PayMyBills.com Web Site Opens For Business

Consumers, Big Billers Wary Of E-Payments

American Express Enters Crowded Net Banking Market

This month we’re featuring the latest developments in online bill payment services and online banking. Beyond the world of stock trading there is a lucrative market for handling checking accounts and bill payments for private individuals. Here are some of the new services and an analysis of the impact they will have on the Net and on the consumer, as well as some of caveats to the success of these new applications.

Idealab has launched an online personal bill management service called PayMyBills.com . The Web site, went live to the public on July 19. It offers online bill presentation and payment services to US users.

The firm says it has signed agreements with third-party companies, including Travelers Bond, a unit of Travelers Property Casualty and Imaging Acceptance Corp. to reach its goal of becoming the "premiere" bill management service for consumers.

Through this Web site users can arrange for their bills to be presented electronically, can view them and approve payment. After electronically paying the bills, the service debits the charge to the user’s checking account.

John T. Tedesco, PayMyBills.com’s chief executive officer (CEO), said, "The drudgery of receiving and opening bills, writing checks, buying stamps and filing papers is now a thing of the past."

PayMyBills.com says it is the first and only Internet bill management company to provide SafeWeb remote banking insurance from Travelers Property Casualty to its online customers. The insurance will offer protection against unauthorized online transactions and is included at no additional charge with every PayMyBills.com subscription. Each customer is protected up to $100,000 per loss.

Unlike most other e-bill systems, which tend to be tied to a user’s bank account and have only a limited number of billing organizations on their books, the service is designed to work with any US bank.

For those organizations which cannot present their bills electronically, the Web site operator has teamed with Imaging Acceptance Corp. which can scan in user’s bills for them.

The Web site service is located at http://www.paymybills.com.

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Both consumers and big billing companies remain reluctant to embrace electronic bill payments, but the reasons for their reluctance are wildly different, according to new research.

Consumers’ main concerns about electronic billing are privacy and convenience, while the top billing sectors - utilities, communications, insurance and credit-card issuers - are slow to adopt any kind of large-scale electronic payment system because they are funneling most of their technological resources into preparation for the so-called Year 2000 bug.

The sectors with the biggest potential impact on the electronic payments market - are withholding any major action on that front until their Y2K issues are resolved, said Beth Robertson, vice president and director of US billing and payments research at PSI Global, a research firm based in Tampa, Florida.

On the consumer front, PSI found that only about 7 percent of US households said they think they’ll be capable of sending and receiving bills via the Internet within the next six to 12 months. And 16 percent said they would be likely to embrace electronic billing in the next three years.

The study was based on a random sampling of 2,800 households, of which about 40 percent have Internet access, Robertson said. About half of the households PSI surveyed said retaining control of payment timing is an important factor in switching to an electronic payment system. About three-quarters said they still believe that the US Postal Service is a more reliable and secure way of receiving and paying bills.

Companies are working to alleviate such consumer concerns with the introduction of "e-wallet" systems, which store credit card information and share it on demand with online merchants. This lets customers make multiple purchases online without having to enter data every time they buy something.

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American Express, already known for its green charge cards, travelers checks and financial services, is adding checking accounts, certificates of deposit and other banking services with the launch of its own Internet-based bank. The company’s effort to spread its wings into the banking sector will see it flying against Bank One Corp.’s [NYSE:ONE] WingspanBank.com and a number of other concerns with Net-based bank operations.

American Express’ "Membership B@nking" will offer customers money market accounts, certificates of deposit (CDs), lines of credit, electronic bill payment and of course, checking accounts.

Besides its well-known brand, American Express is depending on a number of special offerings to promote its new online bank, with competitive interest rates topping the list.

The company’s annual percentage yield on money market accounts is currently at 5 percent - a figure American Express officials called "one of the highest in the country, and more than double the national average." Interest-bearing checking accounts earn 2 percent, versus an American Express-quoted national average of 1.08 percent.

Membership B@nking also offers free unlimited electronic bill payment and unlimited check-writing on all checking accounts, and ATM surcharge rebates to customers who open an interest-bearing checking account with the company.

Customer service is free and unlimited, with representatives available 7 days a week, 24 hours a day via telephone or e-mail.

Membership B@nking is located at http://www.americanexpress.com/banking on the Web. The bank’s services are also available via telephone, the US mail and ATMs, company officials added. A Web surfer does not need to have a relationship with American Express to open an account.

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American Express may be on the right track in promoting its own branded Internet-based bank. A recent study by London’s Center for the Study of Financial Innovation (CSFI) showed that trusted, global brands will enable as few as five Internet banks to dominate the sector.

The British think tank found that globalization will affect the number of survivors of an Internet bank war, and as larger banks extend their Net-based services to attract wealthy customers, smaller institutions will be displaced.

CSFI surveyed more than 400 bankers and other industry experts in the UK for its survey, the results of which were published earlier this year in Bank Marketing International and other banking-related publications. Most of those surveyed predicted a radical change in the Net banking landscape, which led CSFI to conclude that the role of brand names will become increasingly important.

One bank that has already learned that lesson is Chicago-based Bank One Corp. [NYSE:ONE], the fifth-largest banking concern. Advertising for its new WingspanBank.com has blanketed various forms of media since Bank One launched the initiative one month ago.

Internet users can get checking accounts, along with the ability to pay bills online, apply for loans, and make and manage investments. WingspanBank.com will also search other sources on the Internet to help users find the best deals on mortgages and insurance, Bank One also said.

Another factor that will help WingspanBank.com is its tie-in with the First USA credit-card operation, which is owned by Bank One. First USA already markets heavily within the electronic world, as evidenced by its March 1999 $500 million marketing pact with America Online.

But Internet-generated business makes up only a small part of First USA’s 70 million bank and credit card customers, officials said. John McCoy, Bank One’s president, acknowledged that a strong brand matters on the Internet. "Ask people how many companies sell books online, and they will mention only one, or maybe two," he said. "We will provide the support needed to build WingspanBank.com into another strong brand."

Besides advertising, Wingspan-Bank.com has also forged alliances with Web portals and other online players to help promote the new Net bank. The deals include exclusive marketing agreements for credit cards and/or other financial services with America Online, Broadcast.com, CFN, Cnet, CNN, Cybercash, Ebay, Excite, GeoCities, Iname, iVillage, Lifeserve, Microsoft Network, Peapod, Sportsline, Value America, Web TV and Yahoo.

American Express’ Membership B@nking will also go up against Net.B@nk and others that offer full-service banking on the Web. First USA credit-card competitors like Capital One Financial also offer certificates of deposit and checking accounts via the Internet.

Financial service companies like Charles Schwab offer banking products like checking accounts and ATM cards.

All of the banking and financial services companies either already in or looking to enter Internet banking may want to heed a new report from PricewaterhouseCoopers, released a day before WingspanBank.com launched its Net effort. PricewaterhouseCoopers examined 51 of the world’s leading financial institutions for its study.

According to the consulting firm, not one of the world’s top banking institutions has taken adequate measures to compete in the Internet age. The report specifically found that banks are behind the curve in developing a consumer-friendly online presence. Most institutions are also woefully unprepared for, and blissfully unaware of, the underlying changes in banking and personal finance being heralded in by Internet development, according to the company’s "Creating Tomorrow’s Leading Retail Bank."

Beyond simply altering the way banks interact with customers, the Internet will change banks’ underlying business models and infrastructures - a shift that few banks are aware of, and none are ready for, the firm said.

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