Online Bill Pay

1

• Online Bill Pay
• Case Analysis
• December 2003
• Ken Hysong, Scott Murray, Steve Padgett,
• Kristen Rankin, Wayne Salter

2
Online Bill PayProduct Introduction

• View and pay bills via the Internet
• Also receive electronic version of paper bills
  (e-Bills) from a variety of companies like ATT
  and Georgia Power.
• Product bundled within Online Banking which
  allows you to view account balances and perform
  functions like transfer funds.

3
Online BankingIndustry Company Timeline
Wells Fargo Introduces first concept of Online
Banking
BofA forms alliance with CheckFree for Online
Bill Pay service
CheckFree launches Electronic Bill Pay
Presentment solution
BofA announces merger with Fleet Boston
1990
2003
2000
1997
1998
1995
2001
Online Banking with Bill Pay rolls out to all
BofA customers
BofA and NationsBank merge
BofA launches Online Banking
4
Online BankingIndustry Stats

• Fastest Growing Web Service behind auctions and
  dating, outpaces travel and music.
• Grew from 17 of US households in 2000 to 27 in
  2002. Projected 38 growth by year-end 2003.
• Adoption curves of Online Banking strikingly
  similar with those of ATM usage.

5
Bank of AmericaThe Company

• Based in Charlotte, NC
• Footprint in 21 US states and DC
• 4,211 Banking Centers, 13,120 ATMs
• 132,000 Associates
• 6.63 Million Online Active Users/ Average 16
  Million visits every month

6
Online Bill PayThe Competitive Landscape
7
Online Bill PayThe Other Competition

• Biller Direct Sites
• View and pay your bill directly at the billers
  site
• View pending transactions (e.g credit card)
• Quicker payments
• Less security concerns
• 50 of bill payers use solely biller direct,
  while 28 use consolidator sites, others double
  dip

8
Online Bill PayAreas of Focus

• Marketing Mix Analysis
• Price
• Product
• Placement
• Promotion
• SWOT Analysis
• Recommendations

9
Online Bill PayFocus on the Product

• View and Pay Bills Online
• Functionality Outsourced to Check Free
• Focus on Customer Satisfaction fast and easy.
• 3 Major releases a year to enhance functionality

10
Online Bill PayFocus on the Price

• Bank of America converted Online Bill Pay to a
  free service in May 2002
• Fees largest barrier to customer adoption
• In the first year after going free, 65 growth in
  customer base

Barriers to Customer Adoption
11
Online Bill PayFocus on the Price

• Free Service, yet Profitable (higher SVA)
• 80 Lower Attrition, stickier services
• 38 Higher Deposit Balances
• 21 more profitable than traditional customer
• Cross sell other products

12
Online Bill PayFocus on Placement

• Channels
• Internet-based Email, Web, Quicken
• Other OptionsPay-by-Phone
• Placement-based Barriers to Adoption
• Privacy Security
• Comfort with Internet
• Availability of Internet

13
Online Bill PayFocus on Promotion

• Corporate Marketing and Communications Division
• Responsible for attracting, retaining, and
  delighting customers
• Mass Media Focus Print, Radio, Online, and
  Outdoor Advertising
• Demographics determine number of potential
  e-Billers in geographical footprint

14
Online Bill PayFocus on Promotion
15
Online Bill PayFocus on Promotion

• E-Commerce Relationship Marketing Team
• Specifically supports online bill pay
• Works with Consumer Small-Business e-Commerce
  division
• Orchestrates use of direct marketing capabilities
• Direct mail
• Email advertising
• Online advertising
• Primary focus is existing customers
• Drives acquisition, optimization, and retention
  of Online Banking customers

16
Online Bill PayFocus on Promotion
17
Online Bill PayFocus on Promotion

• Relationship Marketing
• Drives relationships with e-Billers for joint
  promotional and product activities

18
Online Bill PayStrengths Weaknesses

• Strengths
• Strong company and brand largest online bank
  bill pay
• Well articulated implemented strategy
• Marketing company driven by customer wants and
  needs
• Technical innovation
• Weaknesses
• Use of a single supplier for outsourcing
• Large company size, slow to react

19
Online Bill PayOpportunities Threats

• Opportunities
• Small business
• Hispanic market
• Women
• Threats
• Barriers to Adoption
• Stickiness consumer inertia
• Security privacy issue with Internet
• Biller Direct competition

20
Recommendations

• Continue to focus on customer satisfaction,
  specifically payment speed
• Target small business
• Convert Fleet customers ASAP
• Target women and Hispanic market
• Focus on education of product, safety security
• Focus on driving e-Bill adoption

21
Questions