Rethinking the Role of Bill Payment in Digital Banking

By a number of important measures, banks and credit unions are the first place that most consumers turn to handle their bill-paying chores, serving as the conduit for the largest share of the $3.5 trillion that is in play for seven key bills, including $442 billion made on smartphones and tablets. This is critical because a financial institution’s long-term profitability depends on providing digital banking services that compel customers to consolidate their financial activity and banking purchases rather than seek profitable loans and services from secondary FIs that compete on rates and fees. This report analyzes trends in the bill payment market; identifies why consumers typically choose FIs over paying billers directly or through third-party apps such as Mint Bills; and examines how to tailor upgrades for high-value customer segments such as the Moneyhawks^®.

Key questions addressed in this report:

• How much do Americans spend for key bills through FIs, directly at billers, or through third-party apps?
• How much is funneled through online or mobile channels compared with mail and other methods?
• How big is the mobile bill payment market?
• What feature upgrades and marketing messages are likely to have the greatest impact?
• How can FIs, billers, and third parties tailor their services to target specific segments of consumers such as Gen Y, Moneyhawks, Emergents, and Traditionalists?

The consumer data in this report is based primarily on information collected in a random-sample panel of 8,525 consumers in an April/May 2015 online survey. The margin of sampling error is ±1.27% at the 95% confidence level.

Bill dollar volume data is based on information collected in a random-sample panel of 3,509 consumers in a November 2013 online survey, the last year for which Javelin has bill size data. The margin of sampling error is ±1.65 percentage points at the 95% confidence level. For market sizing purposes, Javelin found mean bill sizes by income category and transferred those means to the 2015 survey listed above.

The Moneyhawks Segmentation

Javelin’s retail banking customer segmentation incorporates scores of variables regarding demographics, banking behavior, and attitudes about relationships with FIs. Unlike approaches that use predetermined if/then rules regarding specific behaviors or demographic characteristics, Javelin employs sophisticated multivariate tools to develop a holistic segmentation based on multiple dimensions, resulting in homogeneous segments that differ from one another on such diverse criteria as how consumers prefer to interact with their FIs, what products and technologies they use, their needs and attitudes, and their financial value.