Study Finds One Appeal Of Electronic Payments-Consumer Can Pay Later

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Authors of an extensive, new study into the habits of consumer bill payers say they have found both compelling evidence and confirmation that consumers are increasingly turning to electronic methods to pay their bills and prefer to make those payments directly with their biller.

The study, said the parties that conducted it, also shows that consumers are turning to expedited payments to pay their many bills as close to the actual due date as possible and they have a variety of preferences for making those payments. For example, while payment by phone is still the principal method of expedited payment, a growing number of consumers prefer to use the biller's direct web site to make payments.

The findings were uncovered as part of Fort Knox National's second annual consumer preference study. Fort Knox National Co., a provider of electronic payment solutions, commissioned the second annual Bill Payments and Expedited Payments Survey from Crone Consulting and Javelin Strategy & Research. The intent of the study was to identify key motivations and trends in the use of electronic payment services.

"Do not underestimate the value perceived by consumers in a biller-direct solution. Consumers are expressing clear preferences for how they want to pay their bills. By understanding payer behaviors, companies can develop strategies that support their overall profitability and customer relationship management objectives," said Paul Flanigan, Fort Knox National Co.'s chief marketing officer. "Although bank-based consolidator and biller direct payment channels are both high in preference, when you combine all the biller direct payment options, it is a compelling element that two-thirds of bill payments are going through billers' channels."

Paying At The Last Minute

According to the analysis, the study also points to an increase in expedited (last minute) bill payment. "We are seeing the impact of cycle billing in the survey results," said Richard Crone of Crone Consulting. "Cycle billing complicates personal finances by spreading payment due dates over the course of the month. The date on which consumers pay their bills has become a critical personal financial management issue."

According to the study, cash flow has become a factor of greater importance in the timing of payments, growing from 48% to 54%.

The study divulged a number of explanations for the consumer trend toward utilizing expedited payments to pay billers directly, said its authors. Avoiding "late fees" was again the top overall reason cited for using expedited payments, increasing from 64% to 72% year over year. Consumers also indicated a strong desire to preserve credit ratings. The widespread and long-time use of late fees by billers has established a fundamental demand and value proposition for expedited payments and associated convenience fees. Billers are motivated by these indicators to provide relief through the option of expedited payments. Another significant point brought to view by the study was the high percentage of consumers indicating that they are willing to pay a convenience fee of $1 to $5 in order to avoid a late fee or any potential negative impact to their credit rating.

Demonstrating that a majority of consumers are now embracing technology to make expedited payments, 44% were shown to be made by phone, while Internet usage increased from 31% to 40%, according to the research findings. Looking at the entire body of research, only 8% of those making expedited payments do so by rush delivery or overnight mail; only 6% use walk-up money transfer and/or wire services.

Among the other findings:

* Checks and Automated Clearing House (ACH) payments are the most common payments.

* More than half of respondents have paid bills through biller websites within the last six months. Consumers indicate their main reasons for using these biller web sites include saving time/money, speed of delivery and immediate verification of payment. Some 57% of survey respondents regularly use a biller's website to make payments, indicating there is further opportunity to grow.

* U.S. mail ranked as the most preferred method for paying bills (28%) followed by biller direct (25%) and bank web sites (22%).

* The user base for expedited payment remains fairly constant, with one in five respondents using expedited payments in the last 12 months, however the frequency of usage of expedited payments is growing.

* Phone is still the most common channel for expedited payments.

* Expedited payments are most commonly used for credit cards, followed by utilities, car and mortgage loans, phone and cable/dish services and insurance.

* Respondents were most willing to pay for expedited payments for mortgage and car loans, followed by credit card, insurance, utilities and telecommunications services.

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