2009 Online Banking and Bill Payment Forecast: Active Users Grow While Bank Bill Pay Overtakes Biller Direct

2009 Online Banking and Bill Payment Forecast
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Overview

Financial institutions need to be aware that in the midst of this banking crisis, consumers are unusually sensitive to fees and are prone to switching banks. Seven years of Javelin consumer survey data underscore the necessity of designing banking products and services to serve the customers’ craving for financial control, as 8 out of 10 online households now bank online. The industry has made laudable strides in bringing customers to their Web sites to bank and pay bills. For the first time, slightly more consumers paid at bank sites than at biller-direct sites. Yet many banks and credit unions have been slow to upgrade, creating a wide gap in online capabilities and usage between the nation’s four biggest banks – Bank of America, Citi, JPMorgan Chase and Wells Fargo – and smaller regional, community banks and credit unions.

Primary Questions

  • How fast will online banking and bill-pay adoption grow over the next five years??
  • How active are users of online-banking and bill-pay services?
  • Can banks use online-banking and bill-pay services to boost revenues, increase customer loyalty, reduce costs and create cross-selling opportunities?
  • Can mid-size banks and credit unions boost the performance of their online-banking services to better compete with giant national financial institutions?
  • What services can make online banking more appealing to consumers?

Methodology

This report is based mainly on data collected online from a random-sample panel of 2,779 households in April 2009. The survey targeted respondents based on representative proportions of gender, age and income compared to the overall U.S. online population. Overall margin of sampling error is ±1.86% at the 95% confidence level.

This report is additionally based on data collected online from a random sample of 2,350 households in March 2008. The survey targeted respondents based on representative proportions of gender, age and income compared to the overall U.S. online population. Overall margin of sampling error is ±2.02 percentage points at the 95% confidence level.

It is also based on data collected online from a random sample of 2,714 consumers in March 2008 and 2,800 respondents in March 2007. The surveys targeted respondents based on representative proportions of gender, age and income compared to the overall U.S. online population. Overall margin of sampling error is ±1.88 percentage points at the 95% confidence level and ±1.85% at the 95% confidence level, respectively.

This report is also based on data collected through a telephone-CATI survey from a random-sample panel of 4,784 respondents in October 2008, including 487 identity fraud victims. The survey targeted respondents based on representative proportions of gender, age and income compared to the overall U.S. online population. Overall margin of sampling error is ±1.4 percentage points at the 95% confidence level and ±4.4% at the 95% confidence level for the identity fraud victims.

Finally, it was based on data collected online from a random sample of 2,339 consumers in September 2008. The survey targeted respondents based on representative proportions of gender, age and income compared to the overall U.S. online population. Overall margin of sampling error is ±2.03 percentage points at the 95% confidence level.

Secondary data from public sources such as the U.S. Census Bureau and the Bureau of Labor Statistics was incorporated into the forecasts.

The majority of Javelin data for online banking and bill pay is based upon “households” vs. “individual consumers.” This is a typical way of presenting online-banking and bill-payment data because bills are normally paid on a per-household basis. In 2009, the U.S. population was estimated to comprise 306 million people. That includes 232 million adults, 118 million households, and 86 million households that are online. On average, there are about 2.6 people per household. Javelin also collects online-banking data using a base of all consumers for comparison purposes.

The analysis of financial institutions by size was based on where households maintain their primary banking relationship. Institutions were divided into four categories based on total deposits as of Dec. 31, 2008, according to rankings by American Banker.

  • Giant national banks: Deposits greater than $750 billion (JPMorgan Chase, Bank of America, Wells Fargo and Citi).
  • Large regional banks: From $30 billion to $200 billion in deposits.
  • Regional or community banks: Less than $30 billion in deposits.
  • Credit unions: All credit unions, except for Navy Federal Credit Union, which was classified as a large regional based on deposits

For the first time this year, Javelin collected “last 90 day“ figures for benchmarking purposes. These are shown in the Appendices, under Figures 34 and 36, pages 61 and 62 , respectively.

Preview of 2009 Online Banking and Bill Payments Forecast Report by Mark Schwanhausser, Analyst, Multichannel Financial Services

Companies Mentioned

Bank of America Jwaala
CashEdge Metavante
Citi Mint
Digital Insight S1
Fiserv Wesabe
Geezeo Wells Fargo
Harland Financial Solutions Yodlee
JPMorgan Chase

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