Of the two changes that Bank One Corp. plans for its online bill payment service next month, one of them - dropping the monthly fee - is in line with an industry trend, and the other - eliminating bill presentment - is contrarian.
The Chicago company began notifying online banking customers by e-mail last Wednesday that as of Aug. 25 it would no longer offer bill presentment. And as of Aug. 1 online bill payment, which currently costs $4.95 a month, will be free for all customers except those with the most basic accounts.
Several large banks, most notably Bank of America Corp., have drawn attention and picked up online banking customers by eliminating the fee for e-bill pay.
But at the same time most banks have high hopes for online bill presentment, which has lagged online bill payment in popularity largely because of the logistical difficulties involved in getting myriad corporate billers to deliver invoices. Bank of America offers online bill presentment through its arrangement with CheckFree Corp. and says the service is popular.
Not so at Bank One, which says that a minority of e-billing customers use the presentment piece of the service.
"We are dropping online bill presentment, primarily because we don't have enough customer demand for it," said spokeswoman Calmetta Coleman. "And we are going to take the money we had been spending on presentment and invest it into our online bill pay service, which will be free."
Though Bank One would not say exactly how many people have been using the presentment service, Ms. Coleman said it is a "really small" number.
Others may be having a similar experience, but the prevailing sentiment is that presentment's day will come and that the service will be instrumental in popularizing Web banking. Some studies show that users of presentment become better banking customers.
"I'm really shocked that Bank One is abandoning support for presentment right now," said James Van Dyke, the founder and principal of Javelin Strategies and Research in Pleasanton, Calif. "I think it's going to hurt them in the long run."
He added: "We are just getting to the point where there is critical mass for presentment. I think their timing is really horrible."
Ms. Coleman said Bank One hopes that getting rid of the bill-pay fee will help it get more of its 1.9 million e-banking customers to use the service. "Customers who use online bill pay are more likely to maintain their relationship with us and more likely to have a deeper relationship with the bank," she said.
There is ample evidence that bill-pay users are sensitive to fees and that they form closer bonds with their bank. A year after Bank of America eliminated monthly fees it said that 65% more customers were using the service. The newer customers tended to be profitable and many of them wound up buying more products, B of A said.
The Charlotte company says it has also had high growth for online bill presentment and that the service has aided adoption of bill pay.
"Customers tell us they like presentment because it is easier for them to see their bills and to pay them in one place. It mimics real life," said Stephanie Smith, the senior vice president for Bank of America's online services and products group. "We think it's one of the reasons our bill-pay program has grown no much over the last year."
Carl Rutstein, a vice president and partner with Boston Consulting Group of London, said customers using online bill pay typically become 40% more profitable to a bank within a year of enrolling for the service. This gain comes from customers' carrying higher balances in the accounts they use to pay bills, and even more important, from buying more banking services.
"Bill-pay customers are more likely to do the things you like," Mr. Rutstein said.
That the service brings in the best customers is not the only reason for this. "This is a cause-and-effect," said Chris Musto, a vice president for research at consulting firm Gomez Inc. in Waltham, Mass. "Using bill-pay helps people become a better customer."
But if bill pay makes for more attractive customers, then electronic bill presentment, or e-bill, furthers that effect. Research from CheckFree demonstrates that customers using presentment are 86% more active than bill-pay customers who do not receive their statement electronically, and that they make 37% more payments.
That translates into more cross-selling opportunities and an even stronger relationship with the bank, according to Matt Lewis, a senior vice president for client development at the Norcross, Ga., company.
Because these customers are savvier Internet users, they make 43% fewer service requests, which saves the provider money. Mr. Lewis said this combination of higher sales potential and lower costs means consumers using presentment are more profitable. "Just adding e-bill [presentment] generates $96 per year for every customer using it."
Then again, since Bank One is getting little benefit to speak of from its bill presentment service, it might make sense for the company to try it again later when more billers are involved and more customers embrace online bill pay.
"Presentment has been the next big thing in online banking for about five years," Mr. Musto said. "If a bank is tired of waiting for presentment to take off, it's understandable."
Instead of waiting for that, he said, Bank One's plan indicates that it wants to sign up more bill-pay customers right now.
"Presentment is not something you need to hurry up with," Mr. Musto said. "Eventually, many customers will do it, but not a lot care to do so now. We're not saying don't do it, we're saying there are other things to do first."
And with Boston Consulting Group estimating that the just 4% of U.S. retail accounts are using online bill payment, Mr. Rutstein agreed that a bank's priority now should be signing up more people for bill-pay. "The benefits of eliminating the bill-pay fee will outweigh any customer dissatisfaction from losing presentment. This is probably hugely positive for Bank One," he said. "Presentment is not the big story right now."
But some say presentment is building momentum. CheckFree closed the 12-month period that ended March 30 with 842 financial institutions offering e-bills through it, nearly double the amount of a year earlier. The number of actual bills transmitted grew 285%; the company delivered nine million e-bills in March, it said.
"Growth is very strong," Mr. Lewis said.
