Regardless of your budget, three building blocks are vital for all epayments programs. An optional fourth area devoted to small and microbusinesses should be added if you target those segments.

1.Research & Planning Zone: Educational area to learn the benefits of epayments and how best to use them. This is free area is a cost center designed for customer service and sales support.

2.Payment & Transaction Zone: Users log in to process and track various types of epayments. You may want to consider at least two service levels: one for new and/or basic users and the other for power users . A mix of subscription and per-use fees could make this zone a significant profit center.

3. Security & Privacy Zone: A place for customers to learn about security issues and use tools such as online credit report access. Although primarily a customer service center, optional fee-based services could cover costs and transform it into a profit center.

4. (Optional) Small Business Zone: A place for small and microbusinesses to find electronic solutions for billing (accounts receivable) and payment needs (accounts payable). Ideally, financial institutions will deliver integrated solutions encompassing both.

Budget Considerations

Not everyone has a large budget to put towards an expanded epayments program, but everyone can make improvements, even if only to post clearer and more extensive educational material. A summer intern, or branch volunteer, could provide additional material for your Web site at a low cost. The table on page 13 outlines recommended features for budgets of $1,000 to more than $1,000,000.

Target Markets

Retail banks have two primary targets, consumers and small businesses, each with distinct needs. Small businesses will pay much more for tools that help manage receivables and payables. But businesses are slower to adopt new online methods due to their prior investments in accounting procedures and software.

Consumers simply want to get their bills paid with the least amount of work while still maintaining control. Although price is important, they have demonstrated a willingness to pay for services, especially when the costs are embedded in balance requirements or higher rates on loan balances.

ePayments Target Market Segments

Source: Online Banking Report, 4/02

Credit card issuers: The 800-pound guerillas of online bill payment?

Credit card issuers may have the inside track to gaining a critical mass of online bill-payment users. By leveraging their captive audience of account-management users¹, they can move into total bill management with the credit card as the linchpin and email as the marketing vehicle. Here is how a well-integrated program could work:

1.       Cardholder receives a reminder email 5 days before the credit card due date.

2.       Cardholder logs into card account and settles current credit card bill.

3.       Cardholder is asked if they would like to pay any other credit card bills (e.g., balance transfer) with no signup required.

4.       Cardholders responding yes are presented a simple form; they simply type in issuer name, account number, and payment amount; the payment is then posted using existing balance transfer mechanisms.

5.       Finally, cardholders could be presented with an opportunity to pay any bill, using either a cash advance or a regular purchase transaction with a grace period.²

Provident does a good job putting it all together. Its “About Online Bill Pay” discusses four consumer features/benefits: ebills, payment customization, email payments, and payment status. Check Free also gets a little free publicity with its “guaranteed” logo on the bottom.

¹According to Gartner, nearly 25 million U.S. adults were logging in to their credit card statement at year-end 2001 .

²For the limited number of merchants that accept credit card payment for bills, the card company would process a regular credit card purchase to settle the bill, earning interchange revenue on the transaction; for all other payments a check or ACH would be used to pay the biller. Card issuers would have the option of processing these payments as regular purchase transactions, cash advances, or special transactions with no fee, but also no grace period.