Banks may stand to lose a substantial amount of money due to the advent of electronic bill presentment and payment (EBPP), according to a recent study released by Killen & Associates.
The study, Consumer and Wholesale Banks: Electronic Bill Presentment and Payment Opportunities and Threats, found that as much as half of banksí repetitive billing revenues will be lost due to the increased efficiencies of EBPP. The study concluded that for banks to survive, they must lower their basic cost structure and up-sell and cross-sell products to add revenueóand soon.
"The change to EBPP will happen a great deal faster than most people think or expect," stated Michael Killen, president of the research firm. "Unlike other electronic activities, the underlying transaction basis of EBPP already exists. It is just a matter of electrifying established procedures. Success will depend on managing the transition to electronic presentment on the wholesale side of the bank, while managing the profitability of the business build-up on the retail side."
Killen also pointed out that the banks will have to look beyond the obvious industries (utilities, petroleum companies) for business segments that can profit from EBPP. "This cash cow may be all but dead. Their repetitive billing customers see the banks simply as payment conduits. In this highly comoditized Internet marketplace, the banksí value-added for billers is very marginal and banks primarily charge on a cost-plus-margin basis. Only those banks that embrace electronic delivery services for billing and presentment, as embodied by the Internet, will retain major accounts, though at reduced revenue levels for the basic services provided."
Killen offered this advice to wholesale banks: "Wholesale banks will have to develop additional services revenues óboth financial and non-financialó if they want to maintain profitability and remain in business. Those that donít embrace electronic delivery will find their wholesale customers moving to other lower cost service providers." Killen continued, "EBPP challenges the top banks to show just how good they are. It forces all banks to think along new lines. Some, such as Mellon, Wachovia, Citibank, Wells, and BofA (Nations Bank) will pass muster. Other, slower-moving financial institutions will not survive in their current form."
Killen & Associatesí study, Consumer and Wholesale Banks: Electronic Bill Presentment and Payment Opportunities and Threats, is the second in a set of three focused on the EBPP marketplace. For more information visit Killen & Associatesí Web site at http://killen.com.
