McLEAN, Va. – Consumers are increasingly likely to sign up for online bill pay if the service is free, and those same consumers then become sharply more profitable, according to a new report. The report comes from Online Resources Corp. and is based on a review of the experience of 113 of the e-commerce vendor's more than 550 financial institution clients. The report also concludes that online bill pay is moving beyond the realm of early technology adopters into a phase of mass consumer adoption. The 2003 study looked at the experience of 113 financial institutions with 992,000 consumer checking accounts and 145,000 online banking users. Online Resources focused its analysis on credit unions and banks using simplified bill pay pricing, and found that 40% of online banking users in August 2003 were using bill pay if it was free, compared with 31% in August 2002, when the company conducted a similar study. Meanwhile, 28% of consumers were using the service if they were being charged $5 or less per month, the same as the year-ago figure, and 20% were using it for more than $5 per month, again the same as a year ago. Online Resources also found that credit union members and bank customers who adopt bill pay services are as much as 40% more profitable to the financial institution because of deepened relationships. "As online bill payment shifts from the early adoption phase to the broader consumer mass market, price incentives become a more important factor in the consumer's purchase decision," says Matt Lawlor, the e-commerce provider's chairman and CEO. "Fortunately for banks and credit unions that provide online services, there is growing evidence that bill payment price incentives can be offset by increased deposit and loan balances, as well as retention and cost advantages," Lawlor says. The Online Resources report says that industry reports indicate that the adoption of online bill pay in the United States – which grew from 8.2 million in 2000 to 19.5 million by the beginning of 2003 – has entered the "mass market phase of a normalized adoption curve" in which mainstream acceptance occurs. It follows the early adopters phase, where price factors don't matter as much, and is being driven by price-conscious consumers who also generally only adopt new technology after it's been widely proven to be effective. In addition to the adoption rates, there's the profitability factor, which makes adopting relationship-deepening CRM technologies and techniques more attractive, the Online Resources report argues. It cites recent reports by Forrester Research and the Boston Consulting Group that show the profitability from online bill payers increasing as much as 40% in one year through such factors as higher balances, lower transaction expenses and increased retention. "In just one year, the market for online bill payment has undergone a swift transformation," the Online Resources report says. "Formerly a premium service used primarily by technologically savvy consumers, online bill payment is quickly becoming a mainstream service used by consumers who cut across demographic groups," it says. Competition for these consumers also is heating up, the report notes, concluding: "In the current mass market phase of the adoption lifecycle, price incentives can be very effective. Financial institutions have an opportunity to capture their share of this rapidly growing market based on how they price, or don't price, their online services. "At the same time, financial institutions that use effective CRM have found that pricing is but one of many factors that can succeed in cross-selling bill payment to online banking customers. "The longer-term reward for a strong online bill payment marketing strategy is a larger base of satisfied customers with deeper relationships." -