New York: If you want to manage all of your money and all of your monthly payments in one convenient online place, you're pretty much out of luck. You can pay bills with some services, manage your budget with others and organise your financial planning with still another set of programs. But if you want one system where you can auto-pay your cable bill through your checking account, review your mortgage statements from a different financial institution and coordinate payment for soccer sweatshirts on the fly, you're dreaming of a future world that doesn't yet exist.
"The industry is at a crossroads," says Mark Schwanhausser, senior analyst at Javelin Strategy & Research, which just released a study on online banking behaviours. "I'd like to be able to see more things in one place, yet banking systems are not yet satisfying those needs. Online banking needs a pick-me-up."
While financial institutions are still the leading online destination for consumers to actively manage their money and payments online, the new research from Javelin shows that even though 81 per cent of people who manage household finances banked online in the last 12 months, consumer behaviour is very scattershot when it comes to paying bills. It further found that banks are not adequately providing needed services and risk being surpassed by third-party ventures that attempt to fill in the white space. Even heavy online users still pay some bills with paper checks, still receive paper statements from some companies and still go to some billers directly instead of going through their bank's websites. "Where we're headed is mobile wallet. We will be able to carry around all of our financial decisions and products and tools in a smart phone. That day will come, but pieces have to fall into place. Right now we have people fighting over various parts of the turf," says Schwanhausser.
Data from a recent survey from Fiserv backs this up, showing that while 66 per cent of 3,000 household money managers say they use online banking to manage their money, 46 per cent say they also use paper check registers, 14 per cent still use a regular spreadsheet and 13 per cent use financial management software. With the US postal service cutting back deliveries and raising stamp prices, and banks pushing customers to bank online, people are going to have to figure this out sooner rather than later. To determine the best options for a fluid bill-paying routine that will save you time, money and the hassle of late fees and overdrafts, you have to break it down by billing activity, because there will be no one-size-fits all.
Regular, recurring payments
Among the 89 million American households that participate in online money management, the starting point for most of them is now the website of their primary financial institution. Bank websites vary in functionality, but most of them offer some variety of bill-paying service, either through automatic deductions from checking accounts or by setting up a vendor as a payee in the system.
This is easiest when payments don't vary in amount and arrive consistently each month. Sending payments electronically like this saves the cost of a stamp and the fear of depending on the US postal service.
Another popular route is to bill most regular payments to a credit card (usually issued by a bank), and then pay your credit card once a month, or mix and match along the way - bill your cellphone to your credit card, but your electric bill to your checking account, as we do in my house.
The major drawback to auto-billing to a credit card is that you have to update the payment info when your card expires, or if you change account numbers due to a security breach or other incident. The major drawback to auto-billing a checking account is over-drafting. So you have to weigh your options based on the balances in your account and your personal ability to manage details. "I pay my student loan through auto-deduction from my checking account because it gets me a lower interest rate, for example," says Geoff Knapp, VP of online banking for Fiserv, a technology company that provides the backbone of most online bill-pay and e-commerce systems for banks.
Variable bills on demand
What trips up a lot of dedicated online bill payers are those one-off bills that come in for things like doctor's bills or lab fees that your insurance doesn't cover, one-time tuition payments, your lawn service and so forth. Some banks participate in an eBill system where your bills from various places - like your cellphone carrier, cable company, etc. - get sent to the bank's system, which sends you an alert when a bill needs to be paid. "Consumers love it. The highest satisfaction of all of online banking is from people who are active eBill payers," says Knapp. "Certainly anyone over hurdle of online bill payment in general isn't going to have a problem with the process of it."
Bill payment services like Quicken BillPay (run by Intuit), Mycheckfree.com (run by FiServ) or PayTrust (also run by Intuit) will also take care of these itinerant bills - all for a fee. Despite the convenience of this, Javelin has found that many people still go directly to a biller's website to pay a bill instead. "In general, people want to control when payments are made. They want to pay directly and they want to see a bill," says Schwanhausser.
Services like Billeo specialize exactly in this process. Basically, Billeo will consolidate your various payments directly to vendors online in one place, so you don't have to go to 10 different sites and remember all the passwords.
"Credit card bills are always number one, utilities are next in line (gas, electric, garbage collection), then wireless, cable, telephone, satellite, says Billeo CEO Murali Subbarao. "What's new is that people are also paying mortgage payments, loans, rent and tuition. The number of companies we have that accept electronic payment has grown from 14,000 to 20,000 in the last 18 months."
What trips people up the most with online banking are one-off payments to people who don't take electronic payments - like the mom collecting for a fundraiser or the brother who paid for your amusement park tickets. Some banks will also allow you to manually add payees, and then they will send a paper check out on the date specified, which saves users the cost of a stamp but not the variability of the postal service.
"There are efforts out there, and there are ways to do it, but there's no ideal solution for the consumer, because it's another site to go to and password to remember. You can write a check in one minute, and be done with it," says Schwanhausser. Until more individuals start accepting credit card payments via their smart phones, the old-fashioned checkbook is still your best option.
Payments across financial institutions
Another pain point for consumers is not being able to pay bills in one spot across accounts at multiple financial institutions. While most banks allow you to make payments to other banks - say, if your mortgage is with another company - they aren't set up for you to access accounts at other institutions. So if you have a checking account with one bank and a savings account with another bank, it does not compute.
This is where third-party bill paying services like MyCheckFree, Quicken BillPay and PayTrust offer the most promise, except for their monthly fee structure. Mint (also owned by Intuit) has scored a huge following by offering users the ability to see all of their accounts in one place for free, and others like PageOnce are bubbling up. But while you can get bill reminders now and analyse your spending, those money management programs stop short of allowing you to follow through on bill paying directly.
The ideal is to marry the personal finance management with the bill-paying ability, and have it available for all your accounts and on any mobile device - and be free. Knapp says that banks could do better on this score. "Proactive banks realise that online has become biggest interaction points with consumer and will continue to grow," he says, and you should start to see more personal finance management tools surfaced when you login, plus more payees available for digital payments, plus more options for alerts across mobile and desktop devices.
For those who can't manage at all
If setting up a system to manage all of these disparate tasks is too much for you, there are services emerging to do it all for you. Balance Financial, a venture-backed startup that just emerged from beta, provides personal bookkeepers for a monthly fee. These paid organisers manage your finances for you, tell you when your bills are due, keep your receipts organised, and all without having access to your personal passwords. "We think the reason why there is such a scatter-shot method is based on the fact that people don't like to do personal finance. They know what they should do, they just don't do," says CEO Devin Miller. "We look at retail banking and we see an industry that forgot that people think of banking as a service industry. More do-it-yourself tools just overdo it for consumer. People will pay for service."