Report: Online Bill Payment to Reach $1B by 2004

Research firm International Data Corp. (IDC) is projecting that online bill presentment and payment will generate more than $1 billion (US$) in worldwide revenues by 2004.

“Buying products over the Internet with a credit card has become a common occurrence, but viewing the credit card bill itself and submitting a payment to settle it electronically is still considered a novelty,” IDC eCommerce Software Research Manager Albert Pang said.

Pang added, however, that the dynamic will change “as electronic bill presentment and payment products become more sophisticated with the inclusion of features such as secure e-mail delivery and as the technology becomes increasingly implemented in business-to-business e-commerce.”

Growing Momentum

IDC says that online bill presentment and payment will continue to build on the momentum that began in 1999, when it generated $32 million in revenues, up 540 percent from the previous year. IDC predicts the market will grow 100 percent per year over the next four years.

The majority of the revenue will come from transaction fees, IDC says, which the company believes will jump from $700,000 in 1999 to $825 million worldwide in 2004.

“Much of this growth is based on the potential use of electronic bill presentment and payment to replace the sheer number of paper bills circulated every year,” Pang said. In the United States, 1.5 billion bills are sent to consumers each month, reaching 18 billion transactions and generating nearly $6 billion in processing fees a year, IDC says.

Competition Abounds

Whether the many online bill payment companies that are already trying to lure consumers into the world of cyber-finances will benefit from this expected boom remains to be seen, IDC says. More than two dozen companies offer online bill payment and processing services, but most focus on providing software and transaction services to third parties, such as banks, portals, multi-retailer shopping sites or B2B marketplaces.

The most visible online bill payment service for consumers is CheckFree. In addition to offering direct bill payment services through its Web site, the company is also courting businesses that want to use its software and processing services for their own billing projects.

For example, CheckFree recently announced that it will team up with application service provider Derivion to offer an e-billing service to small and medium-sized companies. Other well known bill payment software companies include Billserv, BlueGill and Just in Time.

Those targeting consumers instead of businesses will be competing for an extremely cautious customer base, IDC says. According to Pang, “Consumers initially will be resistant to this technology. People tend to be overly cautious when it comes to embracing new ways to handle their personal finances.”