kinda like the metal part of a pencil eraser. It attaches to a key ring. You can pay for gasoline at thousands of Mobil stations by waving the device in front of the gas pump. It identifies you and charges the purchase to a credit card that you chose when you signed up.

You can use Speedpass to buy items in some Mobil convenience stores, and a few months ago Mobil teamed with McDonald's to test payment by Speedpass in the drive-thru lanes and counters of nine restaurants. The results were encouraging, apparently, so customers will be able to pay with Speedpass at 400 Chicago-area McDonald's.

That's not all. ExxonMobil intends to expand Speedpass into supermarkets, video rental stores and vending machines, and the corporate behemoth says its goal "is to position Speedpass as the customer identification and payment system of the future."

If Speedpass can sign a blockbuster deal with a big chain of video stores, and can assure us that it's a safe way to pay at the supermarket, the company might succeed in its lofty goal.

-- Posted: July 3, 2001