Consumers of every age andenterprises of every size are being challenged and empowered with agame-changing array of electronic devices and applications thatfundamentally change the way they communicate and interact.Regardless of economic sector, broadband Internet access and mobileconnectivity have combined to produce savvy, discriminatingconsumers.

In the payments arena, in particular, the impact of the digitalage in which we live has been (and will continue to be)profound.

Research has found that a majority of consumers are interestedin using new forms of electronic payments, including personalpayment transactions and mobile banking:

• Checks will continue to be displaced by card and ACH payments,as check volumes decline at a rate of 8% a year;
• Online bill payment, debit and prepaid cards continue to leadthe shift toward electronic payments by consumers;
• Online and mobile payments are the fastest-growing segments inthe payments industry; the mobile person-to-person payments marketis expected to grow 48% over the next five years and e-commercepayment volumes are projected to grow at 15% annually;
• ACH transactions are estimated to grow at a rate of 12% overthe next few years;
• The number of ATMs appears to be stabilizing as consumersmigrate to electronic payments.

Interestingly, the bill payment landscape continues to fractureand shift with newer channels, such as mobile and tablet, emergingalongside well-established payment methods such as checks, mail,walk-in and phone.

Recent research shows that the number of online households thatpay bills electronically either through a biller or financialinstitution website held steady from 2012 at 74%, with 24% ofhouseholds using both methods.

As the number of payment channels continues to grow, there is acontinued shift in the channels consumers use to pay bills. Thepercent of online households that pay at least one bill a month bycheck declined from 61% in 2012 to 53% in 2013, while the numberthat use their mobile phone to pay bills doubled from 8% to16%.

Despite the emergence and consumer adoption of new paymentmethods, consumers have not completely abandoned the “old” methodsof paying bills like checks, phone or in person payments, makingthe payments landscape continuously more complicated forbillers.

Similarly, as financial institutions battle with each other inthe mobile banking and payments race, what can be absent fromconversations is the estimated 55 million non-online-bankinghouseholds in the U.S. who choose not to bank online regularly orat all. Recent research, coupled with the growing popularity inthis segment of non-traditional financial providers, suggest thatfinancial institutions should pay more attention to this non-onlinebanking consumer segment as a potential target audience for theirmobile banking and payment services.

Non-traditional financial services competitors have already seenthe opportunity and are implementing strategies and products toseize the day. According to data from CB Insights, a mix of venturecapital and corporate venture firms all continued to jockey for apiece of this massive industry: in 2013, payments start-ups raised$1.2 billion in funding across 193 deals.

On a year-over-year basis, venture capital funding and deals topayments and technology companies ticked up 5% and 6%,respectively, from 2012 levels. Deal growth was concentrated at theearly stage, with seed funding accounting for 42% of all deals inthe payments space over the past two years. Of the paymentsstart-ups that first received a seed round between Q1 2010 and Q32012, 35% went on to eventually receive Series A funding.

While mobile banking and payments appears to have a brightfuture among the non-online-banking consumer segment, it's clearthat financial institutions still need to do more to educateconsumers about the security of conducting financial activities ontheir smart phones and other mobile devices. In recent research, amajority of respondents cited fear of transaction security as a keyreason that would prevent them from using mobile banking.

Clearly, technology has also raised the bar for service: in thefuture, it is very likely that consumers will regard the extent towhich they can serve themselves to be a determining factor inselecting a financial provider and/ or individual financialservices. Consumers will expect the organizations with which theydo business to offer multiple electronic payment options and do soseamlessly. They want information in real time and on theirterms.

Mark Sievewright is president of Credit Union Solutions forFiserv Inc. in Brookfield, Wis. CONTACT: [email protected]or (469) 287-3600.