A new Javelin Strategy & Research report issued today – “2010 Online Banking and Bill Payment Forecast: How to Cut $8.3 Billion in Costs Through Channel Conversion” – finds that the banking industry can save nearly $8.3 billion dollars by converting non-online customers to online banking and bill pay – at a cost savings of $167 per customer – and by convincing current online-banking customers to get the answers to half their customer-service questions online rather than through branches and call centers – at a cost savings of $8 per customer.

About 7 out of 10 households pay bills online through banks and billers, but regular bill-payers show a strong preference for paying more types of bills through banks rather than at a biller site. Online-banking holdouts are starting to get more comfortable with the idea of banking online, which gives opportunistic financial institutions an opening to realize these savings. In 2010 – versus 2009 – non-online customers were less likely to say they do not find online banking valuable and showed less preference for dealing directly with a person and markedly less fear about unauthorized access to an online account. The relevance of online banking is expected to increase further as consumers’ expectations for always-on, real-time control grows, regulators prod financial institutions to provide more effective ways to help consumers monitor and manage their money and technological innovations make online banking simpler and more practical.

“Online banking and bill pay are at a crossroads and FIs and billers who do not want to stagnate must upgrade in order to entice more customers to bank and pay bills online,” said James Van Dyke, President & Founder. “The issue is most acute for smaller regional and community banks, which lag far behind giant banks; larger regional banks and credit unions and have the most to gain by upgrading.” Bank of America and Citibank have a higher proportion of customers who regularly view bills online, with U.S. Bank and JP Morgan Chase right behind.

The Javelin 2010 Online Banking and Bill Payment Forecast report provides specifics on how to trim operational costs and boost fee revenues, includes five-year forecasts for online banking, viewing bills and paying bills at both bank sites and biller sites, discusses online-banking and bill-pay trends and appraises the state of online banking and bill pay by FI size.

Selected Key Report Findings – 2010 Online Banking and Bill Payment Forecast

• Nearly 8 out of 10 households bank online, but adoption and usage have leveled off.
• Online-banking customers own more financial products, which presents the opportunity for FIs to deepen customer relationships by cross-selling additional products.
• Household managers who bank with smaller regional banks and community banks are less likely to log in to online banking on a monthly basis and are more likely to pay bills by check.
• Gen Y consumers prefer to pay bills – except for their mortgage – directly at biller sites.

“Consumers see benefits to viewing and paying bills at both bank and biller sites, but bank bill pay has more momentum and will grow faster,” said Mark Schwanhausser, Senior Analyst, Multi-Channel Financial Services. “What will persuade household managers to view and pay more bills online? They want financial incentives such as better rates and one-time discounts. What can banks do? Listen to their customers, upgrade their systems and make it easy for customers to view and pay their bills online. This will enable banks to deepen relationships with their customers and keep them coming back to online banking.”

Javelin’s 2010 Online Banking and Bill Payment Forecast report is based mainly on data collected online from a random-sample panel of 5,211 households in March 2010, which was representative of the overall U.S. online population. Longitudinal comparisons are based on data collected online from random-sample panels of 2,779 respondents in April 2009, 2,350 households in March 2008, 2,800 households in March 2007, 3,215 households in March 2006 and 3,000 households in March 2005. Data regarding expedited payments draws on a national representative online survey of 1,995 households in August 2010. Secondary data from public sources was also incorporated into the forecasts.

About Javelin Strategy & Research

Javelin provides superior direction on key facts and forces that materially determine the success of customer-facing financial services, payments and security initiatives. Our advantages are rigorous process, independent position and expert people.

Note: To arrange an interview with a research analyst and/or view available research (available to qualified members of the media), please contact Liz Travers at (925) 225-9100 ext. 31 or etravers@javelinstrategy.com.