Despite numerous studies that say people who pay bills online prefer to pay them all at a single Web site, the fact remains that by a wide margin more of them are going directly to biller sites.
And though banks continue to trumpet the convenience of using one site, the billers can offer something that banks cannot match: immediate credit.
Customers who are close to their due dates can typically make a payment at the biller sites, and though the transaction may not settle for several days, their accounts will often be credited immediately. Not only does this help consumers avoid late fees, it also means they can keep the funds in their bank accounts for several additional days.
Several banking executives addressed the topic last week at a payments roundtable in New York sponsored by the research firm Celent Communications LLC, and acknowledged that it is a concern.
"I believe that as an industry as a whole we need to go to same-day settlement" for online bill payment, said Armand Abhari, a senior vice president at Wells Fargo & Co. and its head of online bill payment.
Sanjay Gupta, the e-commerce executive at Bank of America Corp., said B of A expects to make progress soon on shortening the time to get these payments posted. "I don't think we're talking about something more than a year out before we start to see that change," he said.
And a B of A spokeswoman said that the company started to offer same-day credits on some bill payments in June.
Such a shift could be key to fostering widespread consumer adoption, and until banks can offer same-day crediting, people will probably stick with the biller-direct model, said Linda Garner, the senior vice president of information delivery systems at U.S. Bank unit of Minneapolis' U.S. Bancorp. For true adoption of online bill-pay at bank sites "to happen, banks have to offer that same day or next day capability," she said.
The problem of delayed crediting can be especially nettlesome - and hard to explain to the customer - when the biller is an arm of the customer's bank, for example when a customer is paying their credit card or a mortgage bill through their bank's online bill-pay site.
"It's unacceptable from a customer-experience perspective" not to provide faster credit for those payments, Mr. Abhari said. "Especially your internals; you have to get those credited in a day or so."
Still, vendors say they are making headway with both billers and their banks. Metavante Corp. has begun to offer real-time or same-day posting through its Spectrum bill-payment network.
Ed McLaughlin, a vice president at Metavante, the technology unit of the Milwaukee banking company Marshall & Ilsley Corp., said Metavante's bank customers can offer this capability to consumers who pay bills through the banks' Web sites, but only for some billers. He would not say which banks, nor would he say how many billers will accept this faster crediting.
"The key is the biller's processing cycle," Mr. McLaughlin said in an interview. He said Metavante usually works with its bank customers' treasury services departments to support the service for their corporate clients.
Last-minute "panic payments" can be 3% to 5% of a biller's monthly volume, Mr. McLaughlin said. "It's important to consumers, so that's why we're working on it. A lot of the groundwork has been laid. What we need to do is to greatly expand the number of institutions" that offer the capability.
CheckFree Corp. of Atlanta - the leading vendor of consolidated e-billing services and the provider to Bank of America and U.S. Bank, among others - announced plans in November 2003 to provide accelerated payment processing in the CheckFree Web 4.0 version of its service.
In June, CheckFree bought American Payment Systems Inc. of New Haven, Conn., whose walk-in bill-payment stores had a reporting system that can tie in directly with the billers' accounts receivable systems.
The American Payment system could be used to let consumers pay bills in person at the stores and receive credit from the billers immediately. Some observers say that if CheckFree can offer this capability to walk-in customers, they might also be able to connect banks' online bill-payment services as well, even if the transaction does not settle for several days.
Matt Lewis, a senior vice president at CheckFree, said that by next June, a majority of the electronic payments made through its network will be credited the same day or the next day, though he wouldn't say how many receive that treatment today. CheckFree now executes 78% of its payments electronically.
But even if banks do begin to implement same-day crediting capabilities, they still must transmit that information to the biller.
Gwen Bezard, an analyst at Celent, said this could pose a problem, because corporate billing systems are typically large, complicated packages, designed to produce monthly statements on paper. Many of them are not set up to receive real-time notices, he said. "The main barrier is on the biller side. In many cases their systems do not allow faster processing."
That is why newer companies, such as mobile telephone service providers, are more likely than utility companies to have systems that can offer faster credit. "Upgrading those systems requires a massive investment," Mr. Bezard said.
Some observers believe that banks face an uphill struggle to overcome the head start that biller-direct has gotten. Even though consumers say they would prefer to pay bills online from a consolidated site, many more still use the biller's site to execute those payments, partly due to the faster processing and partly, at this point, out of habit.
Terence Roche, a principal at Cornerstone Advisors Inc. of Scottsdale, Ariz., said online bill payment is one area where the "first-mover advantage" lingers.
"Whatever works first is going to get traction," Mr. Roche said in an interview. "Biller-direct got traction because it worked. It didn't matter that the banks were working on the big picture. What works first often becomes the standard."
