Table 1

Historical U.S. Payment Transaction Volume by Type: 1995 to 2000
billions of transactions

Source: Federal Reserve Bank of Chicago, 12/01

(1) Bill payments authorized online are generally paid via ACH or paper check so they would be included in the categories above; a minority paid internally through the bank provider (e.g., on-us transactions) would not be included in the above totals    (2) Not a payment transaction, volume would be included in currency totals   (3)

Table 2a

Total U.S. Consumer* Electronic Payments by Type, Year 2000

Source:  National Automated Clearing House Association (NACHA), 2001; eMarketer’s ePayments Report, 11/01 (see enclosed flyer); Federal Reserve, 11/01

*Credit card and bill payment totals include some business activity

(1) OBR estimate +/- 33%; most online bill payments are made with credit cards or ACH, so they are also included in the totals below

(2) The recent Fed study identified 25.2 billion checks worth $9.2 trillion written by consumers; the study also found 6.0 billion checks worth $6.6 trillion from unknown parties; assuming 50% of the unknown checks were written by consumers, we estimate the total number of consumer checks is 28 billion, worth $12.5 trillion, plus or minus 20%; there is also some controversy over the methodology used in the Fed study, with at least one analyst claiming the Fed understated check volumes by 10 to 15 billion (see American Banker, “Fed Study Fails To Back Up Claims On Check Volume,” Jan. 18, 2002, Letter to the Editor from H. Leon Majors 3d, President, ESP Consulting, paymentsresearch.com

Epayments Market Size

Until 2001, the ebilling and payments market grew at a much slower pace than most analysts expected. But as millions of users get their first taste of easy-to-use services such as PayPal and value-added credit card account management such as Citibank’s Cardmember Central, we expect the entire market to grow quite rapidly in popularity (Table 12, below). Within 10 years, 3 billion bills, 16% of the total, will be paid online. Most of those bills will be completely digital, from bill delivery/presentment, through payment and posting.

Table 2b
Online Payments Forecast
millions of U.S. households

Source: Online Banking Report, 2/02

1)        Household used any online financial account access and/or non-POS online payment service within the past 90 days, (+/- 20%)

2)        Includes any non-POS (point-of-sale) payment initiated online; does not include preauthorized debits or recurring credit card payments unless they were initiated online

3)        Pays bills to one or more billers at a third-party site (not the biller’s site); the third party can be a bank, non-bank, Web site, Quicken, or Money; does not view the bill online (+/- 25%)

4)        Views and pays bills directly at the biller’s Web site, or pays directly via a response to an email message from the biller (+/- 35%)

5)        Views and pays bills at a third party’s site, or pays via the third party in response to an email message from the third party; the third party can be a bank, non-bank, Web site, Quicken, or Money; includes scan-and-pay volume at PayTrust and others (+/- 35%)

6)        “Notational funds transfer”(thanks to Gary Craft for the term), meaning the transfer of funds to any person or business using email notification and third-party settlement via on-us, ACH, or credit card (most of the volume is through PayPal); excludes point-of-sale payments (+/- 35%)

7)        Includes other non-POS payments initiated online, which often involve fulfillment with a paper money order, e.g., BidPay/Western Union, Wells Fargo cashiers checks, etc. (+/- 75%)

8)        Households can use more than one online payment type (+/- 25%)

Table 3

Forrester’s Online Bill Payment Market Size Estimates: 1999 to 2005 (mid-year)

millions of U.S. households

Source: Forrester Research, Bill Payment Goes Mainstream, by Kenneth Clemmer, 7/01; Breaking the EBPP Stalemate, by Catherine Graeber, 11/01

Table 4

Online Banking and Payment Segments, March 2001

percent of total U.S. online consumers

Source: Forrester Research, Bill Payment Goes Mainstream, by Kenneth Clemmer, 7/01

Table 5

Number of Online Bills Paid by Tenure

monthly activity per U.S. household

Source: Forrester Research, Bill Payment Goes Mainstream, by Kenneth Clemmer, 7/01

*Forrester’s research found that online households paid an average of 11 bills per month; most other research pegs the number somewhat higher, in the 12 to 15 per month range (see also Table 6)

Table 6

U.S. Consumer Bills by Industry

number of bills per year

Source: Tower Group, 2001 as cited in eMarketer’s ePayments Report, 11/01 (see enclosed flyer)

Table 7

Jupiter’s Online Bill Payment and Presentment Forecast: 2001 to 2006

millions of households*

Source: Jupiter Communications, 12/13/01, PAY01-CO6

*Households can only be in one pay category or one view category, i.e., if they view a single bill online they are in the “bill view and pay” category even if they pay 10 other bills without viewing; same goes for those viewing bills, if they pay a single bill online the household is classified as “bill view and pay”

Now that most Internet users have a number of account statements to view online, they have become voracious users of the service. Gartner says that at year-end, 32 million users viewed statements online compared to 20 million last year. Furthermore, they predict that in less than four years (year-end 2005), nearly 100 million users will manage accounts online, nearly 50% of the U.S. adult population (see Table 8, below). Much of the current activity is with online credit card accounts, with nearly 26 million users, 2.5 times the 11 million consumers managing other types of bills online.

Many billers send email reminders when a new statement posts to the Web. The emails usually contain a link directly to the user’s online account (login required). In the future, we believe more and more billers will provide summaries via email, satisfying the information needs of most customers.

Security Note: To thwart hackers that use email spoofs or other methods to gather usernames and passwords, account numbers and sensitive personal data such as social security number, should be masked, even within password protected billing sites.

Table 8
Gartner Online Statement Forecast (U.S.)

millions of users (NOT households)

Source: Gartner Group, SAP-14-8984, 12/3/01            *Columns do not add due to overlap of those accessing both types of accounts online, see last row

Table 9
OBR Online Account Management and Bill Presentment Forecast (U.S.)

Source: Online Banking Report estimates, 11/01,+/- 20% in 2001, +/- 40% in future years

(1)       Includes credit cards, loans, insurance, utilities, and telecom

(2)       Includes accounts with a financial value such checking, investments, frequent flyer, etc.; excludes accounts at online retailers such as Amazon; OBR estimate +/- 33%

(3)       Excludes bills that are made available online, but are not viewed by the end-user, OBR estimate +/- 40%

(4)       Includes non-POS payments through PayPal, bills paid directly at biller sites (including credit card bills), bills paid online that are received through snail mail, and bills paid automatically by a third party, such as PayTrust; does not include preauthorized debit; Derivation: 2001 – an estimated 10 to 12 million users will pay about 3 bills per month, for a total of 400 million payment transactions; 2006 – 25 to 30 million users will pay 4 to 5 bills per month, for 1.5 billion total transactions; 2011 – 30 to 35 million users will pay 7 to 8 bills per month for 3 billion total transactions

Table 10
 Future Viewing Locations of Online Billing Statements (U.S.)¹

millions of bills viewed by consumers and small businesses

Source: Online Banking Report, 11/01; +/- 67%

1.   Only includes bills received (aka presented) by the user via the given method, the bill does not necessarily have to be paid by the same method; this is a purely speculative estimate provided as an illustration of how many ways the bill presentment pie will be divided; complex and unpredictable market forces will shape the actual results; does not include electronic payment of bills received via snail mail; if a bill is viewed in more then one electronic form, e.g., in an email from the biller and at a bank Web site, only the first view is counted in the above totals; maximum of 1 view counted each month even if user logs in and looks at a bill multiple times; includes financial institutions if they are the originator of the bill, e.g., credit card issuers

2.   Includes users who receive an email bill summary and do NOT click through to view bills

3.   We count users of aggregation services by where they first enter the system; e.g., if they access their aggregated bills through Myciti, they are counted as financial institution user even though their bills are aggregated at Yodlee; only users entering the system directly through Yodlee are counted in the “aggregation specialist” column

4.   Only includes users viewing third-party bills at their financial institution; does not include viewing the financial institution’s own bills which are included in “biller direct” categories above