Study: E-Banking Blooming, but Needs New Apps

While millions of Americans are migrating from offline to online bill
payment, a new study says that the banks offering online banking services
must come up with new applications, if they are to remain competitive in the

Gartner Thursday released a new study on the growth of the
online bill payment market in the U.S. The report says that in 2003 online
bill payment is growing in popularity, and it expects the market to grow by
close to 38 percent to 40 million users.

With the surge in popularity, Gartner expects banks to lower prices and
create incentives to garner online banking customers. The study says that
while most consumers that utilize online banking view and pay their bills,
banks need to do more to create other applications, which will hook
customers into other revenue streams.

Gartner says it conducted its Web-based survey of online banking habits in
September 2002 of more than 1,000 adults that spend time online. The survey
found 79 percent of those surveyed view their bills directly at the biller’s
site, while only 10 percent views bills through what it calls “a bank
consolidation service.”

Gartner says that many consumers go directly to billers’ sites because it is
simple and free to pay at those Web locations. Gartner in its study
challenges banks to “provide more value with their online bill payment
applications to attract and retain profitable customers as well as reap the
significant payment-relate revenue,” it said in a press release.

Gartner says online bill payment is an effective customer retention
strategy, and that consumers that pay bills through their bank online are
twice as likely to stay with their banks. The study says consumers don’t
switch, in part, because of the trouble of setting up online payments with
another bank.

The survey goes onto say 45 percent of consumers use online bill payment in
an effort to save time, while 10 percent said cost savings is the main
reason they’ve migrated to online bill payment.

Gartner suggests bank consider discounts and free trial online banking
services in an effort to attract and retain customers. Gartner goes onto say
that bank should consider offering “value-added features such as customer
self-service, automatic enrollment, bundling of automated payment plans and
a user interface that does not impose bank preferences on the customer.”

A separate study released by The Pew Internet & American Life project in
November 2002, found that 37 million Americans have done some of their
banking online, a 164 percent increase since early 2000. Pew’s Online
Banking Report predicts that more than 50 million U.S. households will bank
online by 2010.

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