The number of US households using PC banking applications is expected to more than triple in the next five years, from 7 million at the end of 1998 to more than 24.2 million by 2004, according to GartnerGroup’s Dataquest Inc. unit.
More than half (13.7 million) of the 24.2 million PC banking consumers will be paying bills online in 2004, Dataquest found.
“To promote growth in these online activities, banks and other financial institutions face two primary challenges,” said George Barto, a senior analyst at Dataquest. “They need to widen the overall appeal of online banking and overcome consumer unease about control of the online bill paying process.”
According to Dataquest, online banking households are not typical of the potential mass market. They differ not only in terms of household composition and income level, but in terms of bill payment habits as well, Barto said. Dataquest found that current online banking consumers are well-educated households with high dual-incomes and children. In short, their time is at a premium.
“Anytime access” was cited by 86 percent of current online banking consumers as the primary motivation for banking online, Dataquest found. Among online households, Dataquest found that the male head of the household typically pays the monthly bills. Among households in general, the female head of the household is usually the monthly bill payer.
Dataquest’s research found that if banks are to widen the appeal of online services and introduce them to mainstream households, they must simplify the process of banking online while allaying fears of paying bills online. Dataquest also found that banks are getting help with changing consumer behavior from credit card companies, stores, telephone companies, and utility companies.
“Many of these are offering account-viewing capabilities for their customers,” Barto said. “Once it becomes familiar behavior, consumers will have less trouble making the transition from account viewing to transferring money among accounts and then to bill paying. The process will be further demystified as digital TV and digital cell phone banking applications become available.”
Dataquest estimates the average fee for online bill payment is $6.20 a month, but only about half of online bill payment customers pay it. Some banks offer the service for free, and others waive the fee for preferred customers. The average fee for account viewing stands at $5.10 a month, but the number of banks with a formal fee schedule is declining, according to Dataquest.
Approximately 20 percent of banks have a fee schedule, and only about 10 percent of account viewing households actually pay. Fees from all account view and bill payment services are forecast to reach $1.3 billion by 2003.