The slowing economy could offer banks an opportunity to earn fee income from expedited bill payment, a technology that vendors have tried to integrate with their other payment services but financial companies have been slow to adopt.
Bill-payment providers have long promoted these same-day payment capabilities, which typically carry a fee of $10 or less, as a better option to consumers than the late fees many billers impose.
Observers say that consumers' payment habits have been disrupted by the ailing economy, and that many people now see last-minute payments as a good tool to manage cash flow.
According to a survey published this week by Javelin Strategy and Research of Pleasanton, Calif., this change has opened a window for banks to add expedited payments to their bill-pay services.
Though the survey found that consumers typically adjust their spending in a slowdown, and will likely make fewer last-minute payments, the current economic situation is far from typical.
"Economic times are changing abruptly," James Van Dyke, Javelin's principal and founder, said in an interview Thursday. "Consumers spent on purchases or household needs in one economy and then they find the bill due in another. When that happens, you're essentially outliving your means."
Consumers will go to billers to make last-minute payments if they cannot get this service from banks, Mr. Van Dyke said, and "banks have been really sleepy to get into this game."
To spur adoption by banks, bill-payment vendors are offering them more options.
Online Resources Corp. of Chantilly, Va., integrated expedited payments into its bill-payment platform in April, after offering a test version for more than a year.
David Munger, Online Resources' vice president of product management for banking payment systems, said the integration has made the service available to clients of more than 500 financial institutions.
Since then, about 1% of the payments to billers that allow expedited payments have used the faster service. For billers with higher penalties for late payments, such as mortgage and credit card providers, it has been 2% to 3%, Mr. Munger said.
"We absolutely think the economy is having an impact on consumers' need for expedited payments," he said.
Consumers are also making same-day payments two or more days before the due date, when other methods would have gotten the payment to the biller on time, Mr. Munger said. These consumers are using the service as "insurance," he said, paying the fee to be absolutely certain that the payment arrives when it needs to.
One of the biggest factors in increased consumer adoption has been awareness, Mr. Munger said. He said Online Resources makes the expedited payments option readily visible and lets consumers choose it with a mouse-click as they make their normal bill payments. This makes the feature prominent without being intrusive, he said. He said Online Resources makes the expedited payments readily visible and lets consumers choose it with a mouse-click as they make their normal bill payments. This makes the feature prominent without being intrusive, he said.
Metavante Technologies Inc. of Milwaukee began offering expedited payments 18 months ago and says it has had a substantial pickup in bank adoption and consumer use over the past five months.
Jeff Lewis, the president of Metavante's ePayments Solutions division, said the number of expedited payments in June topped that of June 2007 by 6% to 10% (he would not provide the total number of expedited payments).
Metavante said that its bank clients typically see 10% to 20% of their customers use the service within the first year after making it available, depending on how it is priced, and 40% of users make more than one payment in the year.
Besides its same-day electronic payment capability, Metavante allows consumers to overnight a paper check to billers, an option that banks charge $15 to $25 to use. Though this costs more than an electronic payment, Mr. Lewis said, "there's a comfort level for consumers" who want to see an online record of a paper check.
Another factor driving expedited payment use is the increasing adoption of paperless bills, Mr. Lewis said. Billers, in an effort to attract consumers to their Web sites, put little information in the e-mail statements they send out. This makes e-mailed bills easier to forget than detailed paper bills, and some people find themselves scrambling to pay them at the last minute, he said.
"When there's not a consistent pattern for consumers, we don't think about it," he said.
Metavante plans to begin offering expedited payments from mobile phones in November, he said.
Last week the CheckFree unit of Fiserv Inc. announced a partnership with M-Com Inc., the U.S. unit of Mobile Commerce Ltd. of Auckland, New Zealand, to provide real-time payments from mobile phones.
Serge van Dam, Mobile Commerce's head of marketing, said this service appeals to consumers who may not pay many bills online. Mobile payment is ideal for "those consumers who typically are worse managers of their cash flow," he said. "The people who are heaviest users of the mobile channel … can least afford the penalty fees" and would be willing to pay for a less expensive expedited payment to avoid them.
Javelin's Mr. Van Dyke said: "I think this is a sustained opportunity. Banks have so few fee opportunities."