Mobile Photo Bill Pay: The Next
Generation in Bill Pay
Andy Schmidt
Research Director, Commercial Banking & Payments
July 2012
Executive Summary
Millions of consumers use electronic bill pay to pay their bills online. This technology is wellestablished for about half the market — creating the opportunity to reach the other half of the
market using a different approach. Banks that offer this service have been searching for new
ways to create interest in bill pay given the positive effect it has on customer relationships.
Banks have also been searching for ways to make bill pay more portable because of the growing
interest in mobile banking — an interest driven by consumers’ desire to have greater control
over their finances.
One way for banks to accomplish this is to combine elements of their existing bill pay offerings
with another technology that is gaining adoption — mobile imaging technology — to enable
consumers to pay bills using their mobile phones. This new offering, called mobile photo bill pay,
automatically converts paper bills into electronic payments and can be used to onboard new
payees into the bank’s bill pay portal, all while eliminating paper and increasing customer
involvement.
The Inevitability of Paying Bills
When a service is rendered or an item is acquired and not immediately paid for, a bill is sure to
follow. Because of this, nearly three million bills are presented daily, with US households
receiving approximately nine bills per month electronically, through the mail, and in-person.
These bills must be paid. The methods for paying these bills vary. Bills can be paid in person,
through the mail, or they can be paid electronically. However, increasingly electronic bill
payment is taking place via mobile devices, reflecting changes in lifestyle.
Within the financial services industry, bill pay is often perceived as a mature market whose
growth is limited to the overall increase in electronic payment volume of approximately 5% per
year. This is not the case though as there is still a great deal of headroom for electronic bill pay.
The simplicity of its “set and forget” functionality for recurring bill payments makes it easy for
users to set up their payees once, never to return, but a large portion of the market have yet to
take advantage of this convenience. Financial institutions seeking new revenue sources and
higher retention rates are examining ways to breathe new life into bill pay and increase their
market share.
CEB TowerGroup Research is available on the Internet at www.towergroup.com
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Mobile Photo Bill Pay: The Next Generation in Bill Pay
One of the ways that banks are reinvigorating bill pay is by expanding the reach of bill pay by
making it available via mobile devices — either as an extension of mobile banking solutions that
consumers use to make balance inquiries and transfers, or as part of a mobile payments solution
consumers use to send funds. Part of this strategy to expand bill pay’s reach includes leveraging
image capture technology to enable customers to pay paper bills using their mobile devices.
Consumer Electronic Bill Pay: Convenient and Growing
Consumer adoption of online bill pay has steadily increased ever since bank-led electronic bill
pay essentially became free in the early 2000s and more billers and banks developed bill pay
capabilities. This trend reflects the ongoing electronification of payments both in the United
States and globally, especially within the consumer segment. Part of the reason for this growth
stems from the recent recession — a time when consumers became much more conscious of
their spending patterns and lacked access to additional credit. A time that made expedited bill
pay a necessary offering. This awareness remains despite improvements in the economy, and
the addition of mobile functionality to bill pay is reviving interest in an offering that had
stagnated despite the ongoing need. One of the drivers for this interest is that offerings like
mobile photo bill pay leverage existing bill pay infrastructure, minimizing the cost of
implementation and capitalizing on existing investments, while simultaneously driving customers
to self-service options, which minimize operational costs.
There are two main types of electronic bill pay: biller direct, where the consumer pays the biller
through a website or by phone, and online bill pay, which is accessed through portals or websites
provided by bill consolidators. Like electronic bill pay, consolidators are split into two groups:
financial institutions and third-party aggregators. The adoption rates for both biller direct and
online bill pay are depicted in Exhibit 1.
Exhibit 1
Biller direct bill payment has been growing in popularity because of the flexibility it provides
consumers, and was used by more than half of US households in 2011. Close behind is online
bill pay, which was used by just over 40% of households.
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Mobile Photo Bill Pay: The Next Generation in Bill Pay
Financial institutions typically provide bill pay as a free extension of their online — and
increasingly mobile — banking services. Online bill pay is widely available and is funded by the
consumer’s checking account held at the bank. Using online bill pay, consumers can pay bills
received via mail or electronically. Consumers must first manually enter the biller’s payment
details into the bill pay system in order to make a payment. Once entered into the system, the
consumer can easily pay a biller on a one-time, episodic, or recurring basis by selecting them
from their roster of billers.
Third-party aggregators consolidate a consumer’s paper and electronic bills and present them for
payment through a single website or the mobile device. Aggregators are convenient for
consumers because they can track due dates, as well as draw funds from multiple bank
accounts. However, unlike financial institutions, third-party aggregators charge a monthly fee
for their services.
The addition of mobile to bill pay makes expedited bill pay more relevant than ever because of
the convenience of making a payment via the mobile device, which enables consumers to pay
their bills at the absolute last possible minute. Prices for expedited bill pay vary from a few
dollars for an electronic payment to $25 to send a check via overnight mail, far less than the cost
of a late fee or higher interest rates. This convenience fee is a ready revenue source for banks
able to deliver an easy-to-use solution via the mobile device.
Paper Remains a Formidable Force in Bill Pay
Although electronic bill pay adoption is increasing, paper remains a formidable force in the bill
pay market. Many of these paper bills are paid with paper payments, either in the form of a
check written to the biller or through the inclusion of the payer’s credit or debit card information
on the paper bill that the payer mails back to the biller because the biller does not accept
electronic payments.
The United States Postal Service's annual Household Diary Study tracks the number of bills
mailed to US households. The study for the 2010 fiscal year reported that the number of paper
bills sent decreased 13.5% between 2008 and 2010, while the number of bills paid via mail fell
nearly 17%. This rate of decline will reduce paper bill payments to 6.4 billion items in 2012,
creating a market where approximately two paper bills will be sent for every paper-based
payment received.
Mobile Is Here: Are You Ready?
Mobile Banking: Increasing Consumer Interaction and Profitability
According to a 2012 Federal Reserve survey, approximately one in five Americans with both a
bank account and a mobile device had used their device to view account balances, receive
account alerts, or otherwise interact with their financial institution in the previous 90 days, and
90% had used their mobile device to check their balance within the previous year. Other
reported uses included remote deposit capture (RDC), which was used by 11% of respondents
and is projected to increase rapidly. This finding indicates that consumers are comfortable
expanding into other mobile services once they become accustomed with the base offering — an
opportunity that banks must capitalize on to improve customer profitability.
This type of widespread use within the mobile channel reinforces the value the bank provides to
consumers and reduces attrition accordingly. In the case study published by CEB TowerGroup
SunTrust Consumer Mobile Banking Value Analysis: Finally, Quantitative Results!, SunTrust Bank
demonstrated that its mobile banking customers were 32% more profitable on average than
online customers, generated 19% more revenue, and were 53% less likely to attrite. These
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Mobile Photo Bill Pay: The Next Generation in Bill Pay
customers were also much more engaged—logging in 20 times a month instead of only 2 times
per month for online customers. Customers who used both mobile banking and bill pay yielded
even better results: profitability was 53% greater than for online users, while attrition was 82%
less, as seen in Exhibit 2.
Exhibit 2
Mobile Bill Pay: Useful but Limited for Now
Mobile bill pay is being pursued by mobile banking and mobile payments providers alike as busy
consumers look for new ways to conveniently pay their bills. Despite this, many mobile bill pay
implementations have limited functionality, with consumers only being able to release payments
rather than initiate new ones. In addition to wanting the ability to initiate new bill payments,
consumers also want the ability to conveniently add new payees via mobile. The addition of this
capability increases the functionality and usability of mobile bill pay. Banks that find a way to
address these issues can drive adoption and usage of the mobile channel for all services while
heightening the perceived value and increasing the stickiness that offerings like mobile and bill
pay already provide.
According to the Federal Reserve study, 47% of all people who used their mobile phone to make
a payment did so to pay a bill. This is nearly double the percentage of mobile banking users who
paid a bill through their phone, indicating that the biller direct sites accounted for the difference.
This finding is supported by the fact that 62% of unbanked respondents indicated that they had
used their mobile phones to pay a bill, as shown in Exhibit 3.
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Mobile Photo Bill Pay: The Next Generation in Bill Pay
Exhibit 3
Given the perceived maturity of the bill pay market and the limitations of existing mobile bill pay
deployments, it would be easy to conclude that no further advancements are being considered.
However, this conclusion would ignore developments that turn the smartphone camera into a
document imaging device. This approach is already being used for mobile remote deposit
capture, and this same technology can be used to facilitate the mobile bill payment process.
Mobile RDC: Turning Smartphones into Deposit Gateways
Mobile RDC gives consumers the ability to deposit checks on an anytime, anywhere basis while
reducing bank costs because it is less expensive to process a digital image than a paper
instrument. Since its introduction in 2009, mobile remote deposit capture has had consistent
success, with the vast majority of implementations exceeding adoption forecasts, quickly turning
mobile RDC into table stakes for institutions of all sizes. Mobile RDC volumes are growing
quickly, increasing 143% from June to December 2011.
This growth rate reflects the convenience mobile RDC provides consumers who no longer need to
travel to ATMs and branches or find envelopes and stamps to make deposits. It also indicates
the simplicity of the user experience. Extending these image capture capabilities into the bill pay
market combines the convenience and cost savings of mobile remote deposit capture to the
bank’s existing bill pay capabilities. This combination has the potential to shorten the adoption
curve for mobile photo bill pay given the positive reception that bill pay and mobile remote
deposit capture already enjoy.
Mobile Photo Bill Pay: Portable Bill Pay Convenience
Mobile photo bill pay leverages the image capture technology found in mobile RDC to convert
paper bills into digital images. To use mobile photo bill pay, a consumer must first launch his or
her bank’s mobile banking application. Within the application, the consumer then uses the
camera within the mobile device to take a photo of the bill. The key data from the bill (including
payee, payee’s address, and amount) is extracted from the image and the relevant data
automatically populates the appropriate fields in the mobile bill pay application. Once populated,
the user reviews the payee information and amount for correctness, and then schedules the
payment to be made either immediately or at some time in the future.
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Mobile Photo Bill Pay: The Next Generation in Bill Pay
Increasing the Reach of Bill Pay
Because mobile photo bill pay adds image capture functionality similar to that used for mobile
check deposit, it will naturally add an incremental cost to existing online bill pay offerings.
However, CEB TowerGroup believes that banks offering mobile photo bill pay will be able to
offset this cost through greater customer involvement and retention, reductions in paper
handling, and increases in expedited bill pay revenue. The ability to self-serve is a leading driver
of retention and profitability among retail banks, and deploying offerings like mobile photo bill
pay on top of existing bill payment rails can greatly shorten payback periods while increasing
ROI.
The ability to enroll new payees and pay a bill on a mobile device extends the utility and
stickiness of mobile banking while streamlining the bill pay process by capturing the biller’s
identifying information and address and the consumer’s account number with the biller, while
prompting the consumer to verify the amount they wish to pay. This creates the opportunity to
remove paper bills from circulation while boosting mobile bill pay usage. This shift will reduce
processing costs for financial institutions and accelerate collection for billers enrolled in the
bank’s bill pay product.
Decreasing Attrition and Increasing Bank Revenue
Mobile photo bill pay creates new revenue opportunities for banks by establishing a new venue
for expedited bill payment. These opportunities can provide needed income at a time when
there are curbs on bank fees in other parts of the payments business (e.g., debit).
Building upon the SunTrust example, deploying mobile photo bill pay would amplify the revenue
increases seen when consumers combine mobile banking and bill pay. Also, the availability of
mobile photo bill pay should decrease the likelihood a consumer would attrite because of the
convenience and peace of mind that mobile photo bill pay provides, and could serve as an
onboarding feature for the unbanked and under-banked as they transition toward using more
bank services.
Taking Advantage of Mobile Photo Bill Pay
There are three elements that banks must consider and develop to successfully deploy mobile
photo bill pay for their clients:



A comprehensive mobile banking and payments strategy
A clearly defined target market
Use-based incentives to drive adoption
Hallmarks of a Comprehensive Mobile Banking and Payments Strategy
Mobile banking and payments give financial institutions the ability to provide greater access to
financial products and services as well as increase the ability to self-serve. A comprehensive
strategy must take into account which markets the bank wishes to provide these services to,
what products it will make available through the mobile channel and the decision criteria for
adding new functionality.
CEB TowerGroup recommends that financial services institutions make their mobile banking and
payments offering available to all clients rather than to a subset of their clients (e.g., online
banking users only). A limited rollout, or a rollout based on perceived usage patterns could
potentially miss key markets altogether.
Mobile photo bill pay will provide the greatest value to financial institutions as an extension of or
enhancement to their bill pay capabilities. The most logical deployment approach would add
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Mobile Photo Bill Pay: The Next Generation in Bill Pay
mobile photo bill pay capabilities to an existing mobile banking or bill pay offering. Financial
institutions could also use mobile photo bill pay to augment their online bill pay capabilities,
regardless of whether mobile banking and payments capabilities are present or planned in the
future. This is because banks without mobile banking or payments capabilities can still use this
technology to onboard new payees into the bank’s online bill pay offering, reducing the amount
of paper that needs to be handled and increasing electronic bill pay adoption.
Target Markets: Gen Y, Gen X, and the Unbanked
Relying on current usage patterns for related products like mobile RDC could lead banks to
conclude that Gen Y is the primary market for mobile photo bill pay given that they are the
primary users of related technologies like mobile RDC, and show the highest propensity for
selecting a bank based on whether an institution provides mobile services.
Although the influential Gen Y market is certainly a key segment to pursue when marketing
mobile photo bill pay, Gen X has also shown a considerable appetite for mobile financial services,
using mobile banking 80% as frequently as Gen Y. This figure increases to 98% when mobile
payments1 are taken into consideration, indicating that while Gen X is less likely to use mobile to
check their balances or make account transfers (possibly because they feel more financially
secure because they have been in the workforce for a longer period of time), they are just as
likely to make mobile payments. Exhibit 4 shows the usage of mobile RDC, banking, and
payments by age group.
1
The Federal Reserve survey defined mobile payments as “purchases, bill payments,
charitable donations, payments to another person, or any other payments made using a
mobile phone. Mobile payments can be used by accessing a web page through the web
browser on your mobile device, by sending a text message (SMS), or by using a
downloadable application on your mobile device.”
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Mobile Photo Bill Pay: The Next Generation in Bill Pay
The underbanked segment — which is spread across the segments in the exhibit — is a third key
market for mobile photo bill pay given their relatively low incomes and limited access to financial
resources. As noted earlier, the underbanked customers use mobile bill pay more often than any
other market segment, indicating that mobile devices like smartphones are their primary access
channels for Internet-based services.
Banks looking to better serve this segment can create targeted offerings and accounts geared at
driving bill pay usage. Over time, the payment and account histories created from this offering
would help underserved customers qualify for higher value bank products like credit cards, car
loans, and home mortgages.
Create Use-Based Incentives to Drive Bill Pay Adoption
In order for mobile photo bill pay to move beyond being an enrollment device, banks must
identify how they can use tools like mobile photo bill pay to transform their bill pay portals into
frequently visited sites that add value to the customer relationship. The following are all actions
banks could take to drive more widespread use and adoption:
Mobile photo bill pay as a migration tool. Moving accounts and bill pay arrangements from
one bank to another can be a tedious chore. Banks looking to acquire new customers or
increase bill pay usage among existing customers could use mobile photo bill pay to facilitate the
migration of new biller arrangements to the bank’s bill pay portal. Opportunities for additional
services stem from notifying the customer’s existing bank that the bill pay arrangement will be
transitioning and that the account should no longer be debited, which helps to avoid duplicate
payments and potential overdrafts during the transition period.
Recruiting more billers for inclusion in bill pay. Increasing the number of bill pay users
creates value for the bank because it increases stickiness. It also increases value for prospective
billers because it provides these companies streamlined access to their customers, which
improves cash flow by shortening collection times. Banks looking to grow their portfolio of
business customers can also use this opportunity to enable businesses of all sizes to accept
electronic payments, which, in addition to creating a new source of revenue for the bank, will
decrease the number of paper checks that need to be generated for bill payment activities.
Create other offers or products that can be accessed through bill pay. Banks and billers
can collaborate to create special offers or coupons that can be printed on the paper bill (if not
already enrolled as a payee by the consumer) or can only be accessed via the bill pay site.
Other potential opportunities include the ability to buy and send gift cards via the bill pay site.
Gift cards could be sent electronically directly to the recipient’s mobile phone for use online or instore.
Conclusion
The bill pay market has been growing consistently for more than a decade as consumers look for
more efficient ways to pay for goods and services. The electronification of these payments and
the proliferation of mobile devices create a golden opportunity to leverage mobile as a channel
for these types of payments. Banks whose customers use both bill pay and mobile banking have
seen increases in profitability and retention rates that stem from consumers accessing the bank
more frequently through the true 24x7 channel from the mobile platform. Adding features like
mobile photo bill pay to this product mix can expedite customer acquisition and improve selfservice capabilities for a slight incremental cost over traditional bill pay technology, while
providing additional fee revenue from expedited bill payments and reducing per-item processing
costs by enrolling billers in electronic bill pay portals.
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Mobile Photo Bill Pay: The Next Generation in Bill Pay
Mitek Systems commissioned CEB TowerGroup to conduct independent research and analysis of
data management practices and trends in financial services. The content of this report is the
product of CEB TowerGroup and is based on independent, unbiased research not tied to any
vendor product or solution. Although every effort has been taken to verify the accuracy of this
information, neither CEB TowerGroup nor the sponsor of this report can accept any responsibility
or liability for reliance by any person on this research or any of the information, opinions, or
conclusions set out in the report.
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