<p>In 1999, many experts theorized that electronic bill payment and presentment (EBPP) would surge in popularity by the end of that year, with the advent of electronic bill presentment spurring the growth. EBPP would become a must have service that would attract new members and keep existing members from moving to an alternative financial institution. For those tech-savvy consumers interested in using EBPP, this was and still is true. The growth of mainstream popularity for EBPP, however, was slower than expected. While the surge didn't happen in 1999, it appears 2001 was very promising for the future of EBPP. Today, Forrester Research estimates that about 4.5 million new households adopted EBPP in 2001 through their financial institution and over 10 million total households were using an EBPP solution at the end of 2001. These on-line bill payers are quite desirable members with an estimated average income of $82,000 per year and $370,000 in investible funds. Moreover, projections show that 2002 will be the most productive year yet for attracting new EBPP users. What will spur this growing interest? Bill presentment is making steady progress, but we believe that it will not be the sole factor to EBPP success in the coming year for two reasons. First, we believe it will be 2004 until there are enough billers available through presentment to make it more than just a novelty. Second, while interest is growing for bill presentment among consumers, it appears that a large segment of these individuals are getting their presentments directly from the billers, not through their financial institutions. Two years ago, the experts claimed that the public would want presentment information from their financial institution, not the biller, and that the public would not trust billers to process the payments. They also said that biller direct models were inconvenient to use because people would need to visit multiple websites to get their bills. Currently, it appears that these hurdles for presentment are being overcome. According to Forrester, less than 40% of new EBPP adopters chose their financial institution as the provider of the service. In addition, billers have made their sites easier to navigate and are using e-mail notification of bills. These e-mail messages incorporate hyperlinks to the biller Web site for review of the bill, thus solving the convenience problem. This is not to say that EBPP services at financial institutions will be replaced by biller direct options. It's merely evidence of the diversity that it will take to change the bill payment habits of US consumers. While we feel presentment is, and will increasingly become, an important feature with any EBPP service, we believe it will not come of age any earlier than late 2003. Presentment is, however, bringing an important benefit to EBPP processors today. New presentment networks, such as Spectrum, have the potential to represent large numbers of merchants. Unofficial numbers state that Spectrum will have about 250 merchants presenting bills through their network the first year, but will represent over 6,000 merchants for payment processing. This means that up to 6,000 additional merchants will now be able to accept pre-certified electronic payments from EBPP processors. Spectrum is not the only one, MasterCard already represents over 2,000 merchants through their presentment/payment network, RPPS. This is important because these networks will help to further streamline the industry and reduce the number of payments that become exception items and thus are potential problems. In addition to presentment, we believe member service from EBPP providers will continue to evolve and improve in 2002. Many providers now allow credit unions and their members to research electronic payments on-line anytime they wish. Some providers will even allow you to view and print digital copies of cleared items remitted to merchants via a check. In the past, at best your member had access to a 24 hour call center where they could log any payment questions they may have had. Another positive factor for EBPP in 2002 will be wireless Internet access. Wireless access to the Internet has begun to receive a lot attention lately. The idea surfaced after presentment in the bill pay industry, but it appears it will become a mainstream EBPP feature before presentment. Imagine the convenience of being able to schedule a bill on your mobile phone or PDA when no traditional Internet device such as a personal computer is available. In today's society, where people demand instant access to whatever they want, wireless will surely become a must have within the next 18 months. Overall, there are many factors that will influence the growth of EBPP in 2002. Presentment, member services improvements, and wireless access are just some examples. The two factors that may be most influential to the growth of EBPP, as with any product or service, are marketing and word of mouth. We find the credit unions conducting marketing campaigns for their services, including EBPP, see a much higher success rate than those who do not. Your members talk to each other, so of course, word of mouth will always be important. If you offer a good quality EBPP service, the ones that will use it tell other about its virtues. As we have seen many times before, the acceptance of new services is a snowball effect. For those who have been offering EBPP for a few years, we believe that 2002 will be the year the snowball begins to pick-up speed.</p>