This is how banks can use digital tools to stay ahead of a trillion-dollar opportunity in the bill pay market
Between housing costs, utilities, taxes, insurance, loans, and more, US adults paid an estimated $3.9 trillion in bills last year.
Business Insider Intelligence That market is growing slowly, but it’s changing fast — more than ever before, customers are moving away from paying bills via check or cash and toward paying online, either through their banks, the billers themselves, or using a third-party app.
Thanks to rising customer familiarity with digital payments, an increase in purchasing power among younger consumers more interested in digital bill pay, and a rise in digital payment options, nearly three-quarters of bills will be paid digitally by 2022, representing a big opportunity for players across the space.
In theory, banks should be in a great position to capitalize on this shift. Nearly all banks offer bill payment functionality, and it’s a popular feature. Issuers also boast an existing engaged digital user base, and make these payments secure. But that isn’t what’s happening — even as digital bill pay becomes more commonplace, banks are losing ground to billers and third-party players. And that’s not poised to change unless banks do, since issuer bill pay is least popular among the youngest customers, who will be the most important in the coming year.
For banks, then, that makes innovation important. Taking steps to grow bill pay’s share can be a tough sell for digital strategists and executives leading money movement at banks, and done wrong, it can be costly, since it often requires robust technological investments. But, if banks do it right, bill pay marks a strong opportunity to add and engage customers, and in turn, grow overall lifetime value while shrinking attrition.
Business Insider Intelligence has put together a detailed report that explains the US bill pay market, identifies the major inflection points for change and what’s driving it, and provides concrete strategies and recommendations for banks looking to improve their digital bill pay offerings.
Here are some key takeaways from the report:
- The bill pay market in the US, worth $3.9 trillion, is growing slowly. But digital bill payment volume is rising at a rapid clip — half of all bills are now digital, and that share will likely expand to over 75% by 2022.
- Customers find it easiest to pay their bills at their billers directly, either through one-off or recurring payments. Bank-based offerings are commonplace, but barebones, which means they fail to appeal to key demographics.
- Issuers should work to reclaim bill payment share, since bill pay is an effective engagement tool that can increase customer stickiness, grow lifetime status, and boost primary bank status.
- Banks need to make their offerings as secure and convenient as biller direct, market bill pay across channels, and build bill pay into digital money management functionality.
In full, the report:
- Sizes the US bill pay market, and estimates where it’s poised to go next.
- Evaluates the impact that digital will have on bill pay in the US and who is poised to capitalize on that shift.
- Identifies three key areas in which issuers can improve their bill pay offerings to gain share and explains why issuers are losing ground in these categories.
- Issues recommendations and defines concrete steps that banks can take as a means of gaining share back and reaping the benefits of digital bill pay engagement.