Each year, banks spend billions of dollars on technology. Yet, despite investing heavily in high-tech improvements, financial services executives might be shocked to learn that – when it comes to paying bills – Americans are still likely to lean on traditional payment methods to settle up their financial affairs. Last year Americans wrote 2.3 billion checks, reached for their debit cards 2.5 billion times, and their credit cards 2.6 billion times to pay their bills.
These are just some of the findings from BillGO’s How Americans Pay Their Bills: Sizing Bill Pay Channels and Methods, a sweeping, national study conducted by Aite Group during Q2, 2020.
The 100-plus page report delivers many eye-openers.
For instance, right now U.S. consumers spend nearly $4.6B each year meeting their financial obligations – a list that includes everything from mortgage and rent payments, to grocery bills, to automobile and utility payments to subscriptions. Altogether, Americans pay 15.5 billion bills annually.
But here is where banking executives – who might be confident in the quality of bill payment services they offer their customers – should take note: most Americans reject bill payment offerings from their financial institutions. The percentage of online payments made on biller sites has grown from 62% of online bills in 2010 to 76% in 2020, at the expense of bank bill pay, which declined from 38% in 2010 to 22% in 2020.
This is not to suggest that banks are missing the digital mark. On the contrary, many innovative banks are embracing concepts like digital-first banking because, frankly, they recognize Gen Z – which has a $45 billion spending capacity – expects a comprehensive mobile banking experience.
All of this leaves us to wonder why so many U.S. consumers spurn bank bill pay? The answer is because bank bill-payment technology is widely perceived as cumbersome, lacking payment options, and offering little visibility into payment insights, such as when a payment is received by the biller. Nearly 80% of Gen X/Gen Z consumers prefer third-party bill payment systems. (Don’t assume it’s a generational thing: so do 71% of Seniors and Boomers).
As a result, consumers now struggle with a decentralized bill pay system that forces them to keep track of their bills and expenses. This has impacted both the consumer’s ability to achieve financial wellness and banks’ capacity to build engaging customer relationships.
What do these findings tell us?
It’s simple: a decade of cutting-edge digital innovation has conditioned consumers to expect nearly-instantaneous, frictionless interaction with their financial institutions and billers. Yes, consumers expect speed, but they also demand transparency and convenience from the institutions they do business with.
But that is not all: Apple, Uber, and dozens of other top-tier tech companies have made user experience an obsession. This obsession has convinced consumers to expect the same from all businesses – including financial institutions. When paying bills, they expect a flawless interface, pleasant UX, and real-time confirmation that their bills have been paid. Should something go wrong along the way, they expect financial institutions to notify them immediately – and make things right.
The market cries out for new bill payment solutions that improve the customer experience and deliver better digital consumer experiences and interactions. FIs and payment providers must deploy innovative bill and subscription payment solutions that offer same-day, frictionless processing, exceptional UX, and centralized bill payments. Imagine how such a centralized service requiring only one sign-on and delivering a comprehensive view of all bill payment activities would resonate with consumers who now must negotiate the multiple sign-ons, multiple account numbers, and a host of security issues when using biller-direct models.
Today’s consumers are highly sophisticated. That is where the benchmark is. The FIs that recognize it and respond by meeting customer expectations and delivering a smooth, seamless, and transparent experience will be the ones that thrive in tomorrow’s bill-paying landscape.